Madoff's mad sentence? | AccountingWEB

Madoff's mad sentence?

Bernie Madoff has been sentenced to the maximum of 150 years imprisonment and ordered to forfeit all his assets up to US $170 billion (not that he has anything like that, the figure is based on all the funds said to have passed through his companies). Given that Mr Madoff is 71 years old he is unlikely to serve anything like 150 years in prison.

Is that sentence mad? Did the judge pass the maximum sentence with a view to his prospects for re-election? What might have been the outcome if the case had been heard in the English courts?

Well, forget the 'election'. Although some US judges do indeed have to stand for public re-election regularly, the judge who sentenced Mr Madoff, Judge Denny Chin, is a federal judge in a US District Court. As such he is appointed for life and is not required to stand for re-election. He has been a federal judge for 15 years, having been appointed by US President Bill Clinton in 1994. He therefore has no need to curry favour with the American public.

He's not senile either, in case you were wondering. He is in his mid-fifties, and he is generally reckoned to be a fair and sensible judge.

But there is no doubt that, if Bernie Madoff had been sentenced in England he would be out of prison well before his 80th birthday.

Over here he would face a much lower maximum sentence. The most serious crime to which he pleaded guilty was money laundering - which carries a maximum of 14 years. In England he would be likely to have been charged also with one or more of fraudulent trading, theft, fraud, false accounting, obtaining property or services or a bank transfer by deception, Financial Services Act offences and Companies Act offences. None of these offences carry a maximum sentence of more than 10 years. (Conspiracy to defraud is a popular charge in England too - but Mr Madoff was said to have acted alone, which rules out a conspiracy charge.)

There is always the possibility that he would have been sentenced to consecutive terms of imprisonment for the different offences (so that a total sentence in excess of 14 years would be imposed) but in English courts judges are required to have regard to what is known as the 'principle of totality' so that the total sentence remains 'just and appropriate' to the overall offending. So it is unlikely that a sentencing judge would take as his starting point a sentence of more than 14 years.

Then comes mitigation. Mr Madoff pleaded guilty and that would normally result in a substantial reduction in sentence. Also he expressed remorse for his actions - that is further mitigation.

On the other hand the amounts of money involved were enormous by any standards and some (but by no means all) of the victims were vulnerable individuals or charities. These are aggravating factors.

So in terms of sentence what might Bernie Madoff have got in England? Michael Bright was the Managing Director and Chief Executive Officer of the Independent Insurance Group of companies. The group collapsed in 2001 and the deficiency was estimated at £1 billion. Mr Bright was convicted of conspiracy to defraud, to which he had pleaded not guilty. He was sentenced to 7 years imprisonment. The Deputy Managing Director and the Finance Director of the group were sentenced to 3 years and 4 years, respectively. However this was a case in which the business had been legitimate - the dishonesty was the covering up of losses incurred for two years, so that the group appeared healthy when it was not and should not have continued trading.

So, compared with Mr Bright, Mr Madoff's case was more serious because it involved a much longer period of dishonesty, a greater degree of dishonesty (not just a cover up of losses but the deliberate seeking of 'investments' on a dishonest basis) and some victims were vulnerable individuals and charities. But Mr Madoff pleaded guilty, whereas Mr Bright did not.

Consider Peter Clowes of Barlow Clowes which collapsed in 1988 after it emerged that he had spent £100 million of investors' money on private aircraft, cars, property and a luxury yacht. During a 112-day trial, the court heard how investors believed that they were putting their savings into risk-free government bonds. Mr Clowes was sentenced to 10 years following a not guilty plea. Perhaps his is the closest English comparison to Bernie Madoff.

So Mr Madoff, following a guilty plea, would be expected to receive a sentence of less than 10 years imprisonment.

In practice, in England a person will not usually serve the whole of his sentence in prison. He can confidently expect early release. Peter Clowes, for example, actually spent 4 years inside for the Barlow Clowes fraud. The rules have changed since then and offenders these days spend a greater proportion of their sentence actually in prison.

Even so, there remains a huge disparity between the treatment of fraudsters in the UK and the US.

