With sentencing just around the corner, AUSA Marc Litt has filed the government’s sentencing memorandum and argues that Bernie Madoff should get 150 years in prison for his crimes.  There appears to be a wide disparity between Ike Sorkin’s 12 year proposal and the government’s life plus cancer position.

In juxtaposition to Sorkin’s informal and surprisingly short letter memo, Litt submitted a formal memorandum which, for the first time, provides some insight into the real case against Bernie Madoff.  Up to now, reports of Bernie’s crimes have been largely cursory and hyperbolic, without much by way of hard allegations of criminal conduct.  To some extent, the government’s memo finally puts some meat on the bones, though it’s slim pickings given the scope of the crimes.

From next Monday’s (sentencing date) New York Law Journal :

The government’s loss calculations remain somewhat unclear, though largely a product of what it describes as poor record keeping and the duration of the scheme, going back to the 1970s.  Yet $13.2 billion falls short of the initial claim of $50 billion, which was (as anticipated) an exaggeration.  On the other hand, even a $13.2 billion loss dwarfs anything that came before it.  Imagine, who ever thought we would come to the day when a loss was just $13.2 billion?

The more significant aspect of the government’s memo was the opportunity to grasp the “what” and “how” someone could have managed to pull off a scheme of this scope and duration.  Seriously, if strains credulity to believe that someone could create a private brokerage which took in about $170 billion in the course of its existence, without ever actually functioning.  Unfortunately, the scenario remains as vague now as ever.

This sentence is astounding.  How is it possible that no one, but no one, knew that Madoff, one of the highest fliers within the securities, was taking in billions and didn’t trade any securities.  “[H]ad not purchased any securities on their behalf” is not the sort of thing that wouldn’t be noticed on the street.  Somebody, somewhere, had to notice that Bernie’s trader was sitting there, sipping lattes, for more than 20 years, while the rest of them were busily buying and selling. 

In fact, given Bernie’s fabulous success, you would think that every house on the street would have someone whose only job was to keep an eagle eye on what Bernie was buying and selling.  They should have known every time a Madoff trader burped.  Yet this went on for more than a generation and it never occurred to anyone that Bernie didn’t hold a single position?  The cursory description of the scheme, unfortunately, provides little insight into how it was possible that this happened.

Litt knocks down the two primary arguments made by Ike Sorkin in support of his request for “justice and objectivity.”  Quickly and easily disposing of the comparison to other white collar frauds, it was noted that the top of the line fraudsters received sentences in the 25 year range, but that their offenses were petty in contrast to Bernie’s based on loss, scope, duration and impact.  This comes as little surprise, given how exposed Sorkin’s argument was (based on an in-house “average” of fraud sentences) to being ripped apart.

The government’s response to the mitigation argument is more interesting.  Whereas Bernie’s claim was the he ultimately came forward, albeit to his sons (who he claimed he knew would immediately run to the government and rat out their father), on his own accord, the answer is that he did so, after more than a generation of running the scheme, only because the collapse of the scheme was imminent and, within days, would be exposed when he lacked the wherewithal to pay out the withdrawals.  In other words, Bernie kinda came clean only when he realized that the game was over.

But there’s another tidbit that further undermines Bernie’s claim to a change of heart.

Specifically, Madoff made plans to distribute to employees, family and close associates the remaining cash that BLMIS had on hand; in fact, $173 million in signed checks were found in his office’s desk drawer.

To the bitter end, according to the government, Bernie was trying to suck the last few pennies out of the scheme.  The government alleges that had the FBI not arrested Bernie when it did, these funds too would have been gone.

In its analysis of the criteria of §3553(a), the government’s emphasis is clearly on general deterrence.  If nothing else comes of Bernie’s crimes, at least the rest of the investment world should see that such massive theft will result in massive punishment.  The other factors, per the government’s reckoning, militate against any leniency toward Madoff, noting that the trail of victims, from elderly individuals to pensions, trusts and charitable organizations, will continue to cause harm for generations.  The government dismisses any concern for Madoff, and focuses instead on how this case should serve to prevent anyone else from doing similar harm.

The question posed shortly after this case broke was whether the amount of loss was a meaningful metric for the determination of a sentence for Bernard Madoff.  After all, this case showed that the same crimes, committed by someone who was simply better at the scheme than others and had far more money available to steal, could ultimately reach stratospheric numbers.  Should sentence proportionality be based on the cash value of the loss, as the Sentencing Guidelines assume, as the correct measure of a sentence?  If he stole 20 times as much as the next guy, should his sentence be 20 times greater?

The prosecution’s argument, which relies ultimately on the Guidelines to frame its request for 150 years in prison, only because life imprisonment (as the Guidelines would “advise”) is not available under the statutory maximum term for any of the offense to which Madoff pleaded guilty, goes far beyond mere dollar figures.  The government makes a very persuasive case for the human side of the loss calculations, that the elderly individuals, pension funds, trusts and charitable organizations represent a flow of harm that will ripple through families, businesses and society.  Forget about the dollar amounts and consider just the people.  No matter how you cut it, the effect is huge, devastating and perpetual. 

As for Bernie, there’s little room for sympathy for the devil.  What’s laid bare in the government’s memo is how he made decisions, cut checks and ate caviar (at least metaphorically) for decades that reflected a depth of amorality of shocking proportions.  It wasn’t simply that Bernie seemed not to be bothered much by his committing crime after crime, day after day, for so very long, but that he was never touched at all by the damage he was doing to so many others in the process. 

Think of it this way: Had Madoff stolen only from the rich, but taken the funds of the Elie Weisel Foundation ($10,680,922) and preserved and invested them, lawfully and properly, he might have had some claim to a limited moral compass.  But he didn’t.  He took without regard to anyone or anything.  He simply took.  Even the myth of John Dillinger reflected a heart, when he returned cash to a customer saying that he only stole from banks.  Dillinger makes Bernie Madoff look evil.

Come June 29th, Southern District Judge Denny Chin will be put to the test of having to answer one of the most difficult sentencing questions posed, what to do with Bernie.  We’ve gotten Ike Sorkin’s take, and now the government’s take.  This means, of course, that you’re probably asking yourself, “so what’s Greenfield’s take?”  Read on, Garth.