Relevant Persons and Entities - The New York Timesgraphics8.nytimes.com/packages/images/nytint/docs/...BERNARD L. MADOFF, the defendant, was the founder of BLMIS, and served as its

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

UNITED STATES OF AMERICA I N F O R m T I O N

-v- 09 Cr.

BERNARD L. MADOFF,

Defendant.

COUNT ONE (Securities Fraud)

The United States Attorney charges:

Relevant Persons and Entities

1. At all times relevant to this Information, Bernard

L. Madoff Investment Securities LLC, and its predecessor, Bernard

L. Madoff Investment Securities (collectively and separately,

"BLMIS"), had its principal place of business in New York, New

York, most recently at 885 Third Avenue, New York, New York.

BLMIS was a broker-dealer that engaged in three principal types

of business: market making; proprietary trading; and investment

advisory services. BLMIS was registered with the United States

Securities and Exchange Commission ("SEC") as a broker-dealer and

was, beginning in or about 2006, registered with the SEC as an

investment adviser.

2. At all times relevant to this Information, Madoff

Securities International Ltd. ("MSIL") was a corporation

incorporated in the United Kingdom. MSIL was an affiliate of

BLMIS which engaged principally in proprietary trading.

3. BERNARD L. MADOFF, the defendant, was the founder

of BLMIS, and served as its sole member and principal. In that

capacity, MADOFF controlled the business activities of BLMIS.

MADOFF owned the majority of the voting shares of MSIL, and

served as the Chairman of MSIL's Board of Directors. MADOFF also

served on the Board of Directors of the National Association of

Securities Dealers Automated Quotations (''NASDAQ"), and for a

period served as the Chairman of NASDAQ.

The Scheme to Defraud

4. From at least as early as the 1980s through on or

about December 11, 2008, BERNARD L. MADOFF, the defendant,

perpetrated a scheme to defraud the clients of BLMIS by

soliciting billions of dollars of funds under false pretenses,

failing to invest investors' funds as promised, and

misappropriating and converting investors' funds to MADOFF's own

benefit and the benefit of others without the knowledge or

authorization of the investors.

5. To execute the Scheme, MADOFF solicited and caused

others to solicit prospective clients to open trading accounts

with BLMIS, based upon, among other things, his promise to use

investor funds to purchase shares of common stock, options and

other securities of large, well-known corporations, and

representations that he would achieve high rates of return for

clients, with limited risk. In truth and in fact, as MADOFF well

knew, these representations were false. MADOFF failed to honor

his promises to BLMIS clients by, among other things, failing to

invest the BLMIS investment advisory clients' funds in securities

as he had promised. Instead, notwithstanding his promises to the

contrary, and notwithstanding representations that MADOFF made

and caused to be made on tens of thousands of account statements

and other documents sent through the United States Postal Service

to BLMIS clients throughout the operation of this scheme, MADOFF

operated a massive Ponzi scheme in which client funds were

misappropriated and converted to the use of MADOFF, BLMIS, and

others.

6. In connection with this Ponzi scheme, BERNARD L.

MADOFF, the defendant, accepted billions of dollars of investor

money, cumulatively, from individual investors, charitable

organizations, trusts, pension funds, and hedge funds, among

others, and established on their behalf thousands of accounts at

BLMIS. From the outset of the scheme, and continuing throughout

its operation, MADOFF obtained investor funds through interstate

wire transfers from financial institutions located outside New

York State and through mailings delivered by the United States

Postal Service

7. In the course of carrying out this scheme, BERNARD

L. MADOFF, the defendant, made, and caused others to make, false

representations concerning his investment strategies to clients

and prospective clients of BLMIS. Among other things, MADOFF

marketed to clients and prospective clients an investment

strategy referred to as a "split strike conversion" strategy.

Clients were promised that BLMIS would invest their funds in a

basket of approximately 35-50 common stocks within the Standard &

Poor's 100 Index (the "S&P loo"), a collection of the 100 largest

publicly traded companies in terms of their market

capitalization. MADOFF claimed that he would select a basket of

stocks that would closely mimic the price movements of the S&P

100. MADOFF further claimed that he would opportunistically time

those purchases, and would be "out of the marketrr intermittently,

investing clients' funds in these periods in United States

Government-issued securities such as United States Treasury

bills. MADOFF also claimed that he would hedge the investments

that he made in the basket of common stocks by using investor

funds to buy and sell option contracts related to those stocks,

thereby limiting potential losses caused by unpredictable changes

in stock prices.

8. Further, to induce new and continued investments

by clients and prospective clients, MADOFF promised certain

clients annual returns in varying amounts up to at least

approximately 46 percent per year. MADOFF also told certain

clients that the fee for his services would be based on an

approximately $0.04 per share commission on the stocks that

MADOFF traded for such clients.

9. Contrary to his promises to those clients that he

would use their funds to purchase securities on their behalf, and

would invest client funds pursuant to the strategies he had

marketed, MADOFF used most of the investors' funds to meet the

periodic redemption requests of other investors. In addition,

MADOFF took some of these clients' investment funds as

"commissions," which he used to support the market making and

proprietary trading businesses of BLMIS, and from which he and

others received millions of dollars in benefits.