And another thing. Look at the speed with which the criminal justice system operates in the US. Mr Madoff was arrested on 11 December 2008 at the start of a criminal investigation. He was sentenced just over 6 months later, on 29 June. Even with a guilty plea a similar case would be expected to take years to resolve in the UK.

Do we have any lessons to learn from our US cousins?

David Winch

nogammonsinanundoubledgame's picture

Interested to know ...

nogammonsinanun... | | Permalink

... what pillock dreamt up the technical maximum penalty of 150 years. I mean, c'mon!

I sometimes reflect on how the pendulum swings between penalties for crimes against property contrasted with crimes against the person.

It was not so long ago (at least in local societies) that violent crime was considered relatively trivial, while crime against property was considered heinous. In the Icelandic sagas it was perfectly OK to kill your neighbour without provocation, provided that you made no attempt to conceal the fact and coughed up half a dozen goats to his family at the next althing. Of course the family of the victim usually felt a bit hard done by and would next week go and kill the son of the aforementioned murderer and so on, and the whole thing takes about another 50 years to fizzle out. By contrast, steal a horse in USA in the 18th century and you were in for a neck-stretching.

Nowadays, with some exceptions, violent crime is "the business". Happen to kill someone by accident on the road and as the killer you will no doubt feel gutted for ever and a day. There was no criminal intent (indeed no intent whatsoever), but you can expect to have to defend a charge of dangerous or reckless driving, and wherever the burden of proof ought to lie you are in for a bit of a lottery on which turns a substantial part of your life. Some would argue that accident or lack of intent is irrelevant: The family of the deceased is devastated and it is only right and proper that the cause of that devastation suffer likewise. I pass no comment on the merit of that argument, suffice to observe its prevalence in society today.

Of course in some states the maximum penalty is execution, and that tends now to be reserved for crimes against the person. This is presumably considered to be a sanction more punitive than 150 years and a fine of $170 billion.

And yet, for all that the pendulum has swung in favour of the heavier penalty for violence against the person in what has only been the case in the very recent history of humanity, it is interesting that just occasionally our genetic heritage of the previous hundreds of years comes to the fore when a truly gross crime against property is judged.

In amongst all this we have the anacronysm in UK taxes that civil penalties for transgressions are mitigated for "size and gravity", while "size" is already accounted for in the interest charge. I mean, what's that all about?

With kind regards

Clint Westwood

anyalayne's picture

What's next ?

anyalayne | | Permalink

The 150 years sentencing appears to be more of a deterrent to potential future or existing Madoffs who may have thought (or are thinking) that the system would have allowed for say 10-20 years or maybe indulge in allowing for community service for Mr. Madoff (ludicrous yes but contemplated in certain discussions that this could be an option).

Life sentence is enough of a 'shake up' for those who want to circumvent the system for their own personal gain.

The question is what happens to the people who have been affected by the Madoff scandal? What good is it that Mr. Madoff is incarcerated for 150 years whilst their investments cannot be recovered ? Is there any kind of comfort knowing that he is behind bars being taken care of with the taxes collected from the society that he has defrauded?

Anya Payne

nogammonsinanundoubledgame's picture

Sympathy of course goes ...

nogammonsinanun... | | Permalink

... to his victims, particularly those who were a step or two away from those agents who on their behalf took the decisions to invest in him. And yet I cannot escape a small dent in that sympathy at least for those who invested direct, for their gullibility in expecting the promised rates of return without a hint of suspicion.

I don't suppose that the judge had some investments that suffered? That would be a bit obvious, you would think (certainly grounds for appeal, it seems). And yet, the judge in Scandinavia who presided over the PirateBay founders had close links with copyright organisations, so it has been known to happen.

With kind regards

Clint Westwood

Bernie Madoff

The Black Knight | | Permalink

I think it may all be political spin!

The really amazing thing is not that Bernie Madoff with millions, (as there is always a ready supply of the greedy and gullible who will not pay for advice) but that he did not buy a false identity, plastic surgery and plan an exit route, how daft was that ? Or was he caught with his pants down ? Surely he must have known it was going pear shaped.

Was his name really Madoff, funny these names after the event?

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