Compliments of Mark Anderson of Andertoons
Probably everyone has heard about federal and state crimes but the majority of people doesn’t differentiate them. Let’s make it clear and define both of the terms.
Federal crime is an illegal act that is made against U.S. federal legislation and is prosecuted by federal criminal law. Federal crimes are investigated by:
- Internal Revenue Service (IRS)
- Federal Bureau of Investigation (FBI)
- Drug Enforcement Administration (DEA)
When federal cases go to trial they are prosecuted by United States Attorney in each judicial district in accordance with already established laws. Federal crimes can range from illegally downloading songs from Internet to RICO, drug trafficking, corruption or immigration crimes.
On the day of Peter Madoff’s sentencing, it is only fitting that the victims be heard. In a stark contrast to the image of the man portrayed by those who wrote in support of Peter Madoff, Document 298 filed by the U.S. Department of Justice on December 19, 2012 contains eleven additional victim impact statements that were presented to the Honorable Laura Taylor Swain.
Perhaps you have the impression that all of the Madoff Victims were either very wealthy individuals or institutional investors. While it’s clear that many of the victims fit this profile, it was painful to read about the financial position that many of these folks now find themselves in.
The first Impact Statement was submitted by email to the U.S. Justice Department by Marcia Ellis on behalf of Victim Martin & Marcia Ellis. The Ellis couple was comfortably retired and living in Maine when they learned from their daughter that they had lost all of their money in the Madoff Ponzi Scheme. Their losses extended to brothers, sisters, grandmothers, grandfathers, aunts and uncles. The Ellis Family filed amended tax returns with the IRS which were rejected. An appeal, which took them more than two years, resulted in a a tax adjustment of only 75% of their actual losses.
Mrs. Ellis now describes her life as one of:
“discount stores and living as in expensively as we can. Will we be able to support ourselves in our golden years – we can not plea bargain that reality away”.
The second victim statement came from Jill and Nancy Miller and was filed in order to express their dissatisfaction with the sentencing extension that Peter Madoff received from the court in order to be able to file amended tax returns with the Internal Revenue Service. The victims reported that Mr. Madoff was not using his time to get his tax situation resolved but rather:
“he was out an about enjoying a leisurely lunch in an expensive upper east side restaurant where many of his victims would like to eat but can’t afford to. Yet miraculously he can. I saw him personally eating in this restaurant. He has nerve showing his face and flaunting his freedom (extra). I hope he savored the food cause that’s not what he will get in PRISON!”
Perhaps the most heart breaking Victim Impact Statement was iled by Morton J. Chalek, a World War II Veteran. Mr. Chalek’s short statement made such an impact that it has been included in its entirety:
I welcome the opportunity to vent my spleen regarding the Madoff fiasco.
In the way of an introduction:
- When Pearl Harbor was bombed, I stood online overnight in order to enlist in the Air Force. I then flew 23 combat missions.
- After I was discharged, I worked hard, built a successful business and saved enough for a comfortable (well earned) retirement.
- Then my attorney introduced me to his golf partner, Bernie Madoff.
I am now 90 years old and bankrupt. I have been waiting hopelessly to recover the money Madoff stole from me. At the very least, I expected to receive some compensation from my SIPC insurance. Four years have passed and I have received nothing and, I see no help coming from the U.S. Department of Justice.
Mr. Picard and his clan seem to be thriving while my cause seems to be helpless.”
Morton J. Chalek
Victim Natalie, who signed her statement with the title: Direct Investor Sentenced to a Lifetime of Financial Ruin and Emotional Unrest provided perhaps the most interesting perspective for Judge Swain to consider when sentencing Peter Madoff today:
Peter Madoff was educated in the law. He was savvy enough to help create the computerized trading system. He worked closely with his brother for years. He aided and abetted his brother and helped the scheme to continue and thrive. He did a lot of damage over a long period of time. He ran the daily operations for the past 20 years and should be sentenced to the same amount of time. 20 years.
While the Federal Sentencing Guidelines are extremely complex, we would like to commend Natalie Erger for her wisdom and simplicity. Moreover for her courage and those of all who have spoken out with respect to this financial disaster. We express our sympathy for all of those who have had their lives impacted by the Madoff Ponzi Scheme and hope that the sentence imposed today on Peter Madoff by Judge Swain provides each and every one of them with some small measure of justice for their losses.
On Monday, December 17, 2012, Defense attorneys John R. Wing, Charles T. Spada and Jeannie Rose Rubin of Lankler Siffert & Wohl LLP filed a 44 page Sentencing Memorandum on behalf of their client Peter B. Madoff. The document was submitted to the Honorable Laura Taylor Swain of the Southern District of New York. Judge Swain is expected to sentence Mr. Madoff on Thursday, December 20, 2012.
Peter Madoff is the younger brother of Bernie Madoff who was sentenced on June 29, 2009 to 150 years in Federal Prison for masterminding one of the largest Ponzi Schemes in history. Principle losses to investors were nearly $20 Billion. Including recorded fictional investment gains, investors lost close to $65 billion.
The sentence imposed on Bernie Madoff by Federal District Judge Denny Chin was nearly three times longer than what had been recommended by the federal probation office and more than ten times longer than that requested by Mr. Madoff’s defense lawyers. At the time of sentencing, Judge Chin condemned Mr. Madoff’s crimes as being “extroadinarily evil”.