10. BERNARD L. MADOFF, the defendant, created and

caused to be created a broad infrastructure at BLMIS to generate

the impression and support the appearance that BLMIS was

operating a legitimate investment advisory business in which

client funds were actively traded as he had promised, and to

conceal the fact that no such business was actually being

conducted. Among other things, MADOFF hired numerous employees

to serve as a 'back office" for this investment advisory

business. Many of the employees hired to perform those functions

had little or no prior pertinent training or experience in the

securities industry. MADOFF caused those BLMIS employees to,

among other things, communicate with clients and generate false

and fraudulent documents including, but not limited to, monthly

client account statements and trade confirmations that

purportedly reflected the purchases and sales of securities that

MADOFF claimed had been conducted on behalf of BLMIS's clients.

MADOFF further caused account statements and trade confirmations

that were sent to clients to reflect fictitious returns

consistent with the returns that had been promised to those

clients.

11. Moreover, to support BLMIS's market making and

proprietary trading businesses, between at least as early as in

or about 2002 and in or about 2008, BERNARD L. MADOFF, the

defendant, caused more than $250 million of BLMIS investment

advisory clients' funds to be directed, through a series of wire

transfers, to the operating accounts that funded the operations

of these businesses. Specifically, MADOFF caused those investor

funds to be sent from a BLMIS account in New York, New York (the

"BLMIS Client Account"), to accounts held by MSIL in London,

United Kingdom (the "MSIL Accounts"), and further caused funds to

be transferred from the MSIL Accounts to either the BLMIS Client

Account or to another bank account in New York, New York, which

was principally used to fund BLMIS's operations (the "BLMIS

Operating Account"). MADOFF directed these funds transfers, in

part, to give the appearance that he was conducting securities

transactions in Europe on behalf of the investors when, in fact,

he was not conducting such transactions. MADOFF also directed

the transfer of funds from the MSIL Accounts to purchase and

maintain property and services for the personal use and benefit

of MADOFF, his family members and associates.

12. To conceal his scheme, BERNARD L. MADOFF, the

defendant, among other things, withheld information from

regulators and repeatedly lied to the SEC in written submissions

and in sworn testimony.

13. In furtherance of the scheme, BERNARD L. MADOFF,

the defendant, caused false and fraudulent certified financial

statements for BLMIS, including balance sheets, statements of

income, statements of cash flows, and reports on internal

control, to be created. MADOFF further caused such false and

fraudulent financial statements to be sent to clients and

prospective clients through the United States Postal Service, and

also caused such false and fraudulent financial statements to be

filed with the SEC. Among other things, MADOFF knew that the

certification attached to the BLMIS financial statements falsely

averred that those statements had been prepared in accordance

with Generally Accepted Auditing Standards and Generally Accepted

Accounting Principles.

14. As of on or about November 30, 2008, BLMIS had

approximately 4,800 client accounts. On or about December 1,

2008, BLMIS issued account statements for the calendar month of

November 2008 reporting that those client accounts held a total

balance of approximately $64.8 billion. In fact, BLMIS held only

a small fraction of that balance on behalf of its clients.

Statutory Alleaation

15. From at least the 1980s through on or about

December 11, 2008, in the Southern District of New York and

elsewhere, BERNARD L. MADOFF, the defendant, unlawfully,

willfully, and knowingly, directly and indirectly, by the use of

means and instrumentalities of interstate commerce, the mails,

and the facilities of national securities exchanges, in

connection with the purchase and sale of securities, did use and

employ manipulative and deceptive devices and contrivances, in

violation of Title 17, Code of Federal Regulations, Section

240.10b-5, by: (a) employing devices, schemes, and artifices to

defraud; (b) making untrue statements of material facts and

omitting to state material facts necessary in order to make the

statements made, in light of the circumstances under which they

were made, not misleading; and (c) engaging in transactions,

acts, practices, and courses of business which operated and would

operate as a fraud and deceit upon persons.

(Title 15, United States Code, Sections 78j(b) and 78ff; Title 17, Code of Federal Regulations, Section 240.10b-5;

Title 18 United States Code, Section 2.)

COUNT TWO (Investment Adviser Fraud)

The United States Attorney further charges:

16. The allegations contained in paragraphs 1 through

14, above, are hereby repeated, realleged and incorporated by

reference as if fully set forth herein.

17. From at least the 1980s through on or about

December 11, 2008, in the Southern District of New York and

elsewhere, BERNARD L. MADOFF, the defendant, acting as an

investment adviser with respect to clients and potential clients

of BLMIS, unlawfully, willfully, and knowingly, by the use of the

mails and means and instrumentalities of interstate commerce,

directly and indirectly, did: (a) employ devices, schemes, and

artifices to defraud clients and prospective clients; (b) engage

in transactions, practices, and courses of business which

operated as a fraud and deceit upon clients and prospective

clients; and (c) engage in acts, practices, and courses of

business that were fraudulent, deceptive, and manipulative

(Title 15, United States Code, Sections 80b-6 and 80b-17; Title 18, United States Code, Section 2.)

