The Pathetic Irwin Lipkin: a Bernard Madoff Reminiscence

Irwin Lipkin being wheeled out of court

The recent Madoff two-part series on ABC, starring a very convincing Richard Dreyfuss, brought back a flood of memories of my own very limited experience with this long-vanished but still fascinating story. Apart from this article in the old Condé Nast Portfolio I haven't written much, but I did have the interesting experience of attending one of the last acts of this drama. It was the last criminal proceeding in the case, the August 2015 sentencing of a Madoff factotum named Irwin Lipkin.

Lipkin, who was 77 years old, was Madoff's controller. He wasn't important enough to have been mentioned in the miniseries. His defining characteristic is that he was as pathetic as he was guilty. If you weren't acquainted with what he had done, you might feel sorry for him.

Yes, I realize, there is nothing more to be said about Madoff. He's been the subject of umpteen and half books, fifteen umpteen documentaries (one of which followed the ABC film), and an HBO movie in the works, based on the definitive Diana Henriques best-seller. But still, forgive me if I pile on.

It was a gorgeous day in Manhattan—temperature in the lower eighties, low humidity, nice cumulus clouds in the sky—and the view from Courtroom 12D of the federal courthouse on Pearl Street was a stunning vista of Midtown Manhattan to the north. Outside on Broadway there were TV satellite trucks, some parked on the sidewalk. They were there because of the sentencing of a New York City police officer who participated in a motorcycle gang attack on a motorist on the West Side Drive. That's news. Madoff wasn't news anymore, and certainly Lipkin was not.

Lipkin, in his wheelchair, was talking to his attorneys in a seat outside the courtroom as I arrived at about 1:30 p.m., and left soon after for the cafeteria. I heard Lipkin remark that they let his wheelchair right through the metal detector.

The courtroom was filled with about two dozen college students who have been attending court sessions as part of the Columbia University's American Language Program. They were foreign-born students, largely Asian, and were accompanied by two not very talkative faculty members. They took up most of the seats. There were about five reporters present, no federal officers as you sometimes see at these things, no victims, no phalanx of family members of the accused.

Lipkin was wheeled in, pushed by his son Marc, dressed in blue shirt and khaki pants. Irwin Lipkin was wearing a baseball cap that he didn’t remove until later, and a navy blue track suit with two white stripes running down the leg. He was wearing a dark grey warm-up jacket even though the air conditioning wasn’t that high and it was hot outside. He had another outer garment behind him, not worn.

Lipkin was very bald, his head possibly shaved. He had splotches on his face and was very pale. As he sat waiting for the judge he fingered his metal-rimmed reading glasses and a typed piece of paper he had unfolded, the statement he was going to read. He had a box of tissues in front of him that he didn’t need. Two prosecution lawyers and one federal agent occupied the front row of tables and Lipkin and his lawyer were in the row behind them.

U.S. District Judge Laura T. Swain came in at 2:07 p.m. and thanked everyone for attending, including the press. It was the first time I had ever heard the press thanked in such a situation. It made me feel all warm and fuzzy. Judge Swain proceeded to mechanically, for the record, review the various documents agreed to by both sides.

After a brief conference at the bench, Lipkin spoke for the first time in court. He acknowledged in ritualistic fashion, for the record, that he had read and approved some documents. He spoke in an old man’s voice, a bit horse as you’d get from not speaking in public much, but not frail at all, perfectly distinct. At one point his lawyer pointed out that Lipkin cannot stand up. I don’t happen to believe that, but that’s just my hunch. No problem. The judge understands. The prosecution, the judge, everybody is in agreement about what a death’s-door guy this is. The judge talked about his “mental health condition” and the possibility of home confinement.

'The Virtual King of Wall Street'

His defense lawyer, Hackensack attorney Richard Galler, said that he met Lipkin for the first time in 2008, that Lipkin knew Madoff as the “virtual king of Wall Street” and that Madoff had asked him to sign documents that were “not appropriate” and “not accurate.”

In an exchange with the judge, the lawyer said that Lipkin “didn’t understand the greater fraud” and should have “checked further as to the accuracy” of the documents he filed. In the years since Lipkin “voluntarily offered a plea” in 2012 (voluntarily?) his health has deteriorated, said Galler. He has lost 50 to 75 pounds.

“He’s a hunchback,” he added, “He’s a frail gentleman who had a pacemaker replaced as recently as Friday.” He requested a "downward departure" from the sentencing guidelines for bad health. “He couldn’t get around” in prison, said Galler.

Judge Swain responded that there are facilities for sick people. Galler replied that “they’re not as good as the ones outside the prison,” and said that he can now get an ambulance in five minutes, something he couldn’t get in prison. I remember thinking at the time that this attorney was named “Galler” because of his unmitigated gall. But that wasn't fair. Lawyers are paid to represent to give their clients the best possible representation, no matter who they are.

He went on to note that a Dr. Goldstein, a psychiatrist who teaches at Columbia, described Lipkin as a “sad-looking elderly male who looks older” than his age and seemed depressed. That seemed to be the extent of his “mental health condition”—that he’s depressed, evidently because of the crimes he committed. Depressed he got caught.