Now in what may very well be the final chapter in a painful saga that began on December 10, 2008 when Madoff’s sons told authorities that their father had confessed to them that the asset management unit of his firm was a massive Ponzi scheme, Peter Madoff will stand before Swain to learn his fate.
The question that needs to be answered by the sentenced that will be imposed on Thursday by Judge Swain is whether Peter Madoff is a victim or a villain. Keeping in mind that Peter Madoff has already pleaded guilty to one count of conspiracy to violate various federal statutes and one count of falsifying books and records of an investment adviser, the Sentencing Memorandum submitted by defense counsel portrays Peter Madoff as another victim who was duped by his older brother’s Ponzi Scheme. Under his Plea Agreement, Mr. Madoff has agreed to accept a minimum sentence of no less than ten years in federal prison.
In the Draft Sentencing Report, it was reported that Peter Madoff had only learned of his brother’s Ponzi Scheme on December 9, 2008, a few days before it had been disclosed to the world. Peter Madoff’s attorneys described him as being in shock and realizing that his world had been destroyed by the loss of his reputation and any future ability to support his family financially. They further reported that Peter Madoff had been reviled by strangers, as well as former friends who all assumed that he must have had full and complete knowledge of Bernie Madoff’s Ponzi Scheme.
Peter is described by his attorneys as being someone who believed that his older brother was a brilliant securities trader. As a result, he encouraged his own family to invest millions of dollars into accounts that were managed by Bernie Madoff. The fraud committed by Bernie Madoff resulted in Peter’s wife losing millions of dollars in her Madoff account, as well as his daughter, granddaughter, sister and other relatives also suffering significant losses.
Mr. Madoff’s attorneys state: “Moreover, at the time of his plea this past June, Peter Madoff consented to a Draconian forfeiture order that in one stroke stripped him of all existing assets, his home, his pension, his savings, his personal property, etc. and all future assets and income should he even have the opportunity to earn any income after serving his prison sentence. After a lifetime of hard work, this man has been denied the ability to even collect social security”.
The facts, as presented in the Sentencing Memorandum, are as follows:
- On June 29, 2012, Peter Madoff pleaded guilty to conspiracy and falsifying records of an investment advisor.
- He has accepted responsibility for his conduct, which he knows was wrong, and is deeply ashamed of his conduct.
- Peter worked for his older brother’s business (Bernie was the sole owner) for 39 years.
- On several occasions, and at Bernie’s instigation, Bernie and Peter engaged in money transfers in ways specifically designed to avoid payment of taxes.
- At Peter’s request, his wife Marion was placed on the BLMIS payroll and for many years received compensation for what was essentially a “no-show” job.
- Peter pled guilty because he conspired with others to commit the following violations of law: (1) Attempts to interfere with the administration of internal revenue laws; (2) falsifying the books and records of an investment adviser; (3) false filings with the SEC; and (4) mail and securities fraud.
- Regarding the interference of internal revenue laws, Peter conspired with others to prevent the IRS from collecting proper revenue taxes in the following ways: (1) He received various fringe benefits from BLMIS, including meals, travel, leased cars, country club costs, apartment rentals, payment of household employees, and life insurance premiums which he failed to report on his income tax returns; (2) He placed his wife on the BLMIS payroll, although tax was paid on her income, he caused her to receive untaxed 401(k) contributions to which she was not entitled; (3) In 2005, Bernie gave Peter a substantial sum of money in the form of a completed securities transaction.
- In July of 2006, BLMIS Peter became the Chief Compliance Officer as the Company registered with the SEC as an investment adviser despite the fact that at this time Peter did not have any substantial knowledge or experience with the rules governing Investment Advisers.
- As the Chief Compliance Officer, Peter failed to implement any meaningful supervision of his brother’s management of the customer business and failed to test or confirm his brother’s representation that he was trading and managing the Investment Advisory accounts in compliance with the customers’ directions.
- In 2006 and 2007, Peter allowed Bernie to file false reports with the SEC.
The list of disclosures contained in the Sentencing Report goes on and on. It makes for very fascinating reading. It will be very interesting to see what kind of sentence Judge Swain will impose on Thursday. Will she take the same hard line position imposed by Judge Chin when older brother Bernie was sentenced or will she buy the fact that Peter was duped by his older brother? Stay tuned as Thursday is only a few days away.
On June 29, 2012, the Peter Madoff, the brother of convicted felon Bernie Madoff, plead guilty to the following charges:
- One count of conspiracy to commit securities fraud
- One count of falsifying records
Mr Madoff agreed to the forfeiture of more than $143.1 billion which represents all of the investor funds that were paid into BLMIS from 1996 through 2008. Additionally, Mr Madoff could face a 10 year prison sentence.
For further fascinating information about the actual charges and history of the case, read the full text of the government’s charges that were filed against him.
On May 21, 2012, the IRS announced changes to its “Fresh Start Program” through the offering of much more favorable terms for “Offers in Compromise” (“OIC”). Among the highlights announced by the IRS are the following:
- Revising the calculation for the taxpayer’s future income.
- Allowing taxpayers to repay their student loans.
- Allowing taxpayers to pay state and local delinquent taxes.
- Expanding the Allowable Living Expense allowance category and amount.
For additional information, you can read the entire article posted by Robert McKenzie on Forbes.com entitled: New IRS Offer In Compromise Policies