COUNT THREE (Mail Fraud)

The United states Attorney further charges:





about December 11, 2008, in the Southern District of New York and


willfully, and knowingly, having devised and intending to devise

a scheme and artifice to defraud, and for obtaining money and

property by means of false and fraudulent pretenses,

representations, and promises, for the purpose of executing such

scheme and artifice and attempting so to do, did place in post

offices and authorized depositories for mail matter, matters and

things to be sent and delivered by the Postal Service, and did

deposit and cause to be deposited matters and things to be sent

and delivered by private and commercial interstate carriers, and

did take and receive therefrom such matters and things, and did

knowingly cause to be delivered, by mail and such carriers

according to the directions thereon, and at the places at which

they were directed to be delivered by the persons to whom they

were addressed, such matters and things, to wit, on or about

December 1, 2008, MADOFF sent and caused to be sent and delivered

via the Postal Service a false and fraudulent account statement

from BLMIS to a client in New York, New York.

(Title 18, United States Code, Sections 1341 and 2.)

COUNT FOUR (Wire Fraud)








willfully, and knowingly, having devised and intending to devise

a scheme and artifice to defraud, and for obtaining money by

means of false and fraudulent pretenses, representations and

promises, did transmit and cause to be transmitted by means of

wire and radio communication in interstate and foreign commerce,

writings, signs, signals, pictures, and sounds for the purpose of

executing such scheme and artifice, to wit, on or about August 5,

2008, MADOFF caused approximately $2 million of investor funds to

be sent by wire from Bloomington, Minnesota to New York, New

York . (Title 18, United States Code, Sections 1343 and 2.)

COUNT FIVE (International Money Laundering To Promote

Specified Unlawful Activity)


2 2 . The allegations contained in paragraphs 1 through



23. From at least as early as in or about 2 0 0 2 ,

through on or about December 11, 2 0 0 8 , in the Southern District

of New York, the United Kingdom, and elsewhere, BERNARD L.

MADOFF, the defendant, in an offense involving and affecting

interstate and foreign commerce, unlawfully, willfully and

knowingly, transported, transmitted and transferred, attempted to

transport, transmit and transfer, and caused others to transport,

transmit and transfer, and attempt to transport, transmit, and

transfer, funds from a place in the United States to a place

outside the United States, and funds from a place outside the

United States to a place within the United States, with the

intent to promote the carrying on of specified unlawful activity,

to wit, fraud in the sale of securities, mail fraud, wire fraud,

and theft from an employee benefit plan, to wit, MADOFF caused

funds to be wire transferred from BLMIS bank accounts, including

the BLMIS Investor Account in New York, New York, to the MSIL

Accounts in London, England, in the United Kingdom, and to be

transferred from the MSIL Accounts in London, England, in the

United Kingdom, to BLMIS bank accounts, including the BLMIS

Operating Account, in New York, New York, in order to promote

fraud in the sale of securities, mail fraud, wire fraud, and

theft from an employee benefit plan.

(Title 18, United States Code, Sections 1956 (a) (2) (A) and 2 . )

COUNT SIX (International Money Laundering To Conceal And Disguise

The Proceeds of Specified Unlawful Activity)





25. From at least as early as in or about 2002,

through on or about December 11, 2008, in the Southern District

of New York, the United Kingdom, and elsewhere, BERNARD L.

MADOFF, the defendant, in an offense involving and affecting

interstate commerce, knowing that the property involved in

certain financial transactions, to wit, investor funds in the

custody and care of BLMIS, represented the proceeds of some form

of unlawful activity, unlawfully, willfully and knowingly would

and did conduct and attempt to conduct such financial

transactions which in fact involved the proceeds of specified

unlawful activities, to wit, fraud in the sale of securities,

mail fraud, wire fraud, and theft from an employee benefit plan,

knowing that the transactions were designed in whole and in part

to conceal and disguise the nature, the location, the source, the

ownership and the control of the proceeds of said specified

unlawful activity.

26. Such financial transactions included, but were not

limited to, the following:

a. From at least in or about 2006, through on or

about December 11, 2008, BERNARD L. MADOFF, the defendant, caused

funds to be wire transferred from BLMIS bank accounts in New

York, New York, including the BLMIS Investor Account, to the MSIL

Accounts in London, England, in the United Kingdom, and

thereafter to be transferred from the MSIL Accounts in the United

Kingdom to BLMIS bank accounts in New York, New York, including

the BLMIS Investor Account and the BLMIS Operating Account, which

transfers were designed to give the false and fraudulent

appearance that BLMIS was operating a legitimate investment

advisory business in which client funds were being used to

purchase and sell securities as MADOFF had promised, and to

conceal the fact that no such purchases or sales were actually

being made; and

b. From at least in or about 2002, through on or

about December 11, 2008, MADOFF caused funds to be wire

transferred from BLMIS bank accounts in New York, New York,

including the BLMIS Investor Account, to the MSIL Accounts in

London, England, in the United Kingdom, and thereafter to be

transferred from the MSIL Accounts in the United Kingdom to

purchase and maintain property and services for the personal use

and benefit of MADOFF, his family members and associates.