Galler poined out that all of Lipkin’s kids worked at the firm, and he was proud to bring them into the firm “not knowing the greater fraud.” He added that the government does not dispute his health condition and that the presentence report says there is no chance of recidivism. Lipkin was portrayed as being as meek and harmless as a mouse. He does not leave the house except to go to the doctor or go out on the driveway, and Galler said that he has had to go to Lipkin's house on legal business, and that Lipkin  hasn’t come to the office in a long time.

He went on and on. Mrs. Lipkin was not there “because of prior strokes.” Lipkin “requires mental health treatment. . . . Home confinement is reasonable under the circumstances.” In other words, since he is already confined to his home—no punishment.

I thought back to a mousy little accountant named John McAndris, the 57-year-old chief financial officer of the A.R. Baron penny stock scam firm, who was sentenced to five to fifteen years in state prison in 1998. Hard time, not home confinement. Punished because he didn't let the AR Baron scam continue for another few years until he was old and sick at the time of sentencing.

The prosecutor, Assistant U.S. Attorney David Abramowicz, offered a crisp rebuttal. He noted that fifteen people have pleaded guilty or been found guilty “and only one was named Bernard Madoff.” He was the most culpable and got a severe penalty. The lesson from the parade of guilty pleas is that “Bernard Madoff didn’t do it alone.” He probably wanted to do it alone but he couldn’t. He got help from people like Lipkin.

The prosecutor pointed out that when Lipkin pleaded guilty he admitted he was controller of Madoff Securities and falsified records. He knew it was illegal, so it was not just a case of his being obedient and following orders. Abramowicz noted that Lipkin “did very well for himself,” drawing a salary of $225,000 a year. He wasn’t following orders when he ordered sham trades on his account.

Abramowicz agreed that Lipkin was sick, and that his condition had deteriorated, but felt that reducing the penalty from 10 years (under the guidelines) to zero was “too drastic.” He said the defense hasn’t established that the Federal Bureau of Prisons is incapable of handling someone in his condition.

Yes he is at great risk of falling or suffering injury and that could happen anywhere. He noted that people who are convicted of serious crimes would love the “ability to choose their preferred medical provider.”

Lipkin was impassive as the prosecutor went point by point. Abramowicz said that Lipkin was older than many defendants because he was “so successful at his crime.” He agreed that there was little chance of recidivism but said there was a need for “general deterrence,” so that people committing crimes doesn’t feel that can “keep digging and digging till they get old.”

Lipkin was given his chance to talk. He bent over the desk to read the type on the paper. His old-man’s voice was distinct as he reads from the paper, with occasional out-of-sequence pauses as take place when you read something and aren’t trying to make it seem spontaneous.

He said he was the first person who went to work for Madoff. “Smarter people than myself were taken in by him. . . . If I had known what I know now, I would never have done these things to my family. . . . If I was so smart and knew anything, why would I have given my own money to this man?”

The answer to that last question, I guess, might have been that he knew what he was doing and that he expected to rob people to pay him. That's how Ponzi schemes work. Lipkin talked slowly, apologizing in rote fashion to the victims and his family, his wife and three sons “for what I had caused them during this period of time.”

He gestured now and then with his hands, and you could see his thin, bony fingers. “I don’t know how I can explain this to my wife,” he says. ("Explain what?" I wondered. It had already been seven years since the Madoff scandal broke.) He noted that his son Marc lives with him and his wife and takes care of them.

“This gentleman”—he gestures to the prosecutor—“spoke—I know how he feels—and there’s nothing I can do to change his mind. I only hope you can have sympathy for my wife and family and myself.”

The statement is over. The judge asked a question to Lipkin because she says she is “puzzled” by something he said,. He had admitted in the plea allocution that he had changed figures. If he was now denying what he had previously admitted in his plea allocution, that would upset the apple cart, and upend the lax sentence she was about to impose. So she asked: did he change figures on the books of Madoff Securities?

Lipkin responded that “I honestly and truly do not remember” what happened 18 and more years ago.

Uh oh. Not a good answer. The judge asked his lawyer to talk with him, which he does. Then his lawyer asks him in open court if he’s not denying what he had said concerning changing of numbers. “You may not remember specific ones” but he did commit that offense? “Correct,” says Lipkin. So hard to stop lying when you've lied for so many years.

Through this ritualistic questioning, the judge allowed Lipkin to put the toothpaste back in the tube via the ridiculously leading questioning from his lawyer. The judge then spent ten minutes sifting through papers on her desk and considering her sentence, which she delivered at 2:52.

First she thanked the spectators for their patience. Then she went through the rote remarks, found that Lipkin suffers from physical illnesses, adopted the presentence report, and said Lipkin is “frail and in exceedingly poor health.” He has cardiac and coronary artery problems, reaction to medication, balance and ambulation and falling risk issues. Also he has “mental health disorders” (another reference, apparently, to being depressed he got caught).

Thus there is medical evidence “outside the heartland” of the sentencing guidelines. She went over his offenses—one of the first employees of Madoff until his retirement in 1998. He knew financial information was false. He falsified books and records. Entered fake trades. Arranged for his wife to be on the company payroll and for himself to be on the payroll beyond the period to which he was entitled. He filed false documents with the U.S. Department of Labor concerning that. But she notes he was “not privy to the scope of client-related fraud.”

