United States v. Bernard L. Madoff, 09 Cr. 213 (DC) — Memorandum of Law of the United States in Opposition to Defendant's Motion for a Reduction in Sentence (Doc. 223)

Claims Supported by This Source

1. BLMIS was a registered broker-dealer established in 1960, with three divisions: proprietary trading, market making, and investment advisory. From the mid-1980s, the investment advisory division was operated on a separate floor (PSR ¶29–31, p. 1).
2. The government places the start of the fraud in "at least the 1980s" (PSR ¶44), while the defendant himself stated in his plea that it began "in the early 1990s, to the best of my recollection" (Plea Tr. 25) (pp. 2, 7).
3. The defendant claimed to use a "split-strike conversion strategy" but in reality did not invest client funds in securities, instead depositing them in an account at Chase Manhattan and using them to pay redemptions and profits to other clients (Plea Tr. 24; PSR ¶47–49, 62) (pp. 2, 7).
4. Key elements of the scheme: the investment manager and custodian were the same, precluding discovery by an independent custodian (PSR ¶65); fake monthly statements and trade confirmations (PSR ¶67); fake audited financial statements submitted to the SEC (PSR ¶73); and instructing feeder fund managers not to tell clients that BLMIS was the manager (PSR ¶63) (pp. 2–3).
5. Redemption requests in the second half of 2008 totaled approximately $7 billion (PSR ¶36). On December 9, he admitted to his brother, and the next day to his sons, that it was a "giant Ponzi scheme," and was arrested by the FBI on December 11. On his desk were 100 signed checks worth $173 million (PSR ¶37–43) (p. 4).
6. Pre-sentencing analysis showed at least 1,341 accounts suffered direct losses totaling over $13 billion (PSR ¶90). Two investors committed suicide (PSR ¶94–95) (p.5).
7. Pleaded guilty to 11 counts without a plea agreement on March 12, 2009. Sentenced to 150 years on June 29, 2009 (PSR ¶128, 206). The loss amount of over $13 billion was more than 32 times the base amount for a life sentence (pp.6–9).
8. The defendant told the probation officer, "The $50 billion figure was profit, not principal" (PSR ¶112) (p.8).
9. From 2002 to 2008, transferred over $250 million in client funds to the proprietary trading division via a London affiliate (PSR ¶68) (p.3).
10. Assets shown to investors at the time of collapse were approx. $65 billion (PSR ¶35, 62). The amount that flowed into the main account during the fraud was approx. $170 billion (PSR ¶16(o)). Losses known at the time of sentencing were over $13 billion; as of February 2020, the trustee's allowed claims were over $19.4 billion (p. 26).
11. Regarding the start date, the government cites the defendant's statement in a December 2008 proffer that it was the "1970s"; the judge's statement at sentencing that "it clearly began before the 1990s" (Sent. Tr. 43); employee trial testimony (creating fake backdated trades from the early 1970s); and a forensic accountant's report (no evidence of trading going back to the 1970s). Immediately after the defendant's plea of "to my recollection, the early 1990s," the government stated it did "not agree with all of the defendant's explanations" (Plea Tr. 31) (p. 23 and notes 14–16).
12. The defendant pleaded guilty only to substantive offenses, not conspiracy, and claimed to have acted alone for a long time, but 14 other BLMIS employees and associates were convicted, 5 of whom were found guilty at trial (p. 24).
13. The trustee informed the government that the defendant "did not help at all" with recovery. The government's Madoff Victim Fund and the trustee's recoveries were made without the defendant's cooperation (p. 24). SIPC's general counsel wrote to the court that many former customers have only been partially compensated and the liquidation will continue for several years (p. 25, note 17).
14. In a March 27, 2009, interview with a probation officer, the defendant stated, "the 50 billion figure was profit, not principal" and "there was no market because of the recession" (PSR ¶112) (p. 8).
15. Personal expenditures from BLMIS accounts, which included client funds: two yachts for $11.5 million, a $6.5 million loan for a home purchase, a $4.4 million residence in Manhattan, four country club memberships for $950,000, etc. (PSR ¶82–84) (p. 3). After his arrest, while on bail, he mailed over $1 million in personal items to family and friends (PSR ¶26) (p. 4).
16. Judge's reasoning at sentencing: A sentence beyond 20–25 years is merely symbolic, but symbolism is important for three reasons: retribution, deterrence, and the victims (Sent. Tr. 46–49) (p. 9). The defendant applied for a pardon in February 2019, requested a sentence reduction from the Bureau of Prisons in September, which was denied on December 5, and filed a motion with the court on February 5, 2020. The government opposed it on March 5 (pp. 10–12).
17. In interviews and affidavits while incarcerated, the defendant stated that the crime was a "bookkeeping violation" and "not a Ponzi," and that the clients had acknowledged in writing that they were "sophisticated investors." The government calls this a denial of responsibility and shifting of blame (pp. 19–23).
18. Approximately 520 victims sent letters to the court; about 20 (4%) supported his release (p. 27).

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