(Title 18, United States Code, Sections 1956(a) (1) (B) (i) & (f) and 2.)

COUNT SEVEN (Money Laundering)





28. From at least in or about the 1980s, through on or


elsewhere, BERNARD L. MADOFF, the defendant, in an offense

involving and affecting interstate and foreign commerce,

unlawfully, willfully, and knowingly engaged and attempted to

engage in and cause others to engage in a monetary transaction in

criminally derived property that was of a value greater than

$10,000 and was derived from specified unlawful activity; to wit,

on or about April 13, 2007, MADOFF caused approximately

$54,485,750 derived from fraud in the sale of securities, mail

fraud, wire fraud, and theft from an employee benefit plan, to be

transferred from the BLMIS Investor Account in New York, New

York, to one of the BLMIS Accounts in London, England, in the

United Kingdom.


COUNT EIGHT (False Statements)





30. Beginning in or about 2006, as described in

paragraph 1 above, BLMIS was, among other things, an investment

adviser registered with the SEC. As such, BLMIS was subject to

periodic examinations by the SEC, and was required to file an SEC

Form ADV Uniform Application for Investment Adviser Registration

( "ADV" ) . 31. On or about January 7, 2008, BERNARD L. MADOFF,

the defendant, filed and caused to be filed an ADV with the SEC

(the "BLMIS ADV"). The BLMIS ADV was signed by MADOFF, who

certified, under penalty of perjury under the laws of the United

States, that the information and statements made therein were

true and correct, and that he was signing the BLMIS ADV as a free

and voluntary act.

32. The BLMIS ADV contained false statements made for

the purpose of deceiving the SEC and hiding the defendant's

unlawful conduct described in paragraphs 4 through 14, above.

The BLMIS ADV filed with the SEC stated, among other things, in

substance, that BLMIS had custody of advisory clients'

securities.

33. On or about January 7, 2008, in the Southern

District of New York, BERNARD L. MADOFF, the defendant,

unlawfully, willfully, and knowingly, in a matter within the

jurisdiction of the executive branch of the Government of the

United States, namely, the SEC, made materially false,

fictitious, and fraudulent statements and representations, to

wit, MADOFF filed the BLMIS ADV with the SEC, in which he made

the following false statement that was material to the SEC's

oversight of BLMIS's investment adviser business:

S~ecification

MADOFF falsely stated that BLMIS had 'custody of . . . advisory clients' . . . securities."

(Title 18, United States Code, Section 1001 (a) . ) COUNT NINE (Perjury)





35. As described in paragraph 1 above, BLMIS was at

certain times, among other things, a broker-dealer and investment

adviser registered with the SEC. As such, BLMIS was subject to

periodic examinations by the SEC. The SEC has broad authority to

conduct investigations into various aspects of the securities

markets and, in or about 2006, was conducting such an

investigation. As part of that investigation, on or about May

19, 2 0 0 6 , employees of the SEC took the voluntary testimony of

BERNARD L. MADOFF, the defendant, under oath (the "MADOFF SEC

Testimony") . 3 6 . During the course of the MADOFF SEC Testimony,

BERNARD L. MADOFF, the defendant, made numerous false and

misleading statements for the purpose of deceiving the SEC and

hiding his unlawful conduct described in paragraphs 4 through 11,

above. MADOFF testified, among other things, in substance, that:

(a) BLMIS executed trades of common stock on behalf of its

investment advisory clients; (b) BLMIS executed options contracts

on behalf of its investment advisory clients; (c) BLMIS had

custody of the assets managed on behalf of its investment

advisory clients; and (d) BLMIS used the same trading strategy

for all its investment advisory clients.

37. On or about May 19, 2 0 0 6 , in the Southern District

of New York, BERNARD L. MADOFF, the defendant, having taken an

oath before a competent tribunal, officer and person, in a case

in which the law of the United States authorizes an oath to be

administered, namely, in testimony before an officer of the SEC,

that he would testify, declare, depose and certify truly, and

that any written testimony, declaration, deposition and

certificate by him subscribed, would be true, unlawfully,

willfully, knowingly, and contrary to such oath, stated and

subscribed material matters which he did not believe to be true,

18

namely, in his testimony on or about May 19, 2006, MADOFF

knowingly testified falsely as to the material matters in the

portions of his cited testimony underlined below:

Swecification One (Page 55, Lines 2 0 - 2 5 )

Let's just get back to some of the basics that we discussed before. You mentioned earlier that the basket in the institutional trading business may be hedged with options. Does that in fact happen?

Specification Two (Page 57, Lines 1 5 - 2 0 )

Let's focus on the actual execution portion of it. Let's go back to the equities. You mentioned that you used this AHOE system, and you mention[edl that it exposes a sliced order to the European market. Is it correct then that the equities are traded in Europe?

Specification Three (Page 6 3 , Lines 1 1 - 2 3 )

Now you mentioned that there was a group of dealers to whom you put out this indication of interest each time Generally, with how many of them do you end up trading in each execution?

Within the basket, we're orobablv interactins with 40, close to 5 0 .

That's for equities and options.

Equities. Options is a dozen.

