Bernard Madoff by liuhongmei


									Bernard Madoff
While Madoff is taken away, the money search begins
 March 13, 2009 By Wayne Tompkins
By: Wayne Tompkins

A   s one chapter closes in the Bernie Madoff saga, the page now turns to a lengthy and complicated effort to find and return as much
money as possible to his victims.

“It’s going to take years to find out and there’s probably not very much,” said Lewis Freeman, a Miami-based forensic accountant. “An
average Ponzi scheme — and there’s none of this magnitude — can easily take five years. You’ve got thousands of investors, you’ve
got assets all around the world. Just to do the forensic accounting and the tracing could easily take three years.”

Madoff, author of history’s largest Ponzi scheme pleaded guilty to all 11 counts he faced in a New York courtroom Thursday, without
any promise of leniency.

U.S. District Judge Denny Chin ordered that Madoff be jailed while awaiting sentencing, scheduled for June 16.

He faces 150 years in prison at sentencing on charges including fraud, perjury and money laundering.

Madoff told 4,800 investors in November that their accounts held $64.8 billion, though their holdings were a “small fraction” of that, the
government said in court papers.

The once-admired Wall Street icon didn’t agree to a plea deal with prosecutors because of their demand that he admit to a conspiracy,
a charge that would require him to say he worked with others, said people familiar with the matter.

Madoff’s decision not to negotiate a deal means the government won’t have his help in determining whether his employees assisted in
the fraud.

“The information crafted by the government does not contain a conspiracy charge, and you can read what you like into that,” Mauro
Wolfe, a Madoff attorney, said, referring to a document listing the charges that filed March 10 in federal court in Manhattan. “The
information speaks for itself.”

Paul Calli, a shareholder at Carlton Fields in Miami who specializes in white-collar criminal defense, said the absence of a deal likely
means that the government will want to drive up the loss figure to adequately reflect the losses to the victims.

“The government may take the position that the loss amount for federal sentencing guideline purposes should include, perhaps, false
profits that he promised investors,” Calli said. “Of course, the Madoff lawyers will contest that.”

Calli noted with interest that prosecutors have taken the unusual position that, although Madoff is pleading guilty, the investigation is
continuing and they are not ruling out the filing of additional charges.

Prosecutors typically review the holdings of all criminal defendants to determine whether those assets are the fruits of criminal activity.

“If the parties are going to litigate over, for example, whether Mrs. Madoff should be able to keep that penthouse, then I think the
government is going to push hard to determine whether she is merely named as a nominee, or that the apartment being in her name in
any way shields that property from being forfeited,” Calli said.

Fred A. Schwartz, partner at Adorno & Yoss in Boca Raton and an expert in complex civil and white collar criminal litigation, said
victims have three avenues available to them within the 11 counts Madoff pleaded guilty to: restitution, forfeiture and fines.

“Each of 11 counts carries a requirement of restitution,” Schwartz said, noting that victims should be able to get restitution ordered by
the judge.

“That doesn’t mean there will be money there to pay, but any assets that he has they can recover without having to go into a civil
lawsuit,“ Schwartz added. “They have a right under the criminal sentencing.”

Schwartz, who grew up as a neighbor of the Madoff family in New York, said two counts for criminal forfeiture have been filed in the
government’s complaint.
“That allows the government to forfeit from Madoff any funds that he took based on a specified unlawful activity,” he said.

Many of the counts also carry fines for $5 million or twice the amount lost by any of the victims.

“Money leaves a trail,” said Alan Goldberg, a forensic accountant and bankruptcy trustee and president of Miami-based Crisis
Management. “How much went in, how much went out, and where did it go to?”

Because investors sent money to Madoff in checks or wires, there is a trail of victim’s money coming in, Goldberg said. “It’s moved
around. He may have parked it offshore, or brought it back in to show it as an ‘investment’ when it really wasn’t. We’re looking for
money that went out of the Madoff family of bank accounts.” That’s why the tracing becomes important, he said.

“What assets did he acquire? Did he buy artwork, did he buy apartment buildings, did he buy companies, or jets?,” Goldberg said. “You
would think that there is a good deal of money in hard assets someplace.”

If investigators find a $10 million check that went to the commodities exchange, for example, they would issue a subpoena for
documentation of the transactions.

“You’re looking at group of financial analysts entering this information into a database, every inbound and outbound transaction and you
need to eliminate the [Madoff] intra-entity transactions,” Goldberg said. “Who put how much in and what did they get back?”

