March 11 (Bloomberg) — Bernard Madoff didn’t agree to a plea deal with U.S. prosecutors because of their demand that he admit to a conspiracy, a charge that would require him to say he worked with others in the largest Ponzi scheme in history, according to people familiar with the matter.
Madoff’s decision not to negotiate a deal means the government won’t have his help in determining whether his employees assisted in the fraud, the people said. Madoff, 70, will plead guilty tomorrow to all 11 counts he faces without any promise of leniency or anything else in return. He could receive 150 years in prison at sentencing on charges including fraud, perjury and money laundering.
Talks between defense lawyers and prosecutors over the charges extended into late last week before the government decided to proceed with the counts against him, according to a person familiar with the matter.
“The information crafted by the government does not contain a conspiracy charge, and you can read what you like into that,” Madoff attorney Mauro Wolfe said today in an interview, referring to a document listing the charges that was filed yesterday in Manhattan federal court. “The information speaks for itself.”
Madoff told 4,800 investors in November that their accounts held $64.8 billion, though their holdings were a “small fraction” of that, the government said in court papers. Madoff defense lawyer Ira Sorkin said yesterday during a court hearing in the case that his client will plead guilty tomorrow.
False Account Documents
Madoff told workers to create false account documents and trade confirmations of phony returns, and to create false financial statements for regulators, according to the government.
Prosecutors working for acting Manhattan U.S. Attorney Lev Dassin said Madoff didn’t act alone in the fraud, which dated back to the 1980s, according to the people. Janice Oh, a spokeswoman for Dassin, declined to comment.
Madoff was arrested Dec. 11 and charged with securities fraud for using billions of dollars from new investors to pay off old ones at his New York-based firm, Bernard L. Madoff Investment Securities LLC. He was charged after the government said he confessed to his sons and the Federal Bureau of Investigation that he led a $50 billion Ponzi scheme.
At the hearing yesterday, prosecutors said he would plead guilty to securities fraud, as well as mail fraud, wire fraud, investment adviser fraud, three counts of money laundering, false statements, perjury, false filings with the Securities and Exchange Commission and theft from an employee benefit plan. Madoff, free on $10 million bond, may be jailed after his plea.
Conspiracy Charge
A conspiracy charge requires prosecutors to prove that two or more people agreed to commit an illegal act, and that they committed at least one act to further the crime. Madoff could be charged later with conspiracy, and prosecutors may still charge others involved in the scheme, former federal prosecutor Christopher Clark said in an interview.
“It’s kind of rare in a white collar case to have a one- person indictment — you often have a number of people included,” said Clark. “You need two to tango in a conspiracy. One thing it says about the current moment is that there’s no other individual they’re claiming Madoff is conspiring with.”
By not charging Madoff with conspiracy, the government “signaled it’s not going to stand in the way of him pleading guilty,” said Daniel Richman, a former federal prosecutor who now teaches law at Columbia University. Most judges would require him to identify his co-conspirators if he were to plead guilty on that charge, “and that would prevent him from going forward.”
The U.S. claimed that Madoff hired unqualified workers for his investment advisory business to generate documents showing fictitious returns for investors. Madoff sought to give the appearance of “operating a legitimate investment advisory business” in which client funds were traded, when “no such business was actually being conducted.”
No Plea Bargain
Assistant U.S. Attorney Marc Litt said in court yesterday that Madoff doesn’t have a plea bargain. Through such deals, defendants often receive some benefit for pleading guilty, such as a reduced sentence, in return for providing details about a crime. Litt said Madoff will be required to plead guilty to all 11 counts.
In a statement released yesterday, Dassin said the investigation of the fraud is continuing.
By not entering a plea deal, Madoff may be trying to protect employees of his firm, former federal prosecutor Christopher Steskal said in an interview.
Madoff’s brother Peter was chief compliance officer at the company, and his sons Mark and Andrew held senior positions in the market-making and proprietary trading businesses. None of Madoff’s family members have been accused of any wrongdoing.
Bernard Madoff’s wife, Ruth, who had been represented by Sorkin, will hire her own lawyer, Sorkin said yesterday.
‘Not Involved’
An attorney for Peter Madoff, John “Rusty” Wing, didn’t return a call seeking comment. Martin Flumenbaum, an attorney for the sons, has said they “were not involved in the firm’s asset management business” and “had no knowledge whatsoever of the fraud.”
Prosecutors and regulators have been probing whether the chief financial officer at the advisory firm, Frank DiPascali Jr., knew of the fraud, according to people familiar with the case. DiPascali has denied wrongdoing. His lawyer, Marc Mukasey, didn’t return a call seeking comment.
Andrew Lankler, a lawyer for Madoff’s auditor, David Friehling, declined to comment. A call to Madoff’s longtime aide, Annette Bongiorno, wasn’t immediately returned. They aren’t accused of any wrongdoing.
The criminal case is U.S. v. Madoff, 09-cr-00213, U.S. District Court for the Southern District of New York (Manhattan).