Ponzi-schemer Bernie Madoff will apparently plead guilty this week to charges that could mean a life sentence for him, without a plea deal. See Rashbaum & Henriques, Madoff Guilty Plea Expected; He Could Face Life in Prison, NY Times, Mar. 10, 2009. Madoff purported to run an investment business managing $64.8 billion for 4800 clients. He promised some of those investors annual returns of 46%. Some investors were paid off with other clients' money, and he even used client money to finance the market-making business run by his sons. Id. All told, he may have paid "in the billions" to investors in the form of redemptions.
Madoff was charged with 11 felony charges--including securities fraud, investment advisory fraud, mail fraud, wire fraud, money laundring, false statements, perjury, false SEC filings, and theft from an employee benefit plan. Id. These charges carry a maximum of 150 years in prison. And the government wants $177 billion, which Madoff's lawyer calls "grossly overstated" as a criminal forfeiture amount.
Clearly, Madoff's criminality represents an iconic image of the ills of Wall Street, when greed and status justify enormous harms to individuals and the society at large. Yet it isn't just individual criminals that are the problem with our economy today. It is, in fact, the larger ethical lapse represented by Wall Street financial institutions that lies at the heart of the economic meltdown we are enduring. Harvey Pitt, former chair of the SEC, suggested "there was criminality at a lot of these [Wall Street] firms" where different valuations of financial instruments were used depending on the purposes for the valuation. "These kinds of things reflect more than happenstance or carelessness; they reflect criminality." Strom, Elie Wiesel Levels Scorn at Madoff, NY Times, Feb. 26, 2009.
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