She points out that the letters sent to her show a “dedicated family man” and that he and his family have suffered financial loss. (How terrible!) She says he has expressed remorse “but he minimized his conduct and recollection of conduct”—apparently a reference to his comments in court today—which destroyed lives, etc etc.

“The court recognizes he has already faced significant repercussions” including a “substantial forfeiture obligation” as well as ostracism and guilt. A lengthy incarceration would be appropriate if not for the health issues. For that a “very substantial departure” is warranted. She then sentences him to six months in prison on each of the two counts, concurrently. Three years supervised release, with 18 months of home detention included in the latter.

The judge reeled off the mandatory conditions of the great, big, walloping slap on the wrist she was giving him for being a key participant  in the Madoff crimes. No weapons. Has to keep taking his meds. No supervised drug testing, that waived because of his medical condition. No caller ID on his phone, no call forwarding. Devils Island conditions, as you can see. No caller ID! Must wear an ankle bracelet.

Judge Swain then proceeded to say that she will recommend to the BOP that he get confined to a medical facility or home confinement, within their discretion, and notes that if there is home confinement it will be in addition to the 18 months he gets as part of his supervised release. Viewed from the rear, as I can't see his face, Lipkin seems impassive during all of this. Galler says Lipkin needs a “hospital setting” and Swain suggests that she get in touch with the “designation officer” of the BOP on that point.

At this point, in a moment of legally required levity, the judge advised Lipkin directly that he can appeal this wet kiss within 14 days, and that if he can’t afford it U.S. taxpayers can appoint a lawyer to rep him. She then directs him to report to the designated facility on Oct. 22, 2015. Finally, the judge said “Mr. Lipkin, the crimes in which you participated are serious and you are paying a heavy price.” In the disruption of his retirement “you have much in common with the thousands of victims of the Bernard Madoff fraud.”

That was so absurd. This man was a perpetrator, not a victim. That was like comparing old Nazi camp guards with survivors, as both are elderly. A shocking statement, or so it seemed to me at the time. The letters sent to her on his behalf, she said, show that he is “much loved and relied upon by the community.” But she didn’t mention that none of these people who love him so much showed up in court. She ended by wishing the family “continued strength and courage.” The proceedings were over at 3:17 p.m.

Postscript: the U.S. Bureau of Prisons was not as lax on Lipkin as Judge Swain was. He went to prison. As of today he was confined to FMC Devens, a federal medical facility in Massachusetts. He is scheduled to be released on April 20, 2016.

His victims, of course, are only part of the way through their life sentences.

© 2016 Gary Weiss. All rights reserved. No republication permitted, in whole or in part, without express written permission.

Happy Anniversary, Bernie Madoff

Today is the fifth anniversary of the Bernie Madoff scandal. Here is the blog item I wrote on it at the time.

Interestingly, the questions that I raised at the time--how did he do it and for how long--have never been satisfactorily and comprehensively answered in the years since.

© 2013 Gary Weiss. All rights reserved.
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"No One Would Listen" to Harry Markopolos -- Including the Media

Harry Markopolos's book No One Would Listen has zoomed to No. 19 at Amazon.com and I can see why: it's a fast-paced thriller that is clearly the best book so far on the Bernie Madoff scandal. Markopolos sheds new light on how the SEC screwed up its Madoff probe--and how the media also dropped the ball.

Markopolos's book (marred only by, arghhhhh, reconstructed quotes) describes in detail his contacts with the late John Wilke of the Wall Street Journal, which fizzled out after a year. Forbes and the New York Times also were contacted and did nothing, but Markopolos had placed all his eggs in the Journal basket, which was a mistake.

Markopolos writes:

The question I wrestled with for a long time was: Why? When the newspaper that existed only to cover the financial world was handed a detailed explanation of the biggest fraud in Wall Street history, why wouldn't someone at least conduct a cursory investigation? Three phone calls, two phone calls, that's all it would have taken to verify that I wasn't some kind of nut, that the accusations I was making were based on fact. A half hour, that's all.

So far there are two alternative, contradictory explanations of what happened.

One, from Joe Nocera, is that Wilke "spent a little time rummaging around the Madoff story, but he didn’t really have any way to get at it, other than to take Mr. Markopoulos’s word for it, and that wasn’t good enough for either John or The Journal."

The other is that Wilke was eager to do the article but was stymied by his editors.

There's now an alternative theory being floated. A Wall Street Journal review yesterday concedes that "the press also did not cover itself in glory," but goes on to suggest that it was at least partly Markopolos's fault that he was ignored.

Former Journal editor Richard Tofel writes:

The author of "No One Would Listen" is fond of describing himself as "slightly eccentric," but he is not exactly self-aware. By his account, the fault for his having been ignored throughout eight years of warnings is everyone else's. But that conclusion requires ignoring much of his story.

Tofel goes on to recount some eccentric behavior by Markopolos and concludes his review as follows:

None of this behavior makes Mr. Markopolos's case against Mr. Madoff any less convincing. Nor does it excuse the SEC. But it does provide a fuller picture of the author than the cardboard cut-out of the lonely hero we've been hearing about for the past 15 months. With his book, Mr. Markopolos sheds more light than he intends on just why no one would listen.

Indeed. If Markopolos's case was convincing, that doesn't excuse the SEC--or the media.

I have a better explanation for why Markopolos didn't make any headway in the press: he just failed to contact enough reporters.

