Guest Column: Assessing the Madoff Sentence

Michael L. Martinez is a partner in the Washington office of Crowell & Moring LLP and is a former Assistant United States Attorney in Philadelphia and Washington.

MIchael L. Martinez

The occasion of Bernie Madoff’s sentence to 150 years in prison and his somewhat surprising decision not to appeal is extraordinary for a white collar crime.  Upon hearing of the sentence it triggered two questions in my mind: (1) was the length of the sentence appropriate; and (2) how did it compare with other sentences for similar crimes?

Whether the length of the sentence was appropriate is a legitimate question for at least two reasons.  First, is that length a prison sentence warranted by Madoff’s crimes?  Second, is assigning 150 years of prison time to someone pointless or “piling on” since obviously Madoff will not live that long?

It seems clear that the Madoff sentence was appropriate.  Certainly the audience in the courtroom thought so, as cheers and applause broke out when the sentence was announced.  But apart from that understandable emotional reaction on the part of some of the victims of Madoff’s ill deeds, U.S. District Judge Denny Chin set forth solid reasons justifying Madoff’s sentence.

For one thing, the raw numbers of Madoff’s Ponzi scheme are staggering.  Estimates of the losses suffered by the collective victims of the fraud range from $13 billion to more than $50 billion.  The number of investors who were direct victims of this fraud is in the thousands, and the number of indirect victims, including for example recipients of charitable funds no longer available to the charities that invested with Madoff, is most likely far greater.  Those defrauded range from sophisticated investment banks and pension funds to average middle class Americans.  Many of the victims are well-known.  For example, Holocaust victim Elie Wiesel’s charitable foundation was wiped out.  Similarly, according to the Wall Street Journal, 91 year old actress Zsa Zsa Gabor lost more than $10 million.  It is impossible to assess fully the breadth of financial and emotional devastation Madoff’s conduct has brought to thousands of people.

In addition, as the prosecutors argued at the sentencing hearing, one must keep in mind that this was not a crime that arose out of a sudden financial distress or some other isolated event.  Rather, Madoff’s fraud “was a calculated, well-orchestrated, long-term fraud.”  Indeed, what struck me as astonishing is that Madoff created “hundreds of thousands of fake documents every year” in his efforts to perpetuate the fraud.  Quite apart from the separate and obvious question of how someone could do this without the knowledge and assistance of others, the sheer number of false documents created annually at Madoff’s behest – all with the goal of misleading investors and the Government – serves to underscore Madoff’s bad intent and the lengths to which he went to perpetuate his fraud.

All of these factors led Judge Chin to conclude, and rightly so, that Madoff’s crimes were “extraordinarily evil” and not “a bloodless financial crime that occurred only on paper, but one that took a staggering human toll.”  Accordingly, he felt compelled to sentence Madoff, who had pleaded guilty to securities fraud and ten other felonies, to incarceration for 150 years.  Judge Chin clearly wanted to make Madoff an example, and under these circumstances, why not?


  • Ronnie Sue Ambrosino
    Posted July 13, 2009, 8:21 am 8:21 am 0Likes

    Mr. Martinez,

    I appreciate the clarity with which you describe the Madoff fraud and the sentencing by Judge Chin.

    As a Madoff victim, I was sitting in the front row of the courtroom, less than 20 feet from the man who stole my entire life savings. My husband was grateful to have had the opportunity to address the Judge, as I had done at his plea hearing in March.

    As victims, we were happy and relieved to see the judicial system work. However, there is much more to this story.
    The obvious and much publicized failure of the SEC does not go away just because Madoff is behind bars. The SIPC failure to pay victims ‘promptly’ and based on the value of the securities in their accounts at the time of Madoff’s arrest as they are mandated to do is not currently happening. The trustee’s arbitrary (and therefore illegal) definition of “net equity” is being challenged in court and while that decision is being made the thousands of victims you wrote about are paralyzed while they await the decision as to whether they will be able to afford to keep their homes, pay for medical care, and/or college tuition for their children and grandchildren.
    The SEC’s lack of action to oversee SIPC and the trustee, although they have the statutory responsibility to do so is another example of the inadequacies of the agency.

    So, Mr. Madoff alone is paying for the crimes that have devastated a country. The financial protection the SEC and SIPC say they provide has been proven to be non-existent for all Americans, and therefore the confidence to invest has been taken away. The trickle down effect of this only further adds to the already weakening economy.

    Judge Chin punished Madoff for his crimes…When does the system begin to ensure that the above mentioned agencies act within the legal confines set forth?

    As victims, we have come together to try to ensure the laws are upheld. We invite all Madoff victims to join our Coalition at

    Ronnie Sue Ambrosino
    Coordinator Coalition

  • Peter Ramsay
    Posted July 13, 2009, 5:48 pm 5:48 pm 0Likes

    Does anyone love Bernie Madoff or even care about him? For a Christian perspective on Madoff’s circumstances and future copy and paste this link into your browser:

  • klerg
    Posted July 17, 2009, 9:54 am 9:54 am 0Likes

    Because I’m personally curious about the mechanics of money, I’ve been thoroughly researching the Madoff scandal since it came to public view last December. I’ve read the various articles from Newsday, Time Magazine and the NY Times. I’ve watched almost all of the Madoff-related videos on Fox Business’ video archive as well as the various TV interviews on Charlie Rose and CNBC, along with many others. And, of course, by reading blogs such as Securities Docket. After seven months of research, I’ve developed the following personal thesis:

    The Madoff victims that were direct investors have a good shot of winning their net equity argument with SIPC; however, there will be sacrifice on their part. That sacrifice will be in the form of non-reimbursement to feeder fund investors and, possibly, wider reaching clawbacks.

    First, let’s be fair: SIPC do say in their brochure that they insure “money, stocks and other securities are stolen by a broker”. Also, the New Times Securities case may help the victim’s as far as precedent for full SIPC reimbursement goes (Madoff Help has a pretty good basic definition of that case here). And yes, the SEC did screw up.

    But on the other hand, SIPC also says that clawbacks are OK and this is also backed by a legal precedent set by the Bayou case (that can be reviewed here.) Furthermore, SIPC/SIPA laws clearly state that individual investors in feeder funds don’t qualify for a SIPC reimbursement.

    Both of these sides will go against each other in some judicial setting. Whoever presents the best argument wins. If the victims side wins and a judgment is made that they should get a SIPC check based on what their final statements say, they will have to realize that there is not enough money in the various SIPC funds to fully reimburse them. The only way that I can see them getting a full reimbursement is if taxpayers cover the loss. And after a year of TARP, Wall Street bailouts and widespread unemployment, it will be very hard for taxpayers to accept that they are covering security losses based on securities that were non-existent. Because of that, I think that taxpayers will insist that the clawbacks be wider than they already are.

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