Madoff's younger brother sentenced to 10 years for role in fraud

NEW YORK Thu Dec 20, 2012 7:37pm EST

1 of 2. Peter Madoff, brother of Bernard Madoff, arrives at the Federal Court in New York, December 20, 2012.

Credit: Reuters/Andrew Burton

NEW YORK (Reuters) - The younger brother of Bernard Madoff will serve 10 years in prison for his role in his brother's Ponzi scheme that stole billions of dollars from investors, a U.S. judge said on Thursday.

Peter Madoff, 67, pleaded guilty in June to criminal charges including conspiracy to commit securities fraud for falsifying the books and records of the investment advisory company founded by his brother.

U.S. District Court Judge Laura Taylor Swain adopted prosecutors' recommendations and sentenced Madoff to 10 years in prison. She also ordered him to forfeit what she called a "draconian" $143.1 billion, which she said would seal his "financial ruination."

"To take his story at face value, he knew that the business operation was a little bit crooked, and he was content to go along with that," Swain said. "We all know that a crooked operation is rarely if ever just a ‘little bit' crooked."

The judge said Madoff's prison term would begin on February 6 and said she would recommend he serve it at a federal prison in Otisville, New York. His lawyers had asked that he remain free until after his granddaughter's Bat Mitzvah on January 19. He was also sentenced to one year supervised release following prison.

"I am deeply ashamed of my conduct," Peter Madoff said at the sentencing. "I accept full responsibility for my actions."

Of 13 individuals charged criminally in connection with the fraud, Peter Madoff is the only one, other than his brother, who was a member of the Madoff family. Bernard Madoff, 74, was sentenced in 2009 to a 150-year prison term and was ordered to forfeit $170.8 billion.

With Madoff looking on, two victims of the Ponzi scheme urged the judge to show no leniency. Customers were defrauded out of about $20 billion in the Ponzi scheme, according to the trustee charged with recovering money for the victims.

"I ask that you show the same degree of compassion to Peter Madoff as he showed us: None," said Michael DeVita, one of the victims.


Peter Madoff, a lawyer, had been chief compliance officer and a senior managing director at the firm, Bernard L. Madoff Investment Securities.

He said he didn't know Bernard Madoff was operating the massive Ponzi scheme until shortly before his brother's arrest in December 2008.

But prosecutors said Peter Madoff helped create false and misleading documents designed to make it appear that the firm had an effective compliance program. If the firm had such a program, prosecutors said it would have shown that no real trades were taking place.

"Peter Madoff carried out his part of an epic fraud," Lisa Baroni, a prosecutor, said. "He lied repeatedly to regulators and investors."

Peter Madoff also transferred millions of dollars within the Madoff family to avoid tax payments to the Internal Revenue Service and also put his wife on the firm's payroll in a no-show job.

In December 2008, as Bernard Madoff's firm neared collapse, prosecutors said Peter Madoff also agreed to send $300 million remaining in its accounts to certain employees, family members and friends. Those funds were never dispersed, as the firm instead folded as Bernard Madoff was arrested.

Manhattan U.S. Attorney Preet Bharara in a statement called Peter Madoff a "gatekeeper," who enabled the fraud instead of protecting against it.

"The decade he will spend in prison and the disgorgement of his assets are a just result," Bharara said.

But Amy Luria, another victim whose grandmother had put Peter Madoff in charge of her estate, argued during the hearing that he should be sentenced for the roughly four decades that he worked for his brother's firm.

"The option of Peter Madoff going to jail for just 10 years does not seem just," she said.

The $143.1 billion the judge ordered Madoff to forfeit was the total investors paid into Bernard Madoff's firm from 1996 to 2008, prosecutors said.

Among the assets being forfeited are all of his wife and daughter's assets, several homes, a Ferrari and more than $10 million in cash and securities. His wife, Marion, was left with $771,733.

The Justice Department earlier this week filed a motion seeking a court order finding that restitution isn't practical, allowing it to distribute the forfeited assets.

The Justice Department said Thursday it had hired a special master, former U.S. Securities and Exchange Commission Chairman Richard Breeden, to administer compensating victims.

To date, the government has recovered more than $2.35 billion, the Justice Department said in a court filing Thursday.

The case is U.S. v. O'Hara et al, U.S. District Court, Southern District of New York, No. 10-cr-00228.

(Reporting by Nate Raymond and Nick Brown; Editing by Eddie Evans, Tim Dobbyn and Lisa Shumaker)

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Comments (3)
Reuters1945 wrote:
Re: “Madoff’s younger brother sentenced to 10 years for role in fraud”

Surely it is a normal human reaction to feel sympathy and even great pity for all the countless victims of Bernard Madoff’s gargantuan Ponzi scheme.

Clearly the Madoff brothers could not possibly or realistically have been able to pull off the largest con game in history without the assistance of countless other people both inside and outside their company.