When Wilke began to lose interest, Markopolos should have gone back to Barron's, which ran an early account raising questions about Madoff, or approached Fortune or BusinessWeek, or other people at the Times or Journal. Or any number of other publications.

In other words, Harry Markopolos could have used a good press agent--which says a hell of a lot less about Markopolos than it does about the financial press.

© 2010 Gary Weiss. All rights reserved.

Bernie Madoff Gets a Christmas Gift: A Beating

I'm not in favor of inmates smacking the guy around, but I'm not losing any sleep over word that Bernie Madoff is in the hospital after getting a severe beating in prison.

Yeah, I know, the official account says that he "fell out of bed." Right. A local media outlet says, "According to the sources, Madoff came to Duke with facial fractures, broken ribs and a collapsed lung."

You don't get that from "falling out of the bunk" or from "high blood pressure," as his lawyer says.

© 2009 Gary Weiss. All rights reserved.

Don't Worry, Folks: Frank DiPascali is Still in Jail

In the past I've decried the behavior of U.S. District Court Judge Richard J. Sullivan, who has pandered to public sentiment by refusing to release on bail the chief cooperating witness in the Bernie Madoff case, Frank DiPascali Jr.

Doing so, I've pointed out, makes the job of cracking white collar cases harder, not just in the Madoff cases but in future cases. Hey, that's how our system works. It depends on rats.

Today, Sullivan issued a simply amazing order, reproduced below, reaffirming that yes, Frank DiPascali is still in jail.

The order was prompted by an email by some guy who wrote the judge, thinking (wrongly) that Sullivan had shown some sense. No sir! Not this judge.

Now, I'm not a lawyer, but this is one of the oddest court filings I've ever seen.




© 2009 Gary Weiss. All rights reserved.

Madoff Lesson: Liars Can Thwart an SEC Investigation

The 536 exhibits released by the SEC Inspector General late Friday on Bernie Madoff don't seem to contain any explosive new revelations, but underscore an essential point about SEC investigations: if you are the target of a probe, just lie, again and again.

The SEC won't check up, even if it's obvious.

Ask Bernie. The documents show that he lied on the most obvious thing possible -- whether he managed money for people. He said no. The SEC either knew this was a lie or was brain-dead not to check up on it, if for no other reason than that there had been two articles in the media in 2001, in Barron's and MAR/Hedge, about what an astounding money manager he was, and raising questions about just how he performed such a fete. (Included among the exhibits is the transcript of a 2009 interview with the author of the MAR./Hedge article, in which he complained that he was ripped off by Barron's.)

Notes to one interview with the SEC in April 2005 say that "Based upon [name deleted] algorithm and capacity to manage money, this led us to ask if [name deleted] (or anyone at the firm) has ever managed money for an outsider. Bemie said, Never."



A few days later, an SEC investigator reported: "I specifically asked Bernie if the London office manages money for outside investors. Bemie said it is my money."



And lastly, here's a record of the cock-and-bull story that Madoff gave the SEC during an interview a few weeks later:


One thing I've learned over the years is that the SEC has a very poor sense of what is actually happening out there in the real world, that it relies too much on documents supplied by the target of the probe, and that it fails to do elementary, shoe-leather investigation. In this case, some basic investigation would have proven that Madoff was lying about a fundamental fact.

The SEC simply didn't have the contacts and street-level sources required to contradict Madoff on something as simple as whether the man ran money for people.

Instead, the probe showed the SEC investigators--one of whom wound up marrying Madoff's niece--tripping over their own shoelaces. Madoff himself marveled at the incompetence of the SEC.

We've seen the SEC's ineptness proven time and time again, such as in its botching of an investigation of Overstock.com's accounting, despite in-your-face GAAP violations uncovered by a whistleblower. The probe has been reopened, but Overstock.com CEO Patrick Byrne has already learned the Madoff' Lesson: Lie, early and often. Lie on your financial statements. Lie in your conference calls. Put aside a "cookie jar reserve" to manipulate your earnings.

The SEC doesn't give a damn.

There are more large and material lies, I hear, unrelated to the financial statements, that haven't publicly surfaced.

Will the Overstock strategy of deception work? The Madoff case is depressing precedent that it will, but the jury is still out.

© 2009 Gary Weiss. All rights reserved.

Bernie Madoff Speaks! (and lies) While Arthur Levitt's Memory Fails Him

Notes of Bernie Madoff's interview with the SEC inspector general were released yesterday, and they make fascinating reading--as long as you keep in mind that Madoff was lying through his teeth, primarily to protect people.

Here's the SEC exhibits page, and here (PDF) is the record of Madoff's interview.

You can be sure that Madoff was lying because of this:

When questioned as to whether he was concerned about Frank DiPascali giving testimony, Madoff answered,"No, he didn't know anything was wrong, either."

In fact, DiPascali, who was Madoff's number two man, has already pleaded guilty, and at the time of his plea in August he said as follows:

“I knew I was participating in a fraudulent scheme,” DiPascali told U.S. District Judge Richard Sullivan. “I knew everything I did was wrong, and it was criminal, and I did it knowingly and willfully. I accept complete responsibility for what I did. I apologize to every victim and to my family and the government. I am very, very, very sorry.”

