Friday, March 13, 2009

• The Deal To Make With Madoff

The icon embodying our generation’s perception of the more extreme and baser elements pervasive on Wall Street will receive a sentence this summer that will extend far beyond his life expectancy. The devastated thousands of sources that rendered up the $65 billion Madoff fraudulently appropriated will not be satisfied. Neither will society’s need for necessary corrections of the system that continues to sanction thievery.

The mainstream media suggests that his 11 felony counts should spread like shrapnel to his wife and kids, and to his associates. Madoff stated in court that the businesses they ran were, “legitimate, profitable and successful in all respects.” The importance of this court delivered statement is not what he said, but what his claim reveals of the prosecutorial shortcomings in his case. Evidently the prosecutors have not effectively extracted the most important information from this well-connected and very effective scoundrel. Madoff is under no obligation to cooperate since he has no deal with the state. The prosecution attempted to extract admission of conspiracy from him. This accomplished nothing, and his lawyer indicated that Madoff has accepted the fact that he will die in jail.

We have previously written on this case with The Madoff Letter, however, with Madoff’s pleading concluded, we feel strongly that prosecutors should move to make him an offer that will render a maximum of the dispersed capital back to the original investors, and surface a majority of the co-conspirators hiding far beyond the circle of the Madoff family. Most importantly, an effective deal would bring the implementation of wide-ranging fixes to the regulatory cracks that continue to enable such broad abuse on the Street.

To successfully achieve these objectives, let’s set aside the public fury calling for blood, and attempt to extract the highest possible benefit to society. The prosecutors may in future use his family as leverage in extracting information from him, however, with his guilty plea, Madoff has made this unlikely in the near or mid-term, and such efforts could take many years to resolve. Time will work against the prosecution in bringing satisfaction in these cases, and the last thing they should wish for is that harm comes to Madoff in prison.

Going after his family might satisfy emotions, but as such a process evolves through years of judicial wrangling, it will provide little of real value toward the principal objectives. Given that he has accepted his fate, the justice system should make Madoff a deal that would provide him some faint hope before he dies. Give him the prospect of spending some free time with his children and grandchildren before his days are over.

If billions of dollars are recovered from offshore accounts, from foreign feeder funds, and from an endless list of individuals who catered to the Madoff cash collection by accepting kickbacks, does it matter if Madoff once again sees daylight? If the long list of individuals who conspired gets rounded up to join the ranks of the incarcerated, does the greater good become advanced? If the specifics of regulatory shortcomings, and failures or incompetence of the “overseers,” such as Congress and the SEC, receive unprecedented attention, and correcting legislation becomes enacted, would this not reduce future recurrences of colossal or amorphous frauds? Would the 5,000 people whose lives have been dramatically affected not welcome a significant recovery of their capital? Of course.

Make a deal Madoff will not refuse. Provide Madoff sight of the end of his tunnel. Take ego and emotions out of the equation, and make light deals with each member of his family. Exchange the leniency for a complete and specific unraveling of the past thirty years Madoff spent in the more dubious financial chambers of Wall Street, Geneva, London, Monaco or Singapore. Get all names and amounts. Then go after all of them, extraditing many from the comfort of protective jurisdictions while those countries still need all the financial goodwill they can get, and grab the cash these co-conspirators stashed as you bring them to justice on the streets of New York.

Revenge in this case would not positively serve the society Madoff abused, and he is not likely to atone for his crimes. What matters now, more than retaliation on this former NASDAQ Chairman, is the achievement of some restoration, and salvaging as much as is possible of the destruction rendered by this monstrous crime. Let his dream hold contain a whiff of freedom, as he rests uncomfortably in his new austere surroundings. Do whatever it will take for him to cough it all up.


  1. brilliant. just as long as he doesn't actually see daylight.

  2. I think you mean to say "take justice out of the equation," since that's what your blog posting amounts to. "Revenge" is proper in cases of fraud, and it's called "justice."

  3. Anonymous,

    While seeking "Revenge," is understandable, it would serve little in this case.

    There is an enormous amount of cash sitting in offshore accounts and feeder funds that could repatriated, then distributed to the investors. There is also the long list of individuals who helped him accumulate those billions, and should be brought to justice. And let's not forget that Madoff was able to get around the regulators. That part of the system is also broken, and needs fixing.

    How does "Revenge," if it is the principal priority, deal with any of that?

