Bernard Madoff, the orchestrator of a massive, long-running Ponzi scheme that snared thousands of victims, from the rich and famous to small investors who entrusted their life savings to him, pleaded guilty on Mar. 12 to 11 charges related to the fraud in a packed federal courthouse in Manhattan.
"I operated a Ponzi scheme," Madoff told U.S. District Judge Denny Chin in a flat, emotionless voice. "I am grateful for the opportunity to speak about my crimes." He went on to say that he knew it was the wrong thing to do and is deeply saddened by the people he hurt. "I knew this day would come," he said.
At the end of the hearing, Chin revoked Madoff's bail and ordered him jailed until his sentencing, which was scheduled for June 16. According to prosecutors, Madoff, 70, could face up to 150 years in prison.
A Peek Inside the Scam
In court, Madoff, who was arrested in December after confessing to his sons, explained some of the workings of the fraud, which cost customers as much as $64 billion. The scam, he said, began during the recession in the early 1990s, as he had promised his clients certain returns and didn't want to disappoint them. He thought he could make the money up later, but couldn't.
He also explained how he moved money between accounts to create an impression of trading, sent false trade confirmations to his clients, and lied to the Securities & Exchange Commission. "Clients would have no way of knowing the statements were false," Madoff said.
He did not implicate anyone else in the scheme and insisted that "while my investment advisory business—the vehicle of my wrongdoing—was part of my firm Bernard L. Madoff Securities, the other businesses my firm engaged in, proprietary trading and market making, were legitimate, profitable, and successful in all respects. Those businesses were managed by my brother and two sons."
Madoff's in-court statement about the timing of the scheme conflicted with that of prosecutors, who said the scam began in the 1980s. The question of how he managed to run a scam of such proportions for so many years without getting caught remains unanswered. He also did not shed any light on whether he had help in running the scheme or whether he managed the complex logistics of it alone.
Victims Address Court
The day was a catharsis of sorts for many of Madoff's victims, three of whom were given the opportunity to speak to the issue of accepting the guilty plea during the hearing, while others watched in the courtroom or on video in overflow rooms. Since his arrest, Madoff had been free on $10 million bail but confined to his Manhattan apartment, and, as the orchestrator of perhaps the largest financial fraud in history, the subject of extreme public scorn.
The first victim allowed to speak, George Nierenberg, asked Madoff: "I don't know if you had a chance to turn around and look at the victims." He then moved toward Madoff, causing a bailiff to shuffle forward. After being asked to move back to the podium by the judge, Nierenberg said he didn't understand why there wasn't a 12th charge, one of conspiracy. Still, he told Chin he accepted Madoff's plea.
The two other victims who spoke argued against the guilty plea. One woman said she thought a trial would bring out more information about where the money went and who else was involved. A second woman said she wanted a trial because it would show the world that Americans believe in justice. Chin said both would happen without a trial and accepted the plea.
Madoff's lawyer, Ira Sorkin, tried to keep his client out of jail until his sentencing, arguing that Madoff wasn't a flight risk and detailing the costly security arrangements that had been set up since Madoff's arrest. However, Chin, noting that Madoff had the means to flee and an incentive to do so because of his age, ordered him to jail.
Madoff was led out of the courtroom in handcuffs, his freedom gone, and with many questions about the scheme still left unanswered.
Levisohn is a staff editor at BusinessWeek covering finance and personal finance. The Associated Press contributed to this report.