Federal And State Crimes – What Are They And How Can You Differentiate Between Them?

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.

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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)

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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.

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Peter Madoff Awaits Sentencing – Victim or Villain?

  

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.

Citigroup $590 Million Proposed Settlement

 

Wall Street has applauded yet another large financial settlement by Citigroup when the bank’s shares rose nearly 2%.  Citigroup has agreed to pay $590 million to shareholders who sued the bank over toxic mortgage backed securities that the bank failed to write down yet knew were worthless.  The lawsuit had been brought on behalf of investors who purchased Citigroup shares between February 26, 2007 and April 18, 2008 when the financial crisis exploded.

While the proposed settlement has yet to be approved by the judge, the announcement is yet another example of a major bank settling for a fraction of the losses incurred by shareholders.

For further information, please read the Forbesarticle written by Halah Touryali entitled Citi To Pay $590 Million To Burned Shareholders In Toxic Asset Case

2nd Madoff Brother Pleads Guilty

    

On June 29, 2012, the Peter Madoff, the brother of convicted felon Bernie Madoff, plead guilty to the following charges:

  1. One count of conspiracy to commit securities fraud
  2. 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.