Ponzi Scheme Finally Sinks Madoff

Disgraced Money Manager Sent From Penthouse To "Big House" After Pleading Guilty To Multi-Billion-Dollar Fraud

(CBS/AP)  Saying he was "deeply sorry and ashamed," Bernard Madoff pleaded guilty Thursday to pulling off perhaps the biggest swindle in Wall Street history and was immediately led off to jail in handcuffs to the delight of his seething victims.

Applause broke out in the packed courtroom of around 100 spectators after U.S. District Judge Denny Chin denied bail for Madoff, 70, noting that he had the means to flee and an incentive to do so because of his age. Madoff stood stoically, if a little pale, at the judge's ruling, reports CBS investigative producer Pat Milton.

Madoff could get up to 150 years in prison when he is sentenced in June.

The plea did not satisfy many investors who had hoped Madoff would be forced to name any family members or others who helped him swindle them out of billions of dollars. He pleaded guilty to all 11 charges against him - with no deal with prosecutors - meaning he is under no obligation to disclose names and tell authorities where the money went. He is not believed to be cooperating with prosecutors.

"I am actually grateful for this opportunity to publicly comment about my crimes, for which I am deeply sorry and ashamed," Madoff, speaking softly but firmly, said in his first public comments about his crimes since the scandal broke in early December.

DeWitt Baker, an investor who attended the hearing and said he lost more than $1 million with Madoff, called it "fantastic" that Madoff's bail was revoked but belittled the apology.

"I don't think he has a sincere bone in his body," said Baker, who added that prison time would be too good for Madoff. "I'd stone him to death."

Madoff did not look at any of the three investors who spoke at the hearing, even when one turned in his direction and tried to address him.

The fraud, which prosecutors say may have totaled nearly $65 billion, turned a well-respected investment professional - he was once chairman of the Nasdaq exchange - - into a symbol of Wall Street greed amid the economic meltdown. The public fury toward him was so great that he was known to wear a bulletproof vest to court.

Madoff pleaded guilty to charges including fraud, perjury and money-laundering, telling the judge that the scheme began in the early 1990s, when the country was in a recession and the market was not doing well.

"While I never promised a specific rate of return to any client, I felt compelled to satisfy my clients' expectations, at any cost," he said.

He said he accepted investors' money but didn't put it into the market. Instead, he sent them phony account statements showing that they were making money. It was a Ponzi scheme, or a pyramid, in which early investors are paid off with money taken in from later investors.

"When I began the Ponzi scheme I believed it would end shortly and I would be able to extricate myself and my clients from the scheme," he said. "However, this proved difficult, and ultimately impossible, and as the years went by I realized that my arrest and this day would inevitably come."

The scheme evaporated life fortunes, wiped out charities and apparently pushed at least two investors to commit suicide. His victims exceed a staggering 13,000 - 162 pages of names who say they lost something or everything, reports CBS News correspondent Jeff Glor. They range from elderly Florida retirees to actors Kevin Bacon and Kyra Sedgwick and Nobel Peace Prize winner Elie Wiesel.

Madoff implicated no one else, though investigators suspect relatives and top lieutenants may have been in on the scheme. Federal prosecutors are investigating his wife, sons, and brother, as CBS News chief investigative correspondent Armen Keteyian reported last night.

"The SEC did not do their job. They were negligent, they were ineffective. … They lured people into a false sense of security," Phyliss Molchatsky, a retiree who lost her life savings, told The Early Show. Molchatsky says she plans to sue the SEC.

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Read Madoff's complete statement to the court
Read the complete list of charges against Madoff
Criminal Complaint Against Madoff

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Another victim, Dr. Henry Backe, told The Early Show that Madoff was an "economic terrorist."

In Washington, White House spokesman Robert Gibbs said: "The president is glad that swift justice will happen."

Gibbs said the Obama administration will do everything possible to ensure strict enforcement of securities regulations "and hope that through those actions that that kind of greed and irresponsibility and that kind of criminal activity never happens again."

The financier, who has spent three months under house arrest in his $7 million Manhattan penthouse, will be sentenced June 16. In addition to prison time, he faces fines, mandatory restitution to victims and forfeiture of ill-gotten gains.

