Restitution in the Bernie Madoff Fraud Case: A Case of Too Little, Too Late!

As the Bernie Madoff fraud case demonstrates, restitution often comes too little and too late in white collar crime cases.  You will recall that Madoff, the "king of the ponzi scheme," was sentenced in 2009 to serve 150 years in prison for masterminding the largest investment fraud scheme in U.S. history. 

Tragically, Madoff's tough prison sentence did little to assuage the losses inflicted on hundreds of crime victims, many of whom were elderly people who saw their life savings taken away.  I will never forget the report of one elderly victim who was forced to return to work as a grocery store clerk after losing his retirement nest egg to Madoff's crime. 

Since Madoff's sentencing, a bankruptcy trustee, assisted by the U.S. Marshal's Service, has been selling off Madoff's property, including homes, jewelry, and even his clothes, to try to help make some restitution to Madoff's victims.  (I started to bid on something in the online auction, but the red tape was too complicated!)  Unfortunately, this restitution effort is not enough.  For instance, according to reports, last week, the trustee distributed $312 million to victims, but this constituted just pennies on the dollar compared to the total amount stolen.  

Also, according to reports, up to one-half of the $17.3 billion taken by Madoff may ultimately be recovered and distributed to victims, but only after time-consuming litigation.  However, many of the elderly victims simply don't have the time.  At least eight of Madoff's elderly victims have already died during the past couple of years.  As a result, sadly, many of Madoff's victims will never be made whole.

And sadly, this case shows that restitution often comes too little and too late in white collar crime cases.

White Collar Crime, Sentencing, and Upward Departures

Many of you probably recognize this photograph of Bernie Madoff, the "investment fraud king," who is presently trying to serve several lifetimes in prison, (i.e. he was sentenced to serve a whopping 155 years in prison!) But did you know that there are "miniature Madoffs" all over the country? And did you also know that the trend is toward enhanced sentencings in many of these white collar criminal cases?

For instance, here, in Augusta, Georgia, the local media are publishing reports about a local insurance agent who is slated to be sentenced in federal court soon. The agent pled guilty in federal court a few months ago after reportedly admitting to defrauding friends and customers, (many of whom are elderly), out of about $2 million. Just like Madoff, the agent reportedly promised to invest the customers' money, but then spent it on himself.

In this case, like many other fraud cases around the country, the government is seeking an upward departure from the agent's federal guidelines sentencing range. And believe me, while we may all pray for an "upward departure" when we die, an upward departure in federal sentencing is not a good thing! It means that this defendant may face a significantly higher sentence than in a typical criminal case. And again, this is the trend, for better or for worse, (depending on your perspective), for white collar criminal defendants. In other words, criminal defense lawyers are no longer assured of probationary sentences for their clients.

What do you think about this trend toward tougher prison sentences in white collar crime cases? I'll bet we already know Bernie Madoff's opinion on this subject, don't we!?

Madoff Aide Faces Fraud and Tax Charges

An old, chauvinistic saying goes: "Behind every good man is a woman." However, as to ponzi fraud king, Bernard Madoff, maybe this old saying should read, "Behind every bad criminal is ....an accountant!"

Madoff's long-time assistant, and accountant, Daniel Bonventre, has reportedly been arrested and charged this week with federal securities fraud and tax charges. Bonventre is essentially accused of being Madoff's co-conspirator, or right-hand man, who allegedly helped his boss "cook the books" and move around all of Madoff's ill-gotten gain which had been fraudulently obtained from investors.

It remains unclear whether a "house will fall" on still other associates of Madoff. But this latest case reveals that the feds are still probing whether or not other Madoff associates are criminally culpable. It will be interesting to see what happens next in this fraud case of the century and who else may still be "behind" Madoff!

Corporate Fraud and Conspiracies: Who Do you Prosecute?

I am sorry about posting again the photograph of convicted ponzi scheme defendant, Bernie Madoff. Based upon his crimes, he doesn't merit the attention! But his fraud case presents a number of interesting issues.

For example, in Madoff's case, it has been reported that investigators are still out there "looking at" some of Madoff's relatives and associates to determine whether to try to lock up anyone else. This raises an interesting question: How do agents and prosecutors determine exactly who all to target in a criminal investigation?

