SEC, Madoff Reach Civil Fraud Case Deal
The Securities and Exchange Commission on Monday announced an agreement with disgraced money manager Bernard Madoff that could eventually force him to pay a civil fine and return money raised from investors.
The partial judgment must be approved by the judge overseeing the Madoff case in federal court in Manhattan.
The civil proceeding is separate from the criminal case against the prominent Wall Street figure, who is accused of bilking $50 billion from investors in what may be the largest Ponzi scheme in history. Madoff was arrested in December after allegedly confessing to his sons that he had stolen from investors for years.
Federal prosecutors have asked a judge to revoke the bail of Madoff, who has been confined to his Manhattan penthouse under house arrest. Madoff, who has not been indicted, is widely expected to eventually enter into a criminal plea deal with prosecutors.
The agreement with the SEC says the agency's civil fraud allegations cannot be contested by Madoff and that possible civil fines and restitution will be decided "at a later time."
The allegations, as laid out in the SEC's civil lawsuit filed on Dec. 11, are that Madoff committed a $50 billion fraud and told his sons his investment business was a sham. Madoff told them he had "absolutely nothing," that "it's all just one big lie," and was "basically, a giant Ponzi scheme," according to the SEC suit.
The fallout from the Madoff affair has been massive and has rocked a Wall Street already churning from the financial crisis. Thousands of victims who lost money investing with Madoff have been identified - including ordinary people and Hollywood celebrities - as well as big hedge funds, international banks and charities in the U.S., Europe and Asia.
The scandal also has brought disgrace to the SEC, which repeatedly ignored credible allegations about Madoff's operations brought to it over the course of decade. Congress and the agency's inspector general are investigating what caused the regulatory failure over Madoff and why SEC inspections of his business failed to detect the improprieties.
Palm Beach was especially hit hard by the Madoff scandal, reported CBS News correspondent Kelly Cobiella last week.
List of Bernie Madoff's Clients
"This is the epicenter of it," said Larry Leamer, who writes about Palm Beach society. He said investing with Madoff was the ultimate sign of status.
"There was a club within the club and that was the club in this country club that invested with Bernie Madoff," Leamer said. "If you're not with him, you're a loser."
Today, million dollar homes are quietly going on the market. So are the items from inside those homes - at estate sales.
You wouldn't know it strolling by the glitzy stores and exclusive restaurants in Palm Beach, but the impact of the Madoff scandal goes beyond the bank accounts of a few hundred millionaires.
A local non-profit health center for seniors lost $10 million investing with Madoff. And the Palm Beach County School district is out $1 million because a donor can no longer afford the donation.
"This is not just a bunch of spoiled rich people who can't have their bottle of champagne that day. these are conservative, philanthropic, giving people," said Susan Markin, a former Palm Beach council member as well as a Madoff neighbor and victim.
Asked what she thinks should happen to Madoff, Markin replied, "I can't say it on camera."
Madoff's Florida home has been vandalized twice since his arrest.