After arguments began as to whether Madoff should remain free on bail, his lawyer Ira Sorkin described the bail conditions and how Madoff had, "at his wife's own expense," paid for private security at his $7 million penthouse.

Loud laughter erupted among the spectators crammed into the large courtroom on the 24th floor of the federal courthouse in lower Manhattan. The judge warned the spectators to remain silent.

Before accepting the plea, the judge gave investors a chance to challenge his conclusion. One former client said she objects to Madoff's guilty plea until the money lost can be found.

Another, Maureen Ebel, wanted to see the case go to trial so the public would have "more of a chance to comprehend the global scope of this horrendous crime," reports Milton.

He also let burned investors challenge his decision whether Madoff should be go to prison immediately.

The fact that Madoff had been allowed to live in his Manhattan penthouse after his arrest "really infuriates everyone," said Matt Weinstein, a motivational speaker who lost the bulk of his savings in the scheme.

"People can't even afford rent anymore," Weinstein said. "He can't go on in this palace of denial."

If Madoff is sentenced to more than 25 years, he will serve out his prison term in a maximum security facility, said CBS' The Early Show legal analyst Lisa Bloom.

For as angry as victims are toward Madoff, some also lay blame at the door of the Securities and Exchange Commission.

The size of the scandal has made him an international symbol of greed and deception in difficult economic times. But it remains in dispute.

People familiar with the case tell CBS News that federal investigators are "ripping apart" 20 years of fraud inside Madoff's firm. They're moving beyond Madoff himself and looking at sons Andrew and Mark, who directed trading activities, and brother Peter, the company's chief compliance officer. None of them have been charged with any wrongdoing.

Also under the microscope: Madoff's wife of 49 years, Ruth, who has not been charged in the case. In court papers, she claims nearly $70 million in assets separate from her husband's fortune, including a $7 million New York apartment, $45 million in bonds and $17 million in cash. She's also listed as the owner of a $9 million Palm Beach, Fla. mansion.

"Just because Madoff apparently won't cooperate with authorities doesn't mean we won't perhaps see charges against other people here," said CBS News legal analyst Andrew Cohen. "There clearly is a paper trail, and clearly people were handling the details of the phony trades, and the investigation is ongoing. When there is this much money at stake the trail won't grow cold here or now."

At the hearing, prosecutor Marc Litt said that the investigation is continuing and that "a lot of resources and effort are being expended to find assets and anyone else who might be responsible for this fraud," reports Milton.

Prosecutors filed papers Tuesday saying Madoff's investment company reported a total balance of $64.8 billion in November even though it actually had only a small fraction of that amount.

Investigators say the true amount lost by investors may be between $10 billion and $17 billion and the larger estimates by Madoff include the false profits prosecutors say he generated with tens of thousands of bogus account statements cataloguing steady profits.
So far, authorities have located only about $1 billion in assets.

Prosecutors say he generated or had employees generate tens of thousands of account statements and other documents, operating a massive Ponzi scheme, a scam in which people are persuaded to invest in a fraudulent operation that promises unusually high returns.

The money Madoff received was never invested but was used by him, his business and others or, as occurs in Ponzi schemes, was paid out to early investors, prosecutors said.

[sndkzyaa]

Keep in mind, Madoff was running this scam for 20 years. That's all the way back to Reagan.

He scammed all through the Clinton years.

[colvinatch]

He looks like Brook's from Shawshank Redemption... hopefully he will end up the same as Brooks did, at the end of a rope!

[sndkzyaa]

If double jeopardy applied in 2004 why did it not apply when Madoof was arrested and convicted of the same crime in 2008-2009. It cannot apply one time then not at another.
Posted by obiden08 at 3:14 PM : Mar 12, 2009

Because now it's after the fact. The scam imploded, and people couldn't withdraw their money.

That led to DIFFERENT charges and an overwhelming amount of evidence.

You have to understand the procedure of pleading double jeopardy. Evidence has to be heard first, then the judge rules whether you're entitled to claim double jeopardy.

Before the scam imploded, there wasn't enough evidence to overcome double jeopardy.

