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December 20, 2009

Potent punishments for ponzi players after Madoff mess

This local article from Florida, which is headlined " Ponzi convictions are weightier now," provides an effective window into the modern dynamics surrounding sentencing for a certain class of white collar offenders.  Here is how the effective article starts:

It's a bad time to be picked off for running a Ponzi scheme. Once brushed off, white-collar scams with real victims are now being treated as serious criminal enterprises by both prosecutors and judges operating in a post-Madoff world.

Getting out on bail is tough and sentences are getting longer. Compounding the situation for defendants in federal cases is that there is no such thing as parole.

Last week, three Sarasota residents -- Beau Diamond and John and Marian Morgan -- were indicted by a federal grand jury on 18 felony counts each. They now face the prospect of months of dreary trial preparation, or attempts to do post-indictment plea bargains in which the government has a stronger hand.

They join Arthur G. Nadel, another Sarasotan who has been in a Manhattan jail cell since early this year, charged with 15 counts of securities, wire and mail fraud and now awaiting an April trial.

Today's Ponzi schemers face a "perfect storm," says Bill Branscum, whose Naples-based Oracle International specializes in hunting down international financial assets for victims. "You've got law-enforcement people who are really doing a good job. You've got prosecutors demanding serious penalties. You've got judges who are hammering these people at trial," he said.

On top of that, because of the record-breaking Ponzi scheme masterminded by New York's Bernard Madoff -- not to mention the 150 years he was sentenced to serve -- "you've got people everywhere in the news talking about Ponzis and pyramids, which really was not part of the dynamic two years ago," Branscum said.

December 20, 2009 at 10:25 PM | Permalink

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Comments

A few years ago just after the turn of the century I was hired to perform opposition research in a Texas state rep campaign where the father of the incumbent had run a Ponzi scheme and his son was implicated in hiding stolen assets as an unindicted co-conspirator. The USA chose not to go after the sitting state rep, I was told, because their priority was restoration of victim assets instead of maximizing punishment and Daddy was cooperating with authorities. Daddy's punishment was relatively light - though he did time, I don't recall how much - but his co-conspirators were all let off the hook for the sake of returning stolen assets.

That instance makes me wonder if there is a tradeoff between harsh punishments for Ponzi schemers and victim restitution? Was little Madoff money returned because he'd spent it all, or because the harsh sentence meant he had little incentive to tell them where he'd hidden it?

Posted by: Gritsforbreakfast | Dec 21, 2009 8:39:56 AM

Grits. That is the question you could ask about many things. It's the reason why at the end of the day I oppose SC 123D approach. There is no doubt that for some people stiffer sentences will act as a deterrent. But for others it will just drive the problem further underground. Look at what happened when abortion was illegal. You change a problem that is difficult but manageable into one that becomes intractable and ultimately, in society where democracy is not strong, into insurgencies. This is not an argument that the guilty should go free. It's making the argument that at some point in time harsh penalties become counterproductive to the social ill they were meant to address.

Where that point is of course a debatable question. I certainly think that white collar crimes have been, on average, taken too lightly. OTOH 150 years is excessive in the other extreme.

Posted by: Daniel | Dec 21, 2009 2:06:53 PM

I think you're right on the mark there Daniel. It's not an easy task to put in place effective deterrents, but somehow we need to get the balance right. I think we've waited far too long to turn the heat up on white collar crimes. However, '150' years for Madoff is just ridiculous. Might as well make it 500 years.

Posted by: Doona Cover | Dec 21, 2009 2:26:21 PM

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