Federal Evidence Review

A cooperation plea agreement would have required his truthful responses concerning the fraud scheme; Madoff plea allocution statement appears to try to limit the exposure of others who may have been involved in his fraud scheme, in United States v. Bernard L. Madoff (SDNY 09 Cr 213 (DC))

On March 10, 2009, Bernie Madoff waived his right to be indicted by a grand jury. The government filed an eleven count information charging him with securities fraud, investment adviser fraud, mail fraud, wire fraud, three counts of money laundering, false statements, perjury, false filings with the Securities and Exchange Commission, and theft from an employee benefit plan. The Madoff plea seems unlikely to end the inquiries into one of the largest fraudulent schemes in the country's history.

On March 12, 2009, defendant Madoff entered his guilty plea to all eleven counts in the Southern District of New York. During his plea allocution, defendant Madoff set forth the fraud scheme. In his statement to the court, he admitted operating a “Ponzi scheme” through his investment firm. He falsely told investors that he employed a “split strike conversion” strategy. He also insisted:

“I want to emphasize today 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.”

He added:

“It is my belief that the salaries and bonuses of the personnel involved in the operation of the legitimate side of Bernard L. Madoff Investment Securities were funded by the operations of the firm’s successful proprietary trading and market making businesses.”

See Plea Allocution Statement; Plea Hearing Transcript. His statement to the court was necessary to demonstrate that the elements for each of the charged offenses had been satisfied. However, in his statement, he evidently sheltered his family and limited the exposure of others in the fraud scheme.

Of course, the government could not compel the defendant to enter into a cooperation agreement. Without a written plea agreement, the defendant could plead to all of the charges, as he did, or put the government to its proof at trial after a formal indictment. Nonetheless, there was some apparent general agreement between the government and defense on how to proceed since the government filed an information and the defendant avoided being formally charged by the grand jury. Since there was no written plea agreement, the government filed a Pimentel letter, which is based upon United States v. Pimentel, 932 F.2d 1029, 1034 (2d Cir. 1991) (“[W]e suggested that district courts should, where feasible, explain to defendants before accepting their pleas what sentence is likely to be imposed. Here, we invite Government attorneys to play a similar role in helping to ensure that guilty pleas indeed represent intelligent choices by defendants”) (citation omitted). In the Second Circuit, when a defendant pleads to charges without a written plea agreement, the prosecutor may file a Pimentel letter which sets forth the government’s view on sentencing and forfeiture issues. The letter is not binding on the court, the probation officer drafting the presentence report, or the defendant.

Cooperation plea terms vary from district to district. Typically, they include obligations and consequences for a possible breach. For example, the terms would normally include a requirement that the defendant must testify truthfully and forthrightly to any questions put forward by the government concerning all aspects of the criminal matter. Some plea agreement require that the defendant help identify assets related to the criminal case. If the defendant breached the terms of the written plea agreement, including failure to provide truthful information, then the plea agreement would be breached. The government would not be required to honor any terms in the plea agreement, including a possible motion for a reduction in sentence for substantial assistance provided under U.S.S.G. Section 5K1.1.

At this point, one can only wonder if standard cooperation terms had been included in a plea agreement, what further cooperation evidence may have been uncovered. Some key questions may have included:

• How could such a massive fraud scheme been committed without the involvement of others?
• How many other decision makers were involved in key aspects of the fraud scheme?
• How could the transaction documents, including investor account statements and false trading documents, be generated without the assistance of others?
• Was there really a line between the legitimate and unlawful Madoff entities, as he claimed during the plea hearing?
• What is the extent of any remaining fraud assets and where are they located?
• How did the fraud scheme evade the detection of regulators for so many years?

Without defendant Madoff’s cooperation, investigators may pursue other leads to answer these and other questions. However, it seems unlikely that defendant Madoff was the sole decision maker in an extensive fraud scheme stretching back at least to the early 1990s, as he acknowledged during the plea hearing.

The sentencing hearing for defendant Madoff has been set for June 16, 2009. He faces a maximum statutory sentenced of 150 years for all of the counts of conviction. Given his age of seventy years, he likely will spend the rest of his days in prison. At the conclusion of the hearing, the court remanded the defendant into custody and revoked bail based on his risk of flight. The defense request for a stay pending an appeal was denied. The defense team has appealed this detention ruling.

Some of the key documents and transcripts in the Madoff case include:

Key Documents: United States v. Madoff

Date	Document
Dec. 11, 2008	Criminal Complaint
Jan. 6, 2009	Government Motion to Detain Defendant Madoff
Jan. 8, 2009	Government Reply On Motion to Detain Defendant Madoff
March 3, 2009	Eleven Count Information Against Madoff
March 10, 2009	Government Pimentel Letter
March 10, 2009	Defense Response to Government Pimentel Letter
March 10, 2009	Waiver of Indictment and Conflict of Interest Hearing
March 12, 2009	Defendant's Plea/Allocution Statement
March 12, 2009	Plea/Allocution Hearing
March 12, 2009	Department Of Justice Announcement of Madoff results
March 13, 2009	Defendant’s Appeal Of Detention Order After Plea Hearing
Undated	Madoff Firm customer list