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April 14, 2021

Infamous Ponzi schemer Bernie Madoff dies in prison after spending his final dozen years behind bars

As reported in this Fox Business piece, headlined "Bernie Madoff, mastermind of vast Ponzi scheme, dies in federal prison at age 82," an infamous white-collar offender passed away behind bars today.  Here are the basics:

Bernie Madoff, the notorious architect of the biggest investment fraud in U.S. history, has died at age 82.

Madoff was serving a 150-year sentence at the federal medical care center in Butner, North Carolina, where his attorney said he was being treated for terminal kidney failure. Last year, Madoff's attorney filed court papers seeking the 82-year-old's release during the coronavirus pandemic, saying he suffered from end-stage renal disease. The request was denied....

A decades-long force on Wall Street, Madoff shocked the world when he pleaded guilty in 2009 to running a vast Ponzi scheme that prosecutors said swindled thousands out of their life savings. The scheme began in the early 1970s, and by the time Madoff was arrested in December 2008, had defrauded as many as 37,000 people in 136 countries out of up to $65 billion.

His victims included the famous – film director Steven Spielberg, actor Kevin Bacon and Nobel Peace Prize winner Elie Weisel – as well as ordinary investors.

Madoff said he started the fraud, in which he appeared to deliver steady returns to clients, but was actually using money from new investors to pay off existing shareholders, in the 1990s because he felt "compelled" to give investors solid returns despite the recession and weak stock market. (Prosecutors contend he started defrauding investors much earlier)....

Prior to his downfall, Madoff was viewed as a self-made and respected figure among financial professionals as the head of the seemingly successful Bernard L. Madoff Investment Securities firm. He also served as the chairman of the Nasdaq Stock Market in 1990, 1991 and 1993.

In addition to being sentenced to the maximum 150 years in prison, Madoff and his family took a major financial hit: A judge issued a $171 billion forfeiture order in June 2009 requiring the disgraced financier to give up his interests in all property, including real estate, investments, car and boats. Under the arrangement, the government also obtained his wife's interest in all property, including $80 million that she claimed belonged to her, leaving Ruth Maddoff with $2.5 million in assets.

The decline and fall of Madoff also took a toll on his family. The oldest of his two sons, Mark Madoff, died by suicide on the second anniversary of his father's arrest in 2010. His other son, Andrew, died from cancer at age 48 in 2014. Mark Madoff's suicide prompted his mother, Ruth Madoff, to cut off all communications with her husband....

Meanwhile, Madoff's younger brother, who helped run the business, was sentenced to 10 years in prison after pleading guilty to one count of falsifying false records and one count of conspiracy to commit securities fraud. He was released from federal custody last year. "You know there hasn’t been a day in prison that I haven’t felt the guilt for the pain I caused on the victims and for my family," he told The Washington Post in 2020 when his attorney asked for his compassionate release. He said his dying wish was to reconcile with his grandchildren and explain his actions.

I will be interested to see if anyone has anything especially new or interesting to say, circa 2021, about Madoff's crimes and federal punishment.  In addition to linking to some prior posts below, I will be content here to just note that Madoff's lawyer back in June 2009 requested a "prison term of 12 years — just short of an effective life sentence."  Madoff died almost exactly 12 years since the time of that request, though he had served less than 10% of the 150-year prison sentence that Judge Chin gave him back in June 2009.

Some of many prior posts about his initial sentencing:

Some prior posts about his request for compassionate release:

April 14, 2021 at 11:56 AM | Permalink


To the extent Madoff was blamed for contributing to the financial crisis, or served as a diversion that meant less scrutiny for the actual perpetrators, then I suppose I have some sympathy on that score. But only the smallest amount of sympathy possible (the Planck amount?). And even to the extent either or both of those things did happen, AFAIK, the judicial system had nothing to do with it. Judge Chin is a straight shooter too and I'm not aware that he let those kind of improper factors influence the sentence.

In my view, the sentence was appropriate at the time—financial crisis or no—based on the severity of the crime, which can't be overstated, and Madoff's basically total lack of contrition. I don't think the fact that he passed away now changes anything either. It's not like Judge Chin wasn't aware of his age or what his actuarial lifespan was at the time of sentencing. To me, his age if anything was an aggravating factor. For juveniles especially, and even for people a little older, there are certainly some reasonable arguments against life or extremely long sentences. For example, they may have lacked maturity or good judgment at the time, but that won't be a concern once they've aged out of it. Madoff, in contrast, started his fraud when he was already *middle aged*. So he should have known better from the get-go. And then he kept on doing it for multiple decades. The only thing that forced him to stop was the financial crisis making his scheme untenable. Again, it's not like he ever had second thoughts on his own.

Some of the things that happened to Madoff's family members were unfortunate for sure. But if they want to point the finger of blame at anyone, it has to be him. Again, he knew better—and more importantly he knew the obvious consequences—and nobody ever coerced him into his fraudulent ways.

Posted by: hardreaders | Apr 14, 2021 10:15:08 PM

In general, I think nonviolent offenders are overpunished. But Madoff deserved everything he got, for a host of reasons:

The size of his scheme.
The fact that he got other people involved in it, even family members, and that at the time he did, he hadn't told them they were getting into a criminal scheme
The fact that there was no reason he needed to do it. In the case of a CEO whose company gets into trouble, one can at least think "he thought he could pull it off and everything would be OK." This does not apply to Madoff.

Posted by: William C Jockusch | Apr 15, 2021 7:39:48 AM

One of my favorite parts of the Madoff tragedy is that Bernie's married mistress (Sheryl Weinstein) invested all of her family's wealth in his investment funds. He never told his long-term mistress that his funds were only Ponzi schemes. So, when the house of cards collapsed, she and her family lost everything, like so many other people. Her marital residence in Westchester County, New York was foreclosed upon. But she recovered from her losses in that quintessentially American way: she wrote a book about her affair with Bernie, entitled: "Madoff's Other Secret: Love, Money, Bernie and Me".

Posted by: Jim Gormley | Apr 16, 2021 10:07:27 AM

Given that Madoff only had an estimated remaining life expectancy of 12 years at the time he was sentenced (which proved to be correct!), it should be noted that one of the purposes of the 150 year sentence was to deter others from ever considering doing criminally what Madoff did. The 150 year sentence conveys that point far better than a 12 year sentence would have.

Posted by: Jim Gormley | Apr 16, 2021 10:12:17 AM

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