Now with this overwhelming evidence, plus NEW, DIFFERENT CHARGES, Madoff goes to the slammer.

His lawyer could try to plead double jeopardy on the charges that are the same as the 2000 charge. But the judge probably would consider the evidence and overrule it.

It's moot anyway. With all the differenet charges, Madoff is in the slammer for the rest of his life.

[jimahc]

Madoff will probobly go to one of those minimum security white collar prisions. He'll still get to play golf and live very well, on the taxpayers dime.
Posted by jsd330 at 3:14 PM : Mar 12, 2009

Yeah but it will he// for him...having to play with 2 year old golf clubs rather than the latest
titleist clubs..

[sndkzyaa]

After Being reported in 2000 the SEC did not investigate the complaint according to Markopolos. They said they had bigger fish to fry.
Posted by obiden08 at 3:11 PM : Mar 12, 2009

LOL! Bigger than Madoff??????

What bigger fish? Enron? Nope, not investigating them. Andersen Accounting? Nope, ditto. Worldcomm? Nope, Clinton was looking the other way.

Clinton was an expert of using scare tactics to pretend he's frying "bigger fish" that turn out not to exist. Meanwhile, the REAL big fish are getting away.

Same thing on his Pearl Harbor Day 2000 executive order. Said he had a big fish to fry. He needed the FAA to stop pestering those hijackers and focus on what was REALLY important to Clinton - cut down those airline flight delays.

Who was going to hijack any planes anyway? Do you know how many years it had been since a plane was hijacked in the USA???

According to Clinton, it was time to stop wasting taxpayer money fighting something that hasn't happened in years, and start fighting flight delays.

Because, according to Clinton, flight delays were jeopardizing our prosperity.

You remember that. You remember how airline flight delays destroyed our proserity.

You remember that, don't you?

[jsd330]

Madoff will probobly go to one of those minimum security white collar prisions. He'll still get to play golf and live very well, on the taxpayers dime.

[jimahc]

Biggest ponzi scheme of all time...The United Ponzi States of America.

[sndkzyaa]

Following the money trail would probably turn up some real surprises. A proverbial Who's Who in Washington. TOO bad that it will probably be swept under the rug, along with all the rest of the corruption in the Capitol. We can only hope the SEC, and the rest of the crooks get found out, an gotten rid of. Am I right, or am I being too harsh....................Doig
Posted by az97202 at 2:27 PM : Mar 12, 2009

That's why Madoff was in such a hurry to plead guilty instead of bringing out all the evidence during a trial.

His life would have been in danger if the public had to see the list of all those who took money from the charities along with Madoff.

[sndkzyaa]

Seeing how the SEC is under the jurisdiction of the Executive office of government I am going to say Bush or Cheney was the ones responsible for making the SEC back away from Madoff and his Ponzi scheme.
Posted by obiden08 at 2:37 PM : Mar 12, 2009

News flash - Bush was not the president in 2000, Clinton was.

Other than that, I totally agree. The president in 2000 was directly responsible for the SEC giving Madoff a free pass.

Why did Slick Willy do that?

For exactly the reason given. Huge political contributions.

The 2004 report was moot. Madoff was immune due to double jeopardy after he was reported in 2000.

Bush couldn't touch Madoff because of double jeopardy. Clinton gave Madoff a free pass that lasted 8 years.

[liberalameri]

it is about time some of this elite scum started reporteing to jail.

when will george bush be reporting?

[sndkzyaa]

There was no bribe.
Madoff's daughter married a higher up in the SEC, he even BRAGGED about it. Madof bragged about it.
Posted by anti-zionist007 at 2:22 PM : Mar 12, 2009

OK, OK, I made a spelling error.

It wasn't BRIBE, it was BRIDE.

same difference :-)

[sndkzyaa]

Madoff fits the consistent pattern that has emerged from the Clinton administration.

The FBI sent undercover agents to flying schools when the 9/11 pilots were engaging in suspicious behavior. They found nothing.

Enron, Worldcomm, Andersen Accounting, and the other Clinton era scams were going on right under Clinton?s nose. But the Clinton admin saw nothing.