Even when hard assets are found, he said, they may no longer be worth anything near what Madoff paid for them.

“The problem is you find out where it went, but if it went into an apartment complex in Cape Coral, I don’t think anyone wants an
apartment complex in Cape Coral,” Goldberg said. “If he spent $10 million, it may be worth only $1 million today, but at least you’ve
found $10 million, you’ve located the asset and you can liquidate and whatever you get, you get.”

The electronic banking system’s ability to trace payments and funds will enhance the ability to prove the assets were tainted and relate
to the criminal activity, said Martin Goldberg, a partner at Lash & Goldberg who handles both criminal and complex civil litigation.

“The only viable defense they’re going to have is two-fold. They’re going to have to show that either the assets were acquired before
the fraud began or that they are a purchaser for value — that it was purchased at some sort of arms-length transaction from Madoff,” he
said. “That might exclude it from forfeiture.”

Freeman, the Miami forensic accountant, said it’s easy to account for where the money came from.

“That’s the investors and everybody else,” he said.

“You don’t know if you can trust the books and records of the corporation,” he said. “You have to go through the transaction to find out
what happened to the money. You get the black hole occasionally, but in today’s financial world, with a bleep, the money can be in
Liechtenstein or Panama. Then it can be moved three more times.”

Under the USA Patriot Act, the receiver has a number of powers at his disposal, Freeman said.

“The biggest question that every investor has is, ‘When am I getting my money back and how much am I getting?’ ” Freeman said. “As
a receiver, the first thing I look at is a little bit different. My job is to protect and gather the assets. If I can’t get any assets, I have no
money for the investors.”

He said the receiver will set up a claims process and the investors will file a claim, usually within six months of the receiver’s

“But that might sit for two, three or four years, because the receiver is only concerned with getting money,” Freeman said. “If he doesn’t
have any money to disperse, he’s not going to disperse much.”

Freeman said he’s not surprised by Madoff’s decision not to cooperate with the government.

“What’s the benefit to him to cooperate?” he said. “Some who do won’t give you the full story, so you have to stay skeptical.”

Where criminal forfeiture procedures come up short, civil remedies will also be attempted.

“The lawyers will be looking for the deep pockets to recover from, like banks and accounting firms,” Freeman said. “You’re supposed to
know your customer.”

In some people’s cases, victims may be successful in getting a judgement.

“They will find pockets of money, I’m sure,” said James Cassell, vice chairman and head of investment banking at the Miami brokerage
Ladenberg Thalmann. “But some of those people don’t have anything. If they had all of their money there [with Madoff], and were living
off the interest and that was their lifestyle, they lose all of their money but they had been getting income, that income is spent. They
don’t have assets.”
Richard Rosenbaum, a Fort Lauderdale-based criminal defense attorney with Arnstein & Lehr, said Madoff’s guilty plea was likely his
best option.

“There’s always a defense — whether there’s one that would have any likelihood of success is another story,” he said. “This is the type
of case where the best approach is to work with the government as best as you can, try to work a plea agreement. Where the victims
are screaming about any potential plea agreement, the smartest thing the U.S. attorney’s office can do is say, ‘There’s no pleas coming
from here. It’s an open plea to the court.’ ”



Count 1: Securities fraud. Maximum penalty, 20 years in prison; fine of the greatest of $5 million or twice the gross gain or loss from the
offense; restitution.

Count 2: Investment adviser fraud. Maximum penalty, Five years in prison, fine and restitution.

Count 3: Mail fraud. Maximum penalty, 20 years in prison, fine and restitution.

Count 4: Wire fraud. Maximum penalty, 20 years in prison, fine and restitution.

Count 5: International money laundering, related to transfer of funds between New York-based brokerage operation and London trading
desk. Maximum penalty: 20 years in prison, fine and restitution.

Count 6: International money laundering. Maximum penalty: 20 years in prison, fine and restitution.

Count 7: Money laundering. Maximum penalty: 10 years in prison, fine and restitution.

Count 8: False statements. Maximum penalty: Five years in prison, fine and restitution.

Count 9: Perjury. Maximum penalty: Five years in prison, fine and restitution.

Count 10: Making a false filing with the Securities and Exchange Commission. Maximum Penalty: 20 years in prison, fine and

Count 11: Theft from an employee benefit plan, for failing to invest pension fund assets on behalf of about 35 labor union pension
plans. Maximum penalty: Five years in prison, fine and restitution.

Source: The Associated Press

Wayne Tompkins can be reached at (305) 347-6645. This report was supplemented by reporting by Bloomberg News

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