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June 27, 2012

"Madoff's Brother to Plead Guilty to Criminal Charges"

The title of this post is the headline of this breaking Wall Street Journal story, which gets started this way:

The brother of convicted Ponzi scheme operator Bernard Madoff will plead guilty to criminal charges Friday, marking the first time a family member has admitted guilt aside from Mr. Madoff himself since the fraud came to light 3½ years ago.

Peter Madoff, who worked as the Madoff firm's chief compliance officer and senior managing director, is expected to plead guilty to two charges at a hearing Friday, including falsifying the records of an investment adviser and conspiracy to commit securities fraud and other crimes.

As part of an agreement with prosecutors, Peter Madoff has agreed to a sentence of 10 years in prison, prosecutors said in a letter to U.S. District Judge Laura Taylor Swain, which was filed on Wednesday.  He also has agreed to forfeit about $143.1 billion, prosecutors said.

I trust I will not be the only one who wonders about and sees the irony in a mega-fraudster like Peter Madoff, thanks to the exercise of prosecutorial charging/sentencing discretion, is now apparently going be serving just 10 years in federal prison (actually, probably less than 9 years given good-time credits) while many low-level federal crack offenders are still serving their second or third decade of federal prison time because a federal judge lacked any sentencing discretion to impose a lower sentence deacdes ago under then-applicable mandatory minimums and/or then-binding mandatory guidelines.

June 27, 2012 at 05:36 PM | Permalink

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Comments

"Forfeit $143.1 billion" . . . which $143.1 billion would that be? While we're at it, why not have him agree to pay off the entire Federal Debt, cover all Federal deficits for the next 666 years, and finance a manned expedition to Pluto?

Posted by: William Jockusch | Jun 27, 2012 11:03:00 PM

Doug, isn't it possible that Peter Madoff is genuinely not guilty but decided he can't take a chance at trial?

Posted by: Herodotus | Jun 27, 2012 11:39:01 PM

@Herodotus: The statements Madoff sent to clients were totally fabricated. It is tough to imagine that even the most cursory of audits would have failed to uncover the fraud. As Madoff's head of compliance, it was Peter Madoff's job to ensure the business was compliant with the law. From the facts that have come out, it wouldn't have taken much diligence to smell a rat. Indeed, many in the industry had doubted Madoff's results before the law finally caught up with him. The notion that Peter Madoff is being railroaded into an unjust guilty plea doesn't pass the laugh test.

Posted by: Marc Shepherd | Jun 28, 2012 8:27:24 AM

What you suggest is surely possible, Herodotus, but I share Marc Shepherd's instincts that Peter's fear of a trial was more based more in concern for a rightful conviction than a wrongful one. Moreover, my main question is not so much why would Peter Madoff make/take this deal, but rather why would the feds agree to allow him to cap his sentencing exposure at only 10 years. Of course, the answer to that question may be that it was federal prosecutors who were unwilling to take a chance on trial and thus gave Peter a (huge?) sentencing break in order to garner a more certain (and swifter) outcome.

Posted by: Doug B. | Jun 28, 2012 9:05:59 AM

Prof. Berman. I am not so sure there is any irony given that there are many more defendants who are not serving a minimum mandatory at all because the government did not allege an amount of drugs that implicated a MM for whatever reason. Perhaps for some of the same reason(s) that Madoff was offered a plea deal. I have no inside track on this case, but surely his offer was not simply because they could give him less time, which is something that does happen in the drug realm for some defendants.

Posted by: David | Jun 28, 2012 9:54:52 AM

Given his age (around 70 I think), 9 years is a long time. It is possible that the government could prove he improperly trusted his brother and didn't due the typical due diligence required of a compliance officer, but could *not* prove he actually knew about the Ponzi scheme... that is what the indictment sounds like to me.

Posted by: Anon | Jun 28, 2012 12:00:01 PM

Anon, I agree. It seems likes they are trying to go the lack of due diligence route in light of the fact that they may not be able to reasonably prove he was aware of the scheme.

Posted by: John S | Jul 6, 2012 11:21:21 AM

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