As always we hear the same mealy mouthed words dripping from the lips of those who have been made to stand at the Bar to be judged and held accountable for their predatory behavior.

Like a broken record we never fail to hear “how sorry and ashamed they feel at all the pain they have caused to the many victims who trusted them with their money”.

“I am deeply ashamed of my conduct,” Peter Madoff said at the sentencing. “I accept full responsibility for my actions.”

In fact the only sorrow they feel is that they were unlucky enough to have gotten caught and will now have to do serious jail time.

Do the crime- do the time.

But is it not true that many of the victims can not be said to be totally blameless themselves in the larger “scheme” of things.

And I purposely must emphasize the term, “scheme”.

After all most of those who invested money with the Madoff firm were fairly well off, even hugely affluent and highly educated investors.

In most instances they had huge amounts of money to invest because they were quite smart. No one ever became wealthy by being stupid.

They were free to invest their wealth anywhere and in any fashion they so chose. Fairly safe options for example would have been United States Treasury Bills and/or various other types of government bonds.

But those options are not known for making anyone get rich quick.

The people who were Madoff’s willing and eager victims were people who wanted big payoffs on their money. Not the embarrassingly meager returns one gets on US Treasury Bills.

They wanted sky high interest and unbelievable rates of appreciation on their money. Indeed, they wanted returns that were almost “too good to be true”. And once they got a taste of the high returns the Madoff firm produced for them, they could not wait to throw more and more money at the Madoff people.

Hey- in for a buck, in for ten million bucks. Why stop to think and why be timid about it.

Like people drugged on the sweet, intoxicating taste of financial success, investors spread the word, near and far, to relatives and friends alike.

Hey- if you want to be a savvy investor, forget about all those old fashioned US Government financial instruments. Get on the band wagon and join the “in crowd”, the hip crowd. Give your money to the Madoff firm and watch the money roll in like a never ending, cascading stream of sweet honey.

Does this remind anyone of all the famous American Gold rush legends. People who sold everything they had to go West and seek their fortunes.

But how many of Madoff’s countless victims ever stopped and paused and reflected on the fact that if the returns seemed almost “too good to be true”, then maybe, just maybe, those sky high returns were actually not true.

Maybe, just maybe, the fabulous returns on one’s capital were simply coming out of the money the latest suckers were pouring into Madoff’s coffers, hand over fist.

That is after all exactly how every run of the mill Ponzi scheme works. Until the whole edifice grows so large and becomes so unwieldy that the whole deck of cards comes crashing down.

Can a single Madoff investor honestly say they never heard the term “Ponzi scheme” and had no idea how a Ponzi scheme operates.

But hey- they all had it on “good authority” that the Madoff people were on the “up and up”. It was someone’s brother in law, or some trusted attorney, maybe even someone’s family Priest or family Rabbi, who assured each victim who climbed on the Pyramid built by Pharoah Bernard Madoff, that this was all “legit” and more importantly, the chance of a lifetime to build a handsome nest egg for one’s old age.

Was it not the famous Circus impresario, P.T. Barnum, who long ago, famously said: “There’s a sucker born every minute”.

Bernard Madoff must have found that quote printed on a wrinkled up piece of paper inside a Fortune Cookie when he was twelve years old and decided he had just discovered his life’s perfect calling.

Yes, I feel very bad for all the innocent human beings who foolishly placed their trust and their hard earned money, for some, their life’s savings, in the Bernard Madoff firm.

But at the end of the day were all those investors really quite that “innocent” and were they not a lot more than just a little naive and perhaps a wee bit greedy to boot, as well.

They all wanted wanted the impossible which is to say impossibly high financial returns on their money whilst at the same time incurring zero risk and zero possibility of loss.

One might imagine this financial debacle would be a learning experience and serve as a cautionary tale to future investors searching for incredible returns on their capital.

And yes- perhaps some will have learned something from the story of Bernard Madoff, et al, and all those poor, innocent Souls were were taken in by him and his brother.

Surely this type of gargantuan swindle could never occur again.

At least not until the next “Bernard Madoff” arrives on the scene with a “new and better and improved”, scheme.

Watch for it, for as sure as Night follows Day, it’s coming.

Dec 20, 2012 10:34pm EST  --  Report as abuse
CountryPride wrote:
I want to know why OWEbama’s buddy Jon Corzine has not been put in jail yet?

Dec 21, 2012 12:53am EST  --  Report as abuse
Yowser wrote:
Reuters1945: I agree with you that many of the victims may have had eagerness for high return on their minds – call it greed if you must. However, it seems that many frauds are aided by some degree of greed within the victims and the fraudsters seek to take advantage of that. However, this cannot excuse, in any way, the crime of fraud. The only caution that can be given to a potential victim is to beware of one’s own unrealistic expectations and greed, and secondly to heed Shakespeare’s advice (pardon the older English usage) “All that glisters is not gold.”

Dec 21, 2012 1:28am EST  --  Report as abuse
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