A dozen. Do all of them end up trading usually?

Prettv much. Thev all trade on a - ves. It's usually that they all oarticioate durins the tradins. Thev have an interest in these stocks. These stocks are the marketplace.

Specification Four (Page 65, Lines 16-18)

Who are the counterparties to the options contracts?

They're basically EuroDean banks.

Specification Five (Page 66, Line 19 - Page 67, Line 20)

So how does the time frame for the options trading relate to the time frame for the equities trading?

First we're ~uttinq the equity basket on. and then we're puttinq the options on after the eauitv basket is complete, so the options are beina done basicallv in the mornina tvpicallv between 8:00 and 9:00 a.m. . . With the options trades, is there any documentation generated? For example, for some derivatives, there is an after agreement and you have a confirmation, a 2- page document. Is there something like that for the options trades?

Yes, there's an affirmation that's qenerated electronicallv, and there's a master option aqreement that's attached to that that's also electronic.

And the electronic affirmation stores data for each trade with each particular dealer.

Correct.

So if you wanted to find out with whom you bought these contracts on a particular day, that's where you would go.

Specification Six (Page 85, Lines 2-3)

Who has the custody of the assets?

We do.

Svecification Seven (Page 116, Line 17 - Page 117, Line 2)

Q: I wanted to go back to the question that [an SEC attorney] asked you about other persons, persons other than the institutional customers that we discussed so far and proprietary situations. The trading for these persons, is it also pursuant to the same strategy [as] in the institutional trading business?

Q: What is approximately the total amount of assets traded for these persons?

A: My guess would be something, a few hundred million dollars.

(Title 18, United States Code, Section 1621.)

COUNT TEN (False Filing With The Securities And Exchange Commission)




39. On or about December 20, 2007, in the Southern

District of New York, BERNARD L. MADOFF, the defendant,

unlawfully, willfully, and knowingly, in applications, reports,

and documents required to be filed with the SEC under the

Securities Exchange Act of 1934, and the rules and regulations

thereunder, did make and cause to be made statements that were

false and misleading with respect to material facts, to wit,

MADOFF caused a false and misleading certified BLMIS audit report

to be filed with the SEC

(Title 15, United States Code, Sections 78q(e) and 78ff; Title 17, Code of Federal Regulations, Sections 240.17a-5,

240.17a-13 and 210.2-01; Title 18, United States Code, Section 2.)

COUNT ELEVEN (Theft From An Employee Benefit Plan)







willfully, and knowingly, embezzled, stole, abstracted and

converted to his own use, and to the use of others, moneys,

funds, securities, premiums, credits, properties, and other

assets of employee welfare benefit plans and employee pension

benefit plans and funds connected therewith, to wit, on or about

September 24, 2008, MADOFF failed to invest as promised

approximately $10 million in pension fund assets sent to BLMIS by

a master trust on behalf of approximately 35 labor union pension

plans, and instead converted those funds to his use and the use

of others.


FORFEITURE ALLEGATION (Offenses Constituting Specified Unlawful Activity)

42. As the result of committing the offenses

constituting specified unlawful activity as defined in 18 U.S.C.

§ 1956(c)(7), as alleged in Counts One, Three, Four, and Eleven

of this Information, BERNARD L. MADOFF, the defendant, shall

forfeit to the United States, pursuant to 18 U.S.C.

§ 981(a) (1) (C) and 28 U.S.C. § 2461, all property, real and

personal, that constitutes or is derived from proceeds traceable

to the commission of the said offenses.

Substitute Asset Provision

43. If any of the above-described forfeitable

property, as a result of any act or omission of the defendant:

a. cannot be located upon the exercise of due diligence;

b. has been transferred or sold to, or deposited with, a third person;

c. has been placed beyond the jurisdiction of the Court;

d. has been substantially diminished in value; or

e. has been commingled with other property which cannot be subdivided without difficulty;

it is the intent of the United States, pursuant to Title 21,

United States Code, Section 853(p), to seek forfeiture of any

other property of the defendant up to the value of the

forfeitable property described above.

(Title 18, United States Code, Sections 981 (a) (1) (C) , and Title 28, United States Code, Section 2461.)

FORFEITURE ALLEGATION (Money Laundering)

44. As the result of committing one or more of the

money laundering offenses in violation of 18 U.S.C. § § 1956

and 1957, alleged in Counts Five through Seven of this

Information, BERNARD L. MADOFF, the defendant, shall forfeit to

the United States, pursuant to 18 U.S.C. § 982, all property,

real and personal, involved in the said money laundering offenses

and all property traceable to such property

Substitute Asset Provision

45. If any of the above-described forfeitable

property, as a result of any act or omission of the defendant:

a. cannot be located upon the exercise of due diligence;

b. has been transferred or sold to, or deposited with, a third person;

c. has been placed beyond the jurisdiction of the Court;

d. has been substantially diminished in value; or

e. has been commingled with other property which cannot be subdivided without difficulty;

it is the intent of the United States, pursuant to Title 18,

United States Code, Section 982(b) and Title 21, United States

Code, Section 853(p), to seek forfeiture of any other property of

the defendant up to the value of the forfeitable property

described above.