One of the 9/11 pilots was turned in five times to the FAA. The FAA did nothing.

Madoff was turned in on a sliver platter to the SEC in 2000. The SEC did nothing.

The Clinton admin was characterized by ineptness, neglect, and inaction. But they only accuse Bush of inaction before 9/11.

Remind me again. Why did they call him Slick Willy?

[drivelphobe]

Well, Mr. Madoff certainly had a good run and now he has to pay. I bet he thinks it was all worth it. At his age, who really cares if he goes to jail. I find it remarkable that he was able to find so many suckers. I guess that old adage that if it's too good to be true, it probably isn't.

There are most likely a few innocent victims, but I think that most of the investors were schemers themselves and deserve what they got. Perhaps some of these individuals will score on the foreclosure bailout. What a story and how amazingly he pulled it off. The SEC must be run by imbeciles. This certainly inspires confidence to the masses.

[ramos1129]

Let's assign blame where blame is due and our symthathy for those who merit it.

The ones to blame are: (1) Madoff himself for obvious reasons, (2) The SEC - Madoff had connections there in the form of his niece, etc. Somehow, despite numerous notifications, the SEC never took steps to stop this madness; had it acted in a prudent manner, many folks would not have been harmed, (3) There is a saying, "if something sounds too good to be true, then it is no true". Many professional managers wanted to enrich themselves and their funds. They never thought to apply common sense analysis as the whistleblower did years ago. The innocents were the ones who depended on the professional money managers to manage their accounts.

I do not yet know about the family. Remember, it was the sons that turned Madoff in. Had they been participants in the scheme, they would not have done that.

[Vetzero]

Goodbye 'Bernie' boy.

Time to face the rage.

Yer not gonna like where yer goin next June. The jewelry isn't grade A either, it's all chains and bracelets...in stainless steel.

Club Fed isn't what it used to be...it's worse.

Corrections officers will be waiting on you now, hands and foots. Do try and not get them impatient.

Tell yuh what, if they take every dime yuh got...and they probably will...you'll need someone to keep yer commissary tab supplied with cash, don't depend on yer wife, she may be headed for Club Fed herself and I'm not sure yer boys will be any too happy to do that for yuh.

I'll send yuh, oh say, $5.00 a month for envelopes and stamps, ok ?

Now be a model prisoner for us and don't get 'Bubba' too riled up, you know how he gets.

[petesis]

You cannot cheat an honest man. Most of these investors with this guy thought they were gonna make money at a rate higher than other funds. They trusted Madoff because he was "one of them" and because their friends were already in and reporting great results.... He fleeced them like the sheep they apparently were. This guy should rot in prison. Should already have been there.

[jimsar4evr]

I am starting to believe that you are actually a monkey who has picked up on some human traits such as writting and a little bit of reasoning - oldtimer1941

Thank you for flattering me, and I do mean flatter. Monkeys don't have the ability to lie or swindle or embezzle; that is one of those wonderful human characteristics, and monkeys can and do have compassion for their fellow apes, unless they are as deranged as Rush Limbaugh!

[centauri1]

I would suggest that all the investors that Madoff defrauded were simply victims of their own greed to boot. If it was too good to be true, why did not any of them even bother to check just in case? Go figure.

[jimahc]

He'll soon be joining Ken Lay.... in Panama or wherever he is.

[rave_on3]

Don't blame Bush for Madoff.

Madoff had immunity because of Clinton.

Bush couldn't touch Madoff because of double jeopardy.

You can't be charged twice for the same crime. Even if you were acquitted the first time, you can't be charged again.

That's what happened to Madoff. He was turned in during the Clinton administration. But the Clinton admin decided not to take any action.

That gave Madoff immuniity from being charged again.

Thank Bill Clinton for giving Madoff a free pass for 8 years.
Posted by sndkzyaa at 12:58 PM : Mar 12, 2009

Are you making your best effort NOT to make sense?

Was he charged or was he prosecuted? Did he ever go to trial? If he went to trial prior to this, that's news to me. How many times did someone blow the whistle on this guy and when did the SEC finally get off their collective rears to finally do something about it?

Stop being a troll!