In recounting how he sustained a 20-year fraud whose collapse erased as much as $65 billion that his customers thought they had in their accounts, Mr. Madoff said, “I believed it would end shortly and I would be able to extricate myself and my clients from the scheme.”
“As the years went by I realized that my arrest and this day would inevitably come,” Mr. Madoff said. “I cannot adequately express how sorry I am for what I have done.”
Although Mr. Madoff admitted to operating what he called “a Ponzi scheme through the investment advisory side of my business,” he said all other aspects of his enterprise, operated by his sons and brother, were legitimate, profitable and successful.
Thursday, March 12, 2009
Bernard Madoff has pleaded guilty to all of the counts against him. Madoff’s Bail Revoked After Guilty Pleas to All Charges
The Madoff scandal resolved itself relatively quickly and painlessly. Madoff confessed immediately, after all, unlike most white collar defendants. This should not stop further inquiries and prosecutions arising from this sorry affair. Madoff had people in his office fabricating stock purchases and financial statement. His wife appears to have helped him recruit "investors." The accounting firm he used signed fraudulent financial statement. And the so-called "feeder funds" that directed billions of investor $$ to Madoff do not look very innocent right now.
Prosecutions arising from financial fraud shouldn't end with Madoff's crew either, and it appears that they won't as prosecutors are supposedly planning an attack on financial fraud.
I, of course, have little good to say about the Eric Holders of the world, but I hope he does follow through on this. There was a huge amount of fraud in the financial sector the last few years, some of it quite brazen. The officers from entities like Countrywide, Bear Sternes, Lehman Brothers, Washington Mutual, Wachovia, AIG, Fannie & Freddie, Merril Lynch, etc. made repeated public statements about the soundness of their businesses, even as those businesses hurtled toward ruin and gov't bailout. Many of these firms now appear to have engaged in odd bookkeeping practices just before their respective falls, which allowed some insiders to reap millions in "bonuses," some of which came after TARP money arrived. How is that not a crime?
On a broader level, there was a lot of fraud in mortgage lending that was an open secret. We have all smirked about "liar loans," but think of what that represents; lenders were allowing borrowers to exaggerate their income to obtain loans that the lenders turned around and sold to investors as AAA investments. But they weren't. Countrywide, by itself, is already notorious in CA for its shoddy underwriting. This should go unpunished? And by that, I mean, the actual people committing the frauds: not the company itself.
Back in the Seventies, the US seemed to become overwhelmed by street crime, a lot of it arising from the drug trade. The public demanded - and got - new prisons, vigorous prosecutions, mandatory sentencing laws, etc. These measures did not make crime go away; but they certainly reduced it and, even better, reduced the brazen impunity of it. Turn about is fair play. I think White Collar crime - from the street-level pushers selling houses and loans to those who couldn't afford them all the way up to the Lords of Finance like Stan O'Neals and Richard Fulds who abetted these transactions - should be treated similarly.
This is not a matter of "regulation v deregulation" or "left v right." It's a matter of law and order. Too many unscrupulous people have gotten away with looting billions from our economy for too long. Confidence and trust will not be restored to the American financial markets until these bad actors are removed, sent away, and punished for their crimes.