Prosecutors Turn Up The Heat On Madoff

Ponzi schemes almost always have insiders, and sometimes the insiders may not even know they’re insiders.

In an extraordinary revelation, federal prosecutors said this afternoon that Bernard Madoff took overt steps to distribute bonuses to preferred family,  friends and employees after he realized the Ponzi he created was crashing down around him

“[When] the defendant’s office desk was searched, investigators found approximately 100 signed checks totaling more than approximately $173 million, ready to be sent out,” said prosecutors Marc Litt and Lisa A. Baroni.

The assertions were made in a letter to Judge Ronald L. Ellis.

“The only thing that prevented the defendant from executing his plan to dissipate these assets was his arrest by the FBI on December 11,” Litt and Baroni said. The letter was signed by Litt, under the authority of  Acting U.S. Attorney Lev. L. Dassin of the Southern District of New York.

Today’s letter by prosecutors marked the first public disclosure that Madoff already had drafted and signed checks, a situation that could have led to an even greater calamity had the checks been mailed and cashed.

Prosecutors earlier had said only that Madoff had discussed distributing up to $300 million to preferred individuals.

Here is the  letter from prosecutors.

Had the preferred parties received and deposited the checks, Madoff’s assets would have been depleted by $173 million, putting family members, friends and employees in the position of getting sued to disgorge illegal profits.

Prosecutors said earlier this week that Madoff and his wife, Ruth, sent more than $1 million in jewelry and other items to friends and family after his arrest. The government viewed it as a bail violation, saying Madoff should be jailed.

Madoff’s attorney, Ira Sorkin, explained Madoff’s behavior as an innocent mistake.

Today’s filing by prosecutors makes it clear that the government believes home-detention with electronic monitoring weren’t enough to keep Madoff in line while awaiting trial. The gloves are off, and prosecutors now are playing hardball.

“The nature and circumstances of the offense charged are unprecedented,” prosecutors told the judge. “The defendant has admitted to perpetrating one of the largest, if not the largest, Ponzi schemes in history — a scheme that required the defendant to lie routinely to thousands of people and a scheme which has caused extraordinary damage to individuals, families and institutions all over the world.”

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5 Responses to “Prosecutors Turn Up The Heat On Madoff”

  1. SFO opens UK Madoff investigation
    http://news.bbc.co.uk/1/hi/business/7817584.stm

    The Serious Fraud Office has said it is to open an inquiry into Bernard Madoff’s business operations in the UK.

    The investigation will focus on UK victims and any offences that may have been committed in the UK, the SFO said.

    Mr Madoff is accused of running a fraudulent $50bn (£33.2bn) scheme that wiped out many investors.

    The SFO has called for anyone who has had dealings with any of Mr Madoff’s UK businesses – including ex-employees – to assist in the investigation.

    “There were many UK and European investors in Madoff’s funds and in funds under his management,” said Lisa Osofsky, former Deputy General Counsel for the FBI, now working for consultants Control Risks.

    “This will be an easy jurisdictional hook for the UK authorities. Not only are there UK victims, but likely UK contracts, promises made here, and losses here.”

    I wonder how many other non-US investigations will be happening in the future?

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  3. I have been told this will also involve people in the Middle East and Asia besides the UK, France, Spain and Russia. As to what extent and size of dollars involved is not known at this time. Investigations are just getting started.

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  4. WALL STREET IS JUST THE SAME…CORRUPT CEO’S

    LEGALIZED FRAUD IS WHAT IT IS!

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  5. I have been told this will also involve people in the Middle East and Asia besides the UK, France, Spain and Russia. As to what extent and size of dollars involved is not known at this time. Investigations are just getting started.

    Hi Lynn,

    Just testing the new “Quote Comments” feature. It’s a WordPress plug-in by
    Joen Asmussen. I tested it last week, but couldn’t get it to work.

    An update was released this morning, and now it is working.

    Back to our regularly scheduled programming . . .

    Patrick

    P.S. Madoff may found out at noon today if he’ll be jailed for alleged bail violations.

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