Question

When Bernie Madoff confessed, he stated that he acted alone. However, there were six key employees at Madoff Securities who helped facilitate the fraud. Discuss the role each co-conspirator played in the fraud.

Answer 1

Participants in the Madoff investment scandal included employees of Bernard Madoff's investment firm with specific knowledge of the Ponzi scheme, a three-person accounting firm that assembled his reports, and a network of feeder funds that invested their clients' money with Madoff while collecting significant fees. Madoff avoided most direct financial scrutiny by accepting investments only through these feeder funds, while obtaining false auditing statements for his firm. The liquidation trustee of Madoff's firm has implicated managers of the feeder funds for ignoring signs of Madoff's deception. Although Madoff claimed to have executed the scheme alone, subsequent investigation has shown that he was assisted by a small group of close associates, as well as the feeders' self-interested indifference to the source of his investment returns.

It was a brutally casual way to inform a man of his fate. After listening to a lengthy monologue by Bernard Madoff's defence lawyer on why the fraudster should remain on bail in his Manhattan penthouse, Judge Denny Chin waved away the prosecution.

"I don't need to hear from you because it is my intention to remand Mr Madoff," said the judge. He spoke almost as an aside, as if Madoff wasn't in the room.

There was a collective intake of breath. In the overflow room at New York's federal courthouse, full of hard-bitten hacks watching proceedings on a video link, a few people started clapping. The old man was finally going behind bars

If the 70-year-old fraudster himself was surprised at being sent directly to jail, he didn't show it. He would have been warned by his defence team that he ran the risk of instant incarceration by pleading guilty to 11 counts of fraud, perjury and money laundering.

In fact, throughout the 90-minute hearing, Madoff looked as if he had been drugged. He stared fixedly at some point in the middle distance, slouched slightly forward with his arms resting on a table. His speech of "apology" was delivered in a flat monotone.

The only time he showed any tangible reaction was when one of his victims, George Nierenberg, aggressively demanded that Madoff meet his eye, moving towards him and saying: "I don't know whether you've had a chance to turn around and look at your victims."

Madoff, rather reluctantly, swivelled round and briefly eyeballed his former client before Judge Chin ordered Nierenberg to cool off.

Being Bernie Madoff's defence counsel is a job from hell, even by the standards of white-collar litigation. Madoff seems to have been intent on self-immolation from the moment his $65bn (£47bn) fraudulent scheme came to light in December.

Many legal experts were flummoxed by Madoff's decision to confess to every criminal count on the table this week without any sniff of a deal with prosecutors. If he had gone with "not guilty", he could have bought himself another year of bail. Or by co-operating with the feds and by talking them through the paperwork, he might have won a delay and a shorter term. Instead, he's probably in jail until he dies.

The probable explanation is that Madoff hopes to take the bullet for his family and colleagues. Peter Henning, a former fraud prosecutor turned law professor at Wayne State University in Detroit, says: "I think he's protecting his family. Any plea deal would definitely have required him to implicate others."

During his words of penance to the court, Madoff was at pains to emphasise that while his investment advisory outfit was a fraudulent hole, his company's proprietary trading and market-making operations were "legitimately and honestly run businesses". His sons, Andrew and Mark, were senior executives on this "honest" side of the Chinese wall. Madoff's 63-year-old brother, Peter, was in charge of trading.

It is almost inconceivable that Madoff could have spent 20 years squirreling away clients' money in a Chase Manhattan bank account, conducting virtually no legitimate transactions, without anybody at Madoff Investment Securities smelling a rat – even if, as he asserts, he was deliberately employing under-qualified staff with no expertise in the securities industry.

For the feds, catching the kingpin before they get to any henchmen poses an unusual difficulty – because of his reputation as America's biggest liar, Madoff is a radioactive witness. Any evidence he gives in future trials can be easily and quickly discredited.