This is the clearest example I can find of Madoff lying to government officials during the period following his arrest.

However, I'm less dubious about Madoff's statements about how tight he was with former SEC officials and commissioners. Madoff said the following about the super-hyped ex-SEC chairman Arthur Levitt:

Madoff stated that he knew Levitt at Amex, before he was at the SEC, and stated that he knew Levitt "very well." Madoff stated that he went to lunch with Levitt once, to complain to Levitt that he "had to do something about intemet stocks." Madoff stated that Levitt subsequently "went on t.v. and gave a warning about it."

In his interview, Levitt tried hard to convey the impression that he didn't know Madoff from a hole in the ground, though his response was... well, let's call it a "lawyer's response." His memory has failed him when it comes to Madoff, poor dear, preventing him from giving an unequivocal answer:

Mr. Levitt stated that he met Bernard Madoff on an infrequent basis while he was Chairman of the SEC, mostly at seminars or outside functions. He approximated that he saw Mr. Madoff once a year while he was the Chairman of the SEC. He did not recall having lunch with Mr. Madoff and did not believe he ever met with Mr. Madoff alone. Mr. Levitt stated he did not have a personal friendship with Mr. Madoff, had never socialized with him, and did not know his family, other than having met Bernard Madoffs brother.

Note what I've put in boldface italics. He approximated, he did not recall, he did not believe.That's my Artie! The Investor's Champion, to quote a puff piece that I'm ashamed to say once appeared in my alma mater, BusinessWeek.

Yes indeed, you can rest assured that Artie Levitt was no pal of Bernie Madoff (that being an approximation and belief to the best of his recollection).

© 2009 Gary Weiss. All rights reserved.

Bernie Madoff Deflowers. . . . Hadassah?

Pardon me while I barf

My grandmother belonged to an organization called Hadassah. It never had any particular political meaning, at least to me; it was just a group that Yiddish-speaking old women used to belong to back in the old days in the Bronx. When you say "Hadassah" I think of my grandparents' generation, very wholesome and all that.

Well, I guess that borscht-and-babushkas image is about to change forever. Word crept out of the Bernie Madoff sewer today that the ever-reliably creepy Madoff had an affair with the former chief financial officer of Hadassah.

So says a new tell-all book by the married lady in question.

What makes the whole thing surrealistic is that this woman, and her organization, were Madoff victims.

Sheryl "Weinstein and her husband of 37 years, Ronald, were forced to sell their Manhattan home on the Upper East Side a week earlier because they had 'lost everything,' she told the judge," according to Bloomberg.

Well, I guess she has got to earn back that money somehow. Why not do so by humiliating herself and her husband? St. Martin's Press has handled release of the book in hush-hush fashion; note the "to be announced" line where the author should be in its Amazon listing, right next to an illustration of the book's cover, showing Mrs. Weinstein's name.

The Madoff saga was always nauseating, but now we're really testing the limits of our intestinal juices. A British newspaper reported:

Her book 'Madoff's Other Secret: Love, Money, Bernie, and Me' is said to go into explicit detail about their affair.

And it will also include photographs and some intimate descriptions of Madoff, said John Murphy, spokesman for the publishing company, St. Martin's.

As my grandmother would have said, "feh." My poor grandmother. Life was so simple then. No Madoffs to worry about, only pogroms.

I just hope that this is the end of it. If there are more "Bernie screwed me" revelations, in the non-financial sense of the word "screw," life just won't be worth living.

© 2009 Gary Weiss. All rights reserved.

The Problem With Jailing Bernie Madoff's Rat

Judge Richard Sullivan is taking a big risk by refusing to release Frank DiPascali, the Bernie Madoff CFO who has become a cooperating witness. Not a personal risk. Oh no.

It's a low-risk move from the CYA perspective. Had Sullivan released DiPascali, as prosecutors wanted, he might well have been skewered by Madoff's many victims. And obviously, if DiPascali had fled, as Sullivan warned was a realistic possibility, he'd never hear the end of it.

But what Sullivan has disregarded is that the price for this CYA move is that DiPascali may stop cooperating.

In addition to the effect on the Madoff case, his refusing to release DiPascali is a real step backward for law enforcement. Prosecutions of all forms of crime, but particularly organized crime and white collar cases, depend upon insiders ratting out their collaborators.

Sullivan seems to be saying that in a well publicized case, a deal with prosecutors won't be worth a damn.

Future cooperators in the Madoff case, and I'm sure the feds have others, have good reason to wonder if they'll wind up in the can even if the prosecutors promise they won't. This means that prosecutors may have a hell of a time making cases against others who made the Madoff scam possible.

If that happens, Sullivan won't be blamed. After all, he just kept the guy in jail and who can blame him for that?

It's a low-risk move--for the judge. Cynical, self-centered and very dangerous.

© 2009 Gary Weiss. All rights reserved.

Could Carmela Soprano Have Been Sued Like Ruth Madoff?

Carmela's lifestyle was financed by Tony

The $45 million lawsuit against Ruth Madoff yesterday by Irving Picard leads me to wonder: what kind of precedent might this set?

Certainly Ruth is not the first wife to have benefited from the thievery of her husband. Down through history, from Mrs. Jesse James to Mrs. Lansky to Mrs. Gotti and, of course, our beloved if fictional Carmela Soprano, wives have enjoyed lavish lifestyles because of their husbands' criminality, and I imagine they could have been sued by the feds by the same logic that Picard is using. I guess there might have to be a bankruptcy involved, but maybe not. Prosecutors can be creative, after all.