(Title 18, United States Code, Section 982.)

tes Attorney

U.S. Department of Justice

United States AttorneySouthern District o/New York

The Silvio J. Mollo BuildingOne Saint Andrew's PlazaNew York, New York 10007

March 10, 2009

Via E-Mail

Ira Lee Sorkin, Esq.Dickstein Shapiro LLP1177 Avenue of the AmericasNew York, New York 10036-6501

Re: United States v. Bernard L. Madoff09 Cr.

Dear Mr. Sorkin:

This document is not a plea agreement.

Rather, pursuant to the suggestion of the Court inUnited States v. Pimentel, 932 F.2d 1029, 1034 (2d Cir. 1991),this letter sets forth the present position of the Office of theUnited States Attorney for the Southern District of New York (the"Office") regarding the application of the U.S. SentencingGuidelines ("U.S.S.G." or "Guidelines") to this case. Thisanalysis is set forth for informational purposes only. There isno agreement between the Office and Bernard L. Madoff ("thedefendant") with respect to the sentence that he will receive orthe sentence that the Office will recommend upon defendant'sconviction.

As described further below, the above-referencedInformation charges the defendant in eleven counts:

Count One charges the defendant with securities fraud,in violation of Title 15, United States Code, Sections 78j(b) and78ff; Title 17, Code of Federal Regulations, Section 240.10b-5;and Title 18, United States Code, Section 2. Count One carries amaximum sentence of twenty years' imprisonment; a maximum fine ofthe greatest of $5 million or twice the gross pecuniary gain to aperson other than the defendant or twice the pecuniary loss to aperson other than the defendant; a mandatory $100 specialassessment; and a maximum term of three years' supervisedrelease.

Ira Lee Sorkin, Esq.March 10, 2009Page 2

Count Two charges the defendant with investment adviserfraud, in violation of Title 15, United States Code, Sections80b-6 and 80b-17, and Title 18 United States Code, Section 2.Count Two carries a maximum sentence of five years' imprisonment;a maximum fine of the greatest of $10,000 or twice the grosspecuniary gain to any person or twice the pecuniary loss to aperson other than the defendant; a mandatory $100 specialassessment; and a maximum term of three years' supervisedrelease.

Count Three charges the defendant with mail fraud, inviolation of Title 18, United States Code, Sections 1341 and 2.Count Three carries a maximum sentence of twenty years'imprisonment; a maximum fine of the greatest of $250,000 or twicethe gross pecuniary gain to any person or twice the pecuniaryloss to a person other than the defendant; a mandatory $100special assessment; and a maximum term of three years' supervisedrelease.

Count Four charges the defendant with wire fraud, inviolation of Title 18, United States Code, Sections 1343 and 2.Count Four carries a maximum sentence of twenty years'imprisonment; a maximum fine of the greatest of $250,000 or twicethe gross pecuniary gain to any person or twice the pecuniaryloss to a person other than the defendant; a mandatory $100special assessment; and a maximum term of three years' supervisedrelease.

Count Five charges the defendant with internationalmoney laundering to promote fraud in the sale of securities, mailfraud, wire fraud, and theft from an employee benefit plan, inviolation Title 18, United States Code, Sections 1956(a) (2) (A)and 2. Count Five carries a maximum sentence of twenty years'imprisonment; a maximum fine of the greatest of $500,000, twicethe value of the monetary instrument or funds involved, or twicethe gross pecuniary gain to any person or twice the pecuniaryloss to a person other than the defendant; a mandatory $100special assessment; and a maximum term of three years' supervisedrelease.

Count Six charges the defendant with internationalmoney laundering to conceal the proceeds of fraud in the sale ofsecurities, mail fraud, wire fraud, and theft from an employeebenefit plan, in violation Title 18, United States Code, Sections1956(a) (2) (B) (i) & (f)and 2. Count Six carries a maximumsentence of twenty years' imprisonment; a maximum fine of the


greatest of $500,000, twice the value of the monetary instrumentor funds involved, or twice the gross pecuniary gain to anyperson or twice the pecuniary loss to a person other than thedefendant; a mandatory $100 special assessment; and a maximumterm of three years' supervised release.

Count Seven charges the defendant with moneylaundering, in violation of Title 18, United States Code,sections 1957 and 2. Count Seven carries a maximum sentence often years' imprisonment; a maximum fine of the greatest of$250,000 or twice the gross pecuniary gain to any person or twicethe pecuniary loss to a person other than the defendant; amandatory $100 special assessment; and a maximum term of threeyears' supervised release.

Count Eight charges the defendant with making falsestatements, in violation of Title 18, United States Code, Section1001. Count Eight carries a maximum sentence of five years'imprisonment; a maximum fine of the greatest of $250,000 or twicethe gross pecuniary gain to any person or twice the pecuniaryloss to a person other than the defendant; a mandatory $100special assessment; and a maximum term of three years' supervisedrelease.

Count Nine charges the defendant with perjury, inviolation of Title 18, United States Code, Section 1621. CountNine carries a maximum sentence of five years' imprisonment; amaximum fine of the greatest of $250,000 or twice the grosspecuniary gain to any person or twice the pecuniary loss to aperson other than the defendant; a mandatory $100 specialassessment; and a maximum term of three years' supervisedrelease.