  4. Sentencing him for life would be a good deterrent for others. I think prosecutors should rather use his family as leverage to extract as much information as possible.

  5. Anonymous,

    While the family can be somewhat used as leverage, Madoff is the one who has ALL the information that "society" requires.

  6. Why didn't we use "enhanced interrogation techniques" on this guy? Or is that only reserved for brown people?

  7. There is no point whatsoever to offer Madoff a deal. Madoff has been lying for so long, and believes some of his delusions that he was running a legitimate Trading firm, in which he wasn't. He was using his clients' money to prop up his trading business..

    Right now, the two people that I would make deals with are Frank DiPascali and Marcia Cohn. They probably know enough information to send Ruth Madoff, Andrew and Mark Madoff, Peter Madoff and his daughter to prison for years.

    Madoff doesn't want to cooperate. As long as he is uncooperative, he is protecting others from multiple criminal indictments. The only charge that Madoff wouldn't plead to in his 11 count plea: conspiracy, that is pretty telling that much of this is a game, and he is sacrificing himself as the king to protect the queen, his knights and his rooks.

    The Feds have found inklings of the money trail, mainly via Madoff International Securities in London, and via a couple accounts in Gibraltar, they will find more..

    Another point why Madoff shouldn't be offered a deal. He can't be used on the witness stand, his credibility is shot. Any defense attorney can just shift the focus of the trial from his or her client to Madoff, the bogeyman who is to blame for all this mess.

    Final point why Madoff won't cooperate, any bank accounts found, are going to produce a paper trail, and it is very likely they will point back to the family members.

    The Madoffs have to be treated like a criminal cartel, like the Gambino Family. Also the trail is linked to numerous accountants that Madoffs were connected throughout the years, like Michael Bienes and Frank Avellino.

  8. This guy, and not the Arabs nor civilians deserves to be water-boarded.

    Madoff is probably the ultimate Walstreetn Ponzi Scheme terrorist, and its unmistakable how many lives he has ruined.

    A modern George Bush senior of the reich. He's absolutely got to atone for this.

    Find where all the money got sent, make him give it up in plea bargains. Do not accept any bribes, no more of this. It's time for the carousel of the Federal Reserve to end NOW.

  9. It would be best for society if Madoff did community service as a fund raiser. There are thousands of choir boys that have been victimized by sexual predators. Most have are undergoing expensive psychiatric treatment. Madoff could spend the rest of his life helping rape victims pay those expenses.

  10. I don't see how there could be all this money hidden away because obviously Madoff would have used it to pay the requested fund withdrawals to keep the ponzi scheme running. Instead he chose life imprisonment?

  11. as a victim of Madoff, I am truly confused why people think there is some hoard of cash sitting in some hidden acct - there may be some nominal monies but the whole premise of the Ponzi scheme is that he would still be running it except for the fact that he ran out of funds... the money is gone....all we can hope for is a few pennies on the dollar from whatever Picard can squeeze out of various family and feeder funds principals.

  12. the money is mostly gone-sort of: some people collected their earnings, have to give the funds back including interest or other gains made on these "earnings" after re-investment or laundering which were really the next tier's investments- some of the money is in Israel: good luck tracking it., may have been spent to fund some stuff over there- some money might be in european banks.

    madoff did not act alone, but it goes so deep that it may never come to light what this was really about.

  13. The money still exists in secret accounts, many acknowledge this so does Seymour Hersh.

    Madoff's money disappeared into a black hole and some of it is where else, bank of Israel.

  14. Ridiculous. The government has plenty of resources to go after money abroad and all the foreign players have absolutely zero sympathy for Madoff--most, like Switzerland, have lost billions to this con artist.

    The real question is why DoJ and the FBI never executed a search warrant on his homes and those of his closest associates. It is in the homes that info on foreign accounts, hidden assets and the like is most likely to be found. When I asked a NY FBI agent about this, he cryptically stated that maybe they had searched the premises, but I doubt it and if they had, why not publicize it.

  15. Anonymous,

    Switzerland has done little to lift the veil on the trillion dollar hoard residing comfortably on the books of its banks.

    Other than some cracks showing in the USB fiasco, the U.S. appears to have little ability to open those doors.

    While the U.S. Should use the current crisis and the level of "help" from bailout money these foreign banks require, as leverage to flush out tax evaders, .... it won't.