As a former federal prosecutor, I had a fairly simple, straightforward approach. I generally "followed the money" and, unless you were a top executive, or ringleader, who clearly directed and knew about, and directly profited from, the fraudulent scheme, I probably wouldn't try to "make your day" by prosecuting you, even if you had some inkling as to what was going on.

In other words, as a former corporate fraud prosecutor, I generally focused on prosecuting only the primary movers and shakers who put the ill-gotten gain in their pockets and I left alone the salaried, lower level employees, such as secretaries or book-keepers, who merely did what they were told to do. I also generally stayed away from prosecuting family members, unless they were clearly key participants in the fraudulent scheme.

But you need to be aware that other federal prosecutors sometimes utilize a different approach! In other words, I have known some government prosecutors who aggressively target everyone who participated in the scheme. Then, they gamble that they can "roll over" the lower level employees against the top targets. Please don't get me wrong: Prosecutors should be aggressive. However, in my opinion, some prosecutors simply go too far! They allow their own competitive spirit and healthy egos to determine who should be targeted. They also sometimes ignore the human costs.

And can I be honest here? In my opinion, some overly aggressive government prosecutors also lack appropriate human compassion for the people whose lives they are ruining! I will never forget the inconsiderate words of one prosecutor about a target: "It must s_ _ k to be him!"

As a result, if anyone "out there" who is reading this post is a family member or associate of Mr. Madoff, you should get down on your knees and pray that you are being investigated by a government prosecutor who possesses both some common sense and a little human compassion! Otherwise, you may have to face the consequences of being persecuted by a federal prosecutor who is simply interested in putting more notches in his or her holster!

What do you think?

Investment Fraud and Ponzi Schemes

Have you ever heard of Charles Ponzi? No, you youngsters, I am not referring to that cool character, Fonzi, from the 1950's-based t.v. series, "Happy Days!"

Instead, I am talking about the original con artist, Charles Ponzi, who was prosecuted for investment fraud back in the 1920's, and for whom the term "ponzi scheme" is named.

According to Wikipedia, a ponzi scheme refers to any "get rich quick" investment scheme in which the con artist falsely promises a high investment return, which never materializes, and then uses some of the investment money obtained from later investors to repay some of the earlier investors, in order to keep the scheme afloat.

The original Ponzi's crimes pale in comparison to the crimes committed by Bernie Madoff, who was sentenced in June to serve a whopping 150 years in prison. And did you hear the news earlier today that one of Bernie Madoff's assistants, David Friehling, has entered a guilty plea for his role in helping Madoff rip off investors for a record $64.8 billion, according to Wikipedia?

Ponzi may have had the crime named after him, but it appears that Madoff, with help from others, perfected it. Maybe we should re-name it the "Madoff scheme," in his (dis)honor. And trust me, Fonzi wouldn't believe Madoff's crime was cool!

Bernie Madoff and The "Corporate Perp Walk"

By now, we have all seen photographs in the news of Bernard "Bernie" Madoff, the convicted swindler and ponzi scheme perpetrator who ripped off billions of dollars from investors and is now serving a 150 year prison sentence. In my opinion, his crimes are deplorable and he is despicable. But what did you think about the staged photographs taken of Madoff, shortly after his arrest, while he was in handcuffs? Was this practice proper? In the criminal justice lexicon, this staged practice involving government agents parading an arrested white collar criminal (or perpetrator) before news media photographers is known as the "corporate perp walk." The apparent goals include fostering a public image of guilt for a prominent public figure and perhaps whetting the public's appetite for a guilty verdict. As a former federal prosecutor, even as to those, like Madoff, accused of heinous crimes, I did not believe in allowing government agents to conduct a "perp walk." I believe that, if they are guilty, then you should prove it inside the courtroom, not outside the courthouse. I once recall a situation in which agents, intent on getting their news headlines and "perp walks," raided a small town bank in south Georgia, while armed and wearing raid jackets. The agents must have resembled storm troopers. The incident terrified innocent bank customers and bystanders, along with the arrested bank officials. It was a disaster! And it was unethical and perhaps unconstitutional, in my opinion, to stage such a "perp walk." As to Madoff, while we all are disgusted with his crimes, and while we may believe 150 years may be too lenient, we still can believe the government should go about its job in a professional manner. And, in my opinion, that means dispensing with the "perp walks."