Count Ten charges the defendant with making a falsefiling with the SEC, in violation of Title 15, Sections 78q and78ff; Title 17, Code of Federal Regulations, Sections 240.17a-5,240.17a-13 and 210.2-01; and Title 18, United States Code,Section 2. Count Ten carries a maximum sentence of twenty years'imprisonment; a maximum fine of the greatest of $5 million ortwice the gross pecuniary gain to any person or twice thepecuniary loss to a person other than the defendant; a mandatory$100 special assessment; and a maximum term of three years'supervised release.

Count Eleven charges the defendant with theft from anemployee benefit plan, in violation of Title 18, United States


Code, Section 664. Count Eleven carries a maximum sentence offive years' imprisonment; a maximum fine of the greatest of$250,000 or twice the gross pecuniary gain to any person or twicethe pecuniary loss to a person other than the defendant; amandatory $100 special assessment; and a maximum term of threeyears' supervised release.

The total maximum sentence of incarceration on CountsOne through Eleven is 150 years' imprisonment. In addition tothe foregoing, the Court must also impose an order of restitutionin the amount of any loss suffered by persons other than thedefendant resulting from the offenses, pursuant to Title 18,United States Code, Sections 3663, 3663A and 3664.

The Information also contains two forfeitureallegations. The first forfeiture allegation concerns theoffenses charged in Counts One, Three, Four, and Eleven of theInformation, which constitute "specified unlawful activity" asthat term is defined in 18 U.S.C. § 1956(c) (7) (the "SUAOffenses"). The first forfeiture allegation seeks criminalforfeiture, pursuant to 18 U.S.C. § 981(a) (1) (C) and 28 U.S.C.§ 2461, of all property, real or personal, which constitutes oris derived from proceeds traceable to the commission of the SUAOffenses, and all property traceable to such property. Pursuantto 28 U.S.C. § 2461(c), the Court is required to order thecriminal forfeiture of such property in sentencing the defendant.

The second forfeiture allegation, concerning the moneylaundering offenses charged in Counts Five through Seven of theInformation (the "Money Laundering Offenses"), seeks criminalforfeiture, pursuant to 18 U.S.C. § 982(a) (1), of all property,real and personal, involved in the Money Laundering Offenses, andall property traceable to such property. Pursuant to 18 U.S.C.§ 982(a) (1), the court is required to order the criminalforfeiture of such property in sentencing the defendant.

Both the first and the second forfeiture allegationsinclude a substitute asset provision, which provides notice tothe defendant, pursuant to 21 U.S.C. § 853(p), that if any of theproperty described in the forfeiture allegations, as a result ofany act or omission of the defendant: (a) cannot be located uponthe exercise of due diligence; (b) has been transferred or soldto, or deposited with, a third person; (c) has been placed beyondthe jurisdiction of the Court; (d) has been substantiallydiminished in value; or (e) has been commingled with otherproperty that cannot be subdivided without difficulty, it is the


intent of the United States to seek forfeiture of any otherproperty of the defendant up to the value of the forfeitableproperty.

The Government presently believes the SentencingGuidelines apply to the charges as follows:

Offense Level

1. The guideline applicable to defendant's offense isU.S.S.G. § 2B1.1 (November 1, 2008 edition). Because several ofthe charged offenses have a statutory maximum of 20 years ormore, the base offense level is 7. See U.S.S.G. § 2B1.1(a) (1).The offenses are grouped pursuant to U.S.S.G. § 3D1.2.

2. Because the offenses involved a loss amount ofmore than $400,000,000, the base offense level is increased by 30levels. See U.S.S.G. § 2B1.1(b) (1) (P).

3. Because the offenses involved 250 or more victims,the base offense level is increased by an additional 6 levels.See U.S.S.G. § 2B1.1(b) (2) (C).

4. Because a substantial part of the fraudulentscheme was committed from outside the United States and becausethe offenses otherwise involved sophisticated means, the baseoffense level is increased by an additional 2 levels. SeeU.S.S.G. § 2B1.1(b) (10).

5. Because the offenses substantially endangered thesolvency or financial security of 100 or more victims, the baseoffense level is increased by an additional 4 levels. SeeU.S.S.G. § 2B1.1(b) (14) (B).

6. Because the offenses involved a violation of thesecurities law and, at the time of the offense, the defendant wasa registered broker-dealer, a person associated with a broker ordealer, and/or an investment adviser, the base offense level isincreased by an additional 4 levels. U.S.S.G. § 2B1.1(b) (16) (A).

7 .of a criminaloffense level§ 3Bl. 1 (a) .

8 .

Because the defendant was an organizer or leaderactivity that was otherwise extensive, the baseis increased by an additional 4 levels. U.S.S.G.