Picard says Ruth lived a "life of splendor" on proceeds from the Shtunk's fraud, and you can't really argue with him. I wonder if he might be trying to play a bit to the crowds here, as Picard has been a subject of a great deal of unjustified criticism by victims, as Joe Nocera pointed out in a column a few weeks ago. This lawsuit may, or may not, get some of the critics off his back.

While I'd love to see Ruth reduced to the penury of her victims, I have doubts that Picard is going to have much luck collecting and whether the attendant legal fees will exceed any possible recovered sums.

But it's an interesting precedent. Might even serve as a deterrent. Only question is whether future bankruptcy trustees will have the moxie to engage in a similar spouse-suing strategy.

© 2009 Gary Weiss. All rights reserved.

Bernie Madoff Gets a Wet Kiss From the Feds

Here's the latest Bernard Madoff outrage: instead of getting the hard time that he deserves, he will be confined to the "crown jewel" of the prison system, Butner Federal Correctional Complex in balmy North Carolina.

The "crown jewel" description comes from the press coverage Butner received in 2006, when Enron's Jeff Skilling wanted to be confined there. (He actually made out reasonably well, and is currently confined in FCI Englewood, a low-security institution near the pretty little town of Littleton, Colorado.)

Sure, no prison in the system is a "country club," but the idea of Madoff getting a comparatively cushy prison assignment is galling. What has this man done in return for such beneficence?

Business Insideer reports that "Butner is also known for having excellent medical facilities, especially its cancer-treament programs. There have been rumors that Madoff has been diagnosed with cancer." In other words, Madoff gets top quality health insurance at government expense, which is more than his elderly and impoverished victims are going to get.

Hey, I'm not saying he should be thrown in a dungeon and fed bread and water, but this is a bit too much.

© 2009 Gary Weiss. All rights reserved.

Welcome to Ruth Madoff Rehabilitation Week

Bernie and Ruth taking a break between ripping off people/not know hubby was ripping off people

ABC News is reporting that the feds have given back Ruth Madoff's passport. This means, and it is a close question, that either the government is being more incompetent than usual or that Ruth Madoff is not going to be charged criminally for being the rather obvious accomplice to her hubby Bernie.

So this seems to be Ruth Madoff Rehabilitation Week. In its latest issue, New York magazine falls just a few inches short of taking her side, in an article with a title that asks the clueless question, "Why does Bernie's better half inspire such vitriol?" Because she's probably guilty, that's why.

The article goes on to quote Gloria Steinem unconvincingly trotting out the gender card:

Ruth’s problem seems to be a particularly female one. “It’s the gender politics of the culture,” says Gloria Steinem. “It’s easier to blame the person with less power.” And, she adds, why aren’t people blaming her sons? “They would be much more likely to be in cahoots, because they were in the same professional field. And the answer is, they’re men, that’s why.”

Why aren't people blaming her sons? Hello? In its current issue, Vanity Fair has an article by David Margolick describing just how much people are blaming her sons. I wouldn't have minded the Steinem quote so much if it weren't preceded by the ridiculous, approving topic sentence that Ruth's problem is a "particularly female one."

Not to worry. Looks like Ruth will be walking off with her $2.5 million, unprosecuted. One can only hope that the lawsuits snatch away from her that outrageous bonanza, and quickly. Then we can get another naively sympathetic article about "poor Ruth."

© 2009 Gary Weiss. All rights reserved.

Why Not Confine Bernie Madoff to a Supermax?

Bernie Madoff will need to adapt to prison cuisine

There was no real doubt today about the 150-year sentence Judge Denny Chin imposed today on Bernie Madoff.

After all, he did nothing to warrant leniency. The only concession that Madoff was in a position to make, which was a full and truthful account of his scam, was not provided. We know that didn't happen, for otherwise a flock other defendants would already be charged.

So far, Madoff has done an excellent job of keeping his accomplices out of prison. Hopefully his string of luck in that regard will win out.

Right now the only leverage that can be imposed on him is in the hands of the Bureau of Prisons. The conventional wisdom is that he'll get sentenced to a medium security prison, possibly the one in Otisville northwest of New York.

That strikes me as absurd. Why throw away the only remaining leverage the government has on Madoff?

Medium security prisons are no picnic, believe me. They're surrounded by forbidding barriers of razor wire, and the atmosphere is suitably cramped and depressing. Still, they're nothing compared to maximum or supermax prisons, which is where the really worst offenders are held--terorists, top-ranking Mafiosi and convicted spies.

I'd toss him in one of the supermaxes. There is one supermax facility in Florence, Colorado. (There used to be one in Marion, Illinois, but it ain't supermax no more.)

After a few weeks in ADX Florence, I'll bet his stonewalling on his accomplices will come to an end, and that he'll be squealing like a rat in heat--even if it means turning in his sons, his wife, or even his mother if she were still alive.

Besides, it's just the most suitable place to hold someone who committed the kind of crime that he perpetrated, hurting so many innocent people and destroying the little faith that the public had in the financial system.

Can someone please explain to me in what way Bernie Madoff is less deserving of confinement in the supermax than John Gotti, Ramzi Yousef (the 1993 World Trade Center bomber) or Jonathan Pollard?

I thought not.

If he talks, Bernie can be confined to one of the maximum security institutions, such as Leavenworth, and if he's a really good boy, if his ratting results in convictions, if every loose cent is accounted for, then maybe then he can go to Otisville.

And in the unlikely event that he's been telling the truth--that he alone was responsible for such a massive scam--then he'd be in just the right place.

Strikes me as a win-win proposition all around.

UPDATE: A commenter points out that Andrew Fastow of Enron fame is at Florence.

I rest my case.

© 2009 Gary Weiss. All rights reserved.

Ruth Madoff Becomes Millionaire, Thanks to Uncle Sam

I'm sure that victims of Bernard Madoff are going to react harshly to the latest outrage in a long string of Madoff-related outrages: under a deal with the government, his wife Ruth Madoff walks away with $2.5 million.

The Wall Street Journal for some reason says that Mrs. Madoff gets "just" $2.5 million. "Just"? What about all the Madoff investors who have been completely and totally wiped out? And, unlike Ruth Madoff, there isn't the stench of involvement in the scam wafting over them.

Ruth Madoff should be reduced to the same state as her husband's (some might refer to them as her) victims, and not be allowed to keep a penny of the assets forfeited by the government. Her hubby's victims have been wiped out, and so should she.

Her lawyer says that she "unequivocally did not know of the misconduct and did not participate in it." And I have a bridge over the East River I can sell you.

The amount of fury being directed not just at Madoff, but at the government for its handling of this case, has just ratcheted up a notch.

© 2009 Gary Weiss. All rights reserved.

Bernie Madoff's Protectees

Bernie Madoff's secretary, who co-wrote a 9,000-word article in Vanity Fair, said on TV today that Madoff is keeping silent to protect others:

Eleanor Squillari, Madoff's secretary of more than 20 years, told NBC's "Today" that she thinks her former boss carefully orchestrated his arrest and that he's protecting others who might have been involved in his multibillion-dollar scheme by not cooperating with investigators. She declined to speculate as to whom he might be protecting.

It's perfectly credible that Madoff is protecting somebody. What isn't especially credible is that Ms. Squillari would not know who that is. I hope that she is more forthcoming in her talks with prosecutors that she was in her Today show appearance.

© 2009 Gary Weiss. All rights reserved.

The First Bernie Madoff Domino Falls

Bernard Madoff's auditor, David G. Friehling, just got the book thrown at him in a criminal complaint filed by federal prosecutors in Manhattan.

From the U.S. Attorney's announcement:

FRIEHLING failed to conduct audits that complied with
GAAS and GAAP by, among other things, failing to: (a) conduct
independent verification of BLMIS assets; (b) review material
sources of BLMIS revenue, including commissions; (c) examine a
bank account through which billions of dollars of BLMIS client
funds flowed; (d) verify liabilities related to BLMIS client
accounts; or (e) verify the purchase and custody of securities by
BLMIS. FRIEHLING also failed to test internal controls as
required under GAAP and GAAS standards. For example, FRIEHLING
did not take any steps to test internal controls over areas such
as BLMIS’s redemption of client funds, the payment of invoices
for corporate expenses, or the purchase of securities by BLMIS on
behalf of its clients. Further, commencing at least as far back
as 1995, FRIEHLING did not maintain professional independence
from his audit client, BLMIS.

Etcetra. Sounds like something that happens all the time, to tell you the truth, but I guess that it can get you in trouble with a client like Madoff. The hapless numbers-cruncher faces up to 105 years in jail.

How much time will it take for him to flip? My guess is "five seconds."

The dominoes are falling.

© 2009 Gary Weiss. All rights reserved.

Bernie Madoff's New Penthouse Suite

The accomodations are palatial, the cuisine sublime

Judge Denny Chin has remanded Bernie "the Shtunk" Madoff into custody, which probably means that he will be incarcerated at New York's Metropolitan Correctional Center, which is adjacent tot he federal courthouse. (I say"probably" because sometimes federal prisoners are farmed out to local institutions, which are not half as nice.)

So what quality of life does Madoff face in his new home?

Well, I can only speak from the standpoint of a onetime visitor to the facility, where the subject of my book Born to Steal was confined at one point, so my perspective is limited and a bit dated. But I can say that it's not nice at all.

Back in 2003, when I was there last, a visitor to the facility had to pass through several intrusive, unpleasant level of security before arriving at the prisoner holding pens. The atmosphere is a bit like the Port Authority Bus Terminal, reduced in size by a factor of 5000. It is antiseptic but cramped, oppressive, altogether suicide-inducing.

But not to worry. I'm sure the Shtunk will be on suicide watch, and that he will have no ready way of killing himself unless he decides to beat himself to death.

As for cuisine: I'm told that nutricious, fine baloney sandwiches are the main bill of fare.

Madoff's lawyers say they will appeal his incarceration before trial. Hopefully it will be swiftly rejected.

As for his permanent accomodations, I'm sure that his able lawyers will try to get the Shtunk confined to something other than the maximum security prison that he deserves. Bloomberg suggests today that he is in for some hard time, with other prisoners blaming him for the crash.

Fat chance. I'm sure that, as a nonviolent offender, the Shtunk will be segreated from inmates who can do him any harm.

© 2009 Gary Weiss. All rights reserved.

Why Have Madoff's Accomplices Not Been Arrested?

There are conflicting reports in the media about the all important Bernie Madoff Unanswered Question: Who else gets charged? Not "who else is involved," as clearly there were others involved, but who else is going to be nailed, and why the feds haven't nailed 'em yet.

The Daily Beast reported a couple of days ago that 20 people were targeted by prosecutors, including the Shtunk's wife, Ruth. But the criminal information did not include a conspiracy count, and Bloomberg reports today that a plea deal (ugh) fell through because Madoff wouldn't admit to a conspiracy.

Bloomberg says:

Madoff’s decision not to negotiate a deal means the government won’t have his help in determining whether his employees assisted in the fraud, the people said. Madoff, 70, will plead guilty today to all 11 counts he faces without any promise of leniency or anything else in return. He could receive 150 years in prison at sentencing on charges including fraud, perjury and money laundering.

Assuming this report is correct, I find it astonishing. Since when have prosecutors expeced the mastermind of a conspiracy to "rat down" on his underlings?

The usual procedure is for the feds to bear down on the underlings, to force them to rat out other members of the conspirascy.

Looking from the outside--and this is pure speculation on my part--it appears, at least superficially, that the feds have pussyfooted around the Madoff family, have not applied sufficient pressure on them, and instead have hoped that Madoff would turn them in himself and save them the trouble of doing their job.

That's a bit like arresting Vito Genovese and hoping he'll turn in the bookies who used to work for him.

I hope I'm wrong. But I'm puzzled why Bernard Madoff is the only person arrested so far in the biggest white collar fraud case since Cain embezzled from the Estate of Adam and Eve.

UPDATE: A CNBC commentator just summed up the conventional wisdom, which is that we won't know the full extent of the conspiracy if the shtunk doesn't talk about it.

If that were the case, then the government's prosecutions on organized crime--and Madoff's scheme is in that category, in my opinion--would go nowhere. Since the days of Capone, prosecutors have attacked organized crime by putting the heat on underlings. Grand jury probes have been one effective tactic, though that has perils because witnesses receive immunity for their testimony.

So, in other words, a "single bullethead" outcome for the Madoff case is simply not acceptable.

© 2009 Gary Weiss. All rights reserved.

Bernie Madoff and the Single Bullethead Theory

Could one bullethead have caused all that damage?

The eleven-count criminal complaint against Bernie Madoff is a satisfactory document on one level, because it is now very obvious that the Shtunk is going to jail for the rest of his life. Hopefully prosecutors will get Madoff thrown immediately in the can when he pleads guilty tomorrow, so that the spectacle of his "penthouse confinement" will come to an end.

Scot Paltrow has a thorough examination of how Madoff did it on Portfolio.com. But what Scott and everybody else examining this subject have left out, because there is nothing on the subject in the complaint, is the crucial question of who else is involved. There are no conspiracy counts in the charges against Madoff, not even with "John Does" if the precise identity is unknown. Nothing about the culpability of his wife Ruth, and how she wound up with millions of dollars now supporting hubby's lifestyle.

So what we have, so far, is a sort of an equivalent of the JFK assassination's "single bullet theory." Now, don't get me wrong--I happen to believe in the JFK single bullet theory. But the idea that a single bullethead named Madoff could perpetrate this crime--now, that I don't believe.

White collar crime-fighter Sam Antar of Crazy Eddie fame, appearing on Fox Business News today, says that Bernie is now protecting the other conspirators who must surely exist--the people who knew about it and the people who turned a blind eye.

So who are they and why have they not been indicted? Or are prosecutors going to push a "single bullethead theory" of the Madoff crimes? That's implied by the criminal charges talking about the clerical employees of the firm being ignorant and inexperienced.

Baloney.

© 2009 Gary Weiss. All rights reserved.

Try to Do as Much Time as You Can, Bernie

Seems that all the talk about plea bargaining, including a front-page headline in the New York Daily News, is for naught. The U.S. Attorney's office just charged Bernie Madoff with eleven counts of securities fraud and other felonies, and faces up to 150 years in jail. (To quote an old joke, the Shtunk, if he is upset about that prospect, should try to do as much time as he can.)

It's right here in black and white from the U.S. Attorney's announcement: "There is no plea agreement between the Government and the defendant." So evidently he seems to be moving toward a guily plea without a plea deal, as first suggested by the Wall Street Journal. His lawyer said today that he will probably plead guilty on Thursday.

I can't say I'm surprised that there's no plea deal here. His crimes are so massive, with Madoff himself as the ringleader, that I just could not see what he could possibly offer prosecutors. Who would he be able to rat out? He was in charge. He may be trying to protect his wife and other family members, but I can't see anything coming of that.

Plenty of interesting details in the criminal information, including a statement that the fraud began back in the 1980s. Lots of goodies, such as that Madoff siphoned off stolen funds toward his market-making business. One disappointment: no one else charged or implicated.

But the big news is that the U.S. Attorney didn't cut a deal. There's a letter discussing sentencing guidelines, but Madoff gets nothing from that except the prospect of 150 years in prison.

© 2009 Gary Weiss. All rights reserved.