March 15, 2009 in Business

Guilty plea a brief victory for those who lost so much

By The Spokesman-Review
 

The anger of Bernard Madoff’s victims spilled onto Manhattan’s Pearl Street on Thursday, freshly heated by a confession that touched all the requisite legal bases but never touched home.

In a plea allocation slightly more than five pages long, the gray-suited, silver-haired villain outlined his preposterous scheme, made all the more absurd by the utter inability of any regulator to unmask what had been unmasked for them. For anyone who would look closely, his financial wizardry was as credible as those old crudely doctored photos that appeared to show a swami levitating.

He just used a “split strike conversion strategy” instead of meditation.

Madoff’s statement had to be comprehensive enough to justify guilty pleas to 11 separate charges, including fraud, money-laundering, perjury, and theft from a pension fund.

It all had a kind of rhythm: “I knowingly,” “I misrepresented,” “I promised,” “I concealed,” and, finally, “I hope I have conveyed with some particularity in my own words, the crimes I committed and the means by which I committed them. Thank you.”No. Please, thank you.

For being “grateful for this first opportunity to publicly speak about my crimes.”

For being “painfully aware that I have deeply hurt many people.”

For your inadequate expressions of sorrow.

Really, nothing Madoff could have said would have salved those investors who crammed the courtroom, or waited outside, and least of all the newly impoverished too poor to make it to the scene of the crime. They cheered when he was led from the courtroom in handcuffs, but that may be the only satisfaction they get.

The government has turned up but $1 billion of the $65 billion that flushed through Madoff’s hands going as far back as the early 1990s, “To the best of my recollection.”

By definition, a Ponzi scheme keeps going, keeps growing, as long as the operator can take in enough new investors to pay the old. The anxiety of more than a few among those clustered on Pearl Street was probably due less to their irrecoverable losses than to the likelihood the government will want back some of the money they received from Madoff.

“Clawback” of their returns might help offset the losses of other investors, but it can also re-injure investors who had only lately regained a portion of the funds entrusted to Madoff over many years. It’s a word that rhymes with “rich.”

What the government can shake out of the Madoff family and his helpmates will depend in large part how he wants to bargain with his life.

He might – should – never walk free if in June he is sentenced to a potential 150 years in jail. One would think he would have made peace with that endgame as the magnitude of his crime multiplied, but Friday his attorney was expected to appeal his post-plea incarceration.

Incredible. Did he even listen to himself when he said, “I realized that my arrest and this day would inevitably come?”

Besides clawback, there’s another legal hammer that should be applied here: disgorgement.

We do not know what negotiations may be going on between his attorneys and prosecutors, but if the result is not the deposit of everything he and his family owns in the middle of the courtroom floor, Madoff may want to stock up on artificial tanning lotion. The Metropolitan Corrections Center may not have a penthouse.


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