Assuming the defendant clearly demonstrates


acceptance of responsibility through his guilty plea andsubsequent conduct prior to the imposition of sentence, a twolevel reduction will be warranted, pursuant to U.S.S.G.§ 3E1.1(a). Furthermore, assuming the defendant has acceptedresponsibility as described in the previous sentence, anadditional one-level reduction will be warranted pursuant toU.S.S.G. § 3E1.1(b), because the defendant gave timely notice ofhis intention to enter a plea of guilty, thereby permitting theGovernment to avoid preparing for trial and permitting the Courtto allocate its resources efficiently.

In accordance with the above, the applicable offenselevel is 54.

Criminal History

Based upon the information now available to thisOffice, the defendant has no Criminal History points and,accordingly, the defendant's Criminal History Category is I.

Sentencing Range

An offense level of 54 and a Criminal History Categoryof I yields a sentencing range of life imprisonment.

Because the defendant is not charged with any offensethat carries a maximum term of life imprisonment, the Guidelinesentence is computed by adding the applicable statutory maximumsentences on all counts of conviction, which results in aGuideline sentence of 150 years' imprisonment. See U.S.S.G.§ 5G1.2. In addition, after determining the defendant's abilityto pay, the Court must impose a fine pursuant to U.S.S.G.§ 5E1.2. At Guidelines level 54, the applicable fine range is$25,000 to $250,000. Under the Guidelines, because one or moreof the charged offenses authorize maximum fines greater than$250,000, the Court may impose a fine up to the maximumauthorized by the statute. See U.S.S.G. § 5E1.2(c) (4).

The Court must also impose an order of restitution toany victims of his offense, pursuant to Title 18, United StatesCode, Sections 3663, 3663A, and 3664.

The Office intends to seek criminal forfeiture,pursuant to 18 U.S.C. § 981(a) (1) (C) and 28 U.S.C. § 2461, of allproperty constituting or derived from proceeds traceable to thecommission of the SUA Offenses, including but not limited to:


(i) a sum of money representing the amount of proceeds traceableto the commission of the SUA offenses, and all property traceableto such property, including but not limited to an amountexceeding $170,000,000,000; (ii) all specific propertyconstituting or derived from proceeds traceable to the commissionof the said offenses, and all property traceable to suchproperty; and (iii) substitute assets, pursuant to 21 U.S.C.§ 853 (p) .

In addition, the Office intends to seek criminalforfeiture, pursuant to 18 U.S.C. § 982(a) (1), of all property,real and personal, involved in the Money Laundering Offenses, andall property traceable to such property, including but notlimited to: (i) a sum of money representing all property, realand personal, involved in the money laundering offense, and allproperty traceable to such property, including but not limited toan amount exceeding $799,000,000; (ii) all specific property,real and personal, involved in the Money Laundering Offenses, andall property traceable to such property; and (iii) substituteassets, pursuant to 18 U.S.C. § 982(b) (1) and 21 U.S.C. § 853(p).

The forfeiture numbers set forth above are approximatefigures and are being provided to you for informational purposesonly. The Office's investigation of the fraud is ongoing and,prior to sentencing, the Office will submit an application for amoney judgment as to the SUA Offenses and the Money LaunderingOffenses that may contain dollar amounts substantially in excessof the approximations set forth in the two preceding paragraphs.The Office may also apply for preliminary orders of forfeitureseeking forfeiture of the defendant's interest in specificproperty based on a showing that such property is subject toforfeiture as proceeds of the SUA Offenses, and/or propertyinvolved in the Money Laundering Offenses, and/or propertytraceable to such property. The Government may also seekforfeiture bf the defendant's interest in specific property assubstitute assets.

The foregoing Guidelines calculation is based on factsand information presently known to the Office. Nothing in thisletter limits the right of this Office to change its position atany time as to the appropriate Guidelines calculation in thiscase, and to present to the sentencing JUdge and/or ProbationOffice, either orally or in writing, any and all facts andarguments relevant to sentencing, to the defendant's sentencingrange and/or offense level, and to the defendant's CriminalHistory Category, that are available to the Office at the time of


sentencing. Nor does anything in this letter limit the right ofthis Office to take a position on any departure that may besuggested by the sentencing Judge, the Probation Office, or thedefendant.

Further, this letter does not and cannot bind eitherthe Court or the Probation Office, either as to questions of factor as to determination of the correct Guidelines to apply in thiscase. Instead, the sentence to be imposed upon the defendant isdetermined solely by the sentencing Judge. This Office cannotand does not make any promise or representation as to whatsentence the defendant will receive.

Very truly yours,

LEV L. DASSINActing United States Attorney

By: ~~Marc Litt/L~-a-r-o-n-l~'----------Assistant United States AttorneysTelephone: (212) 637-2295 1-2405

Case 1:09-cr-00213-DC Document 37 Filed 03/10/2009 Page 1 of 3

DICKSTEINS HAP IROLLP1177 Avenue of the Americas I New York, NY 10036-2714TEL (212) 277-6500 i FAX (212) 277-6501 I dicksteinshapiro.com

Via Facsimile

March 10, 2009

Honorable Denny ChinUnited States District JudgeDaniel Patrick Moynihan United States Courthouse500 Pearl StreetNew York, New York 10007

Re: United States v. Bernard L. Madaff 09 Cr.

Dear Judge Chin:

USDCSDNYDOