Madoff Faces Life In Prison

The federal sentencing guidelines in this article appear to be correct. I didn't bother doing the calculation, since 10 years for a 70 year old is effectively a life sentence.

If convicted, Bernard Madoff faces life in prison

UPDATE - before someone else comments to tell me that 80 is not a life sentence, please note that I specifically said I did not do the calculation. My point was, that the sentence will be so long that it will be a life sentence. I understand that people live to be 80.

The sentencing guidelines are complicated, and the sentence is determined by adding up points based on a variety of factors. Number of victims, dollar amount of the losses, etc. A quick review of the guidelines, which are complicated, total offense level is off the chart. Yes, the sentencing guidelines chart only goes to 43 points, which is a life sentence, literally, for most crimes. It is difficult to get that high. Very difficult. By my calculations, on only ONE count of an indictment, the point total would be above 50.

There are deductions, and other adjustments, but someone convicted of a fraud of this magnitude gets a sentence that is more than 30 years. As I said, a life sentence.

SIPC Disappointment Down the Road for Madoff Investors

There is such a fundamental misunderstanding of SIPC in the investor community that it is sometimes frightening. SIPC is not a Congressional bailout for investors who lost money. It is not insurance. Its sole function is to protect investors if a brokerage firm goes out of business due to bankruptcy or other financial difficulties and customer assets are missing.

SIPC's role is to return the customer's cash and securities to them from the failed firm. That's all it is. SIPC will get you back your cash (up to $100,000) and will replace your missing securities (up to $500,000).

SIPC is NOT an insurance company, and it does NOT cover an investor's losses that were caused by fraud on the part of the broker dealer.

And that leaves Madoff's investors in the lurch. There will be some interesting twists in this case, but on its face, this is a fraud, not a failed brokerage firm. While SIPC will make sure that the assets that were in the accounts are returned to the investors, the problem is obvious - the firm's statements are undoubtedly fraudulent, and there were no assets in those accounts. It remains to be seen what SIPC will do in that situation.

And, it will be amazing, despite recent press reports, if Judge Stanton opens the SIPC case to investors in the feeder funds. The simple fact is that Judge Stanton cannot do that. It would take, literally, an Act of Congress to expand SIPC in that manner, and for Madoff investors in feeder funds, that is not going to happen.

However, investors in feeder funds do have another alternative - they can sue the feeder funds. Those funds are not bankrupt, and they should have insurance to cover negligence. At the same time, some of those investment agreements attempt to exclude negligence, so feeder fund investors have to be careful, and each claim has to be examined carefully.

There are a lot of law firms out there looking to represent Madoff direct and indirect investors. Ask questions, ask for their background, ask for their experience in securities fraud cases, in ponzi scheme cases, in dealing with brokerage firm issues, and SIPC cases.

Then call us.

Madoff's Cash Stash

Keep the source of this tidbit in mind, but one newspaper is reporting that investigators believe that Madoff has put millions of dollars offshore, and according to this article, there are accounts at Mellon Bank that appear to have sent and received money from offshore locations.

The source is the New York Post, in its story Madoff's Cash Stash.

Fund Blames US Regulators for Losses

You gotta love the Madoff Middlemen. Now they are blaming the regulators for their own failures, even from overseas. A British investment fund, which apparently lost something like 30 million dollars, is screaming about the "systemic failures" in the US regulatory system.

The SEC and FINRA certainly blew this. (Why does no one talk about FINRA's culpability here? They are the primary regulator for Madoff's broker-dealer, not the SEC). However, the SEC was not created to protect 300 million dollar hedge funds, and is certainly not in the business of protecting hedge funds that are located in foreign countries.

Those investment institutions are considered to be experienced enought, and financially educated enough to protect themselves, to conduct their own due diligence and to make their own investment decisions. The US securities statutes recognize the ability of investment professionals to make their own decisions, as do the investors who give these managers their money to invest.

The SEC blew this, but that does not excuse, or even address, the failure of these well paid "investment managers" to recognize a Ponzi Scheme when it was staring them in the face. And, it is comments like this, and the fact that other professionals did spot the fraud, that leads to the question

"What the heck did you do for your 2% plus 20%?"

If the fraud was so easy to spot that the SEC should have stopped it, let's take a look at the fund's due diligence file when it investigated, recommended, and maintained its investment in Madoff.

That is where the blame lies.

Investment fund slams US regulators

Madoff Insane?

The Madoff Mess has moved to the gossip columns. The NY Daily News has a gossip column that "reports" that Madoff may try a sanity defense, some sort of mental break that caused him to do what he did.

Keep the source in mind, but that defense is not very likely to work. Insanity defenses in financial fraud cases are rare. In fact, I can't even think of one. Any thoughts?

The Start of the Mortgage Meltdown

With landscapers claiming $150,000 a year incomes, WaMu built a home mortgage business that eventually collapsed in a sea of bad mortgages. The NYT has a story today that provides an intense insight into the home mortgage business, and the collapse of Washington Mutual.

By Saying Yes, WaMu Built Emplire on Shaky Loans

No Damages in Suit vs. SEC

I didn't want to be the first to say it, but now that Professor Chemerinksy of UC Irvine School of Law has said it out loud, there is no stopping me - it seems that no one sees a viable suit for money damages against the SEC for the Madoff Mess. There just isn't a statute or rule of law that would support such a suit.

Not to mention sovereign immunity. Remember, you can't sue the King.

I wish Howard all the luck in the world with this one. If he makes it through discovery we will all be saying how innovative he was in bringing the suit, but for now, not so much.

Nice catch by Securities Docket.

Madoff Middlemen Under Investigation

WSJ: Investigators probing the Bernard Madoff investment scandal are
beginning to turn their attentions to the middlemen who attracted
billions of investment dollars to Mr. Madoff's funds, said a person
familiar with the government effort.

Yup, no shocker there. I blogged about this here and here

Securities Fraud Prosecutions Lowest since 1991

More troubles for Cox? Since he is gone in a couple of weeks, it probably doesn't matter, but there is a lesson here. Criminal prosecutions for securities fraud are down significantly. 133 prosecutions this year, vs. 437 in 2000, and 513 in 2002.

There are any number of factors that can cause this decline - I suppose it could be due to less actual securities fraud, but I doubt that is the case. More likely is the explanation that since the Justice Department gets is securities fraud cases from the SEC, the new policies at the SEC, which are said to cause a decline in civil enforcement actions, have also led to a decline in criminal prosecutions.

We need to know more about the decline. While the press is using this as a negative, it might actually be a positive. Has the government rooted out the bad cases, and now only bringing the ones that should be brought?

Let's hope that Mary Shapiro doesn't use this statistic to force the Staff to bring more cases, just to get the numbers up.


Securities Docket has more.

Securities Fraud Prosecutions Lowest since 1991

More troubles for Cox? Since he is gone in a couple of weeks, it probably doesn't matter, but there is a lesson here. Criminal prosecutions for securities fraud are down significantly. 133 prosecutions this year, ves. 437 in 2000, and 513 in 2002.

There are any number of factors that can cause this decline - I suppose it could be due to less actual securities fraud, but I doubt that is the case. More likely is the explanation that since the Justice Department gets is securities fraud cases from the SEC, the new policies at the SEC, which are said to cause a decline in civil enforcement actions, have also led to a decline in criminal prosecutions.

We need to know more about the decline. While the press is using this as a negative, it might actually be a positive. Has the government rooted out the bad cases, and now only bringing the ones that should be brought?

Let's hope that Mary Shapiro doesn't use this statistic to force the Staff to bring more cases, just to get the numbers up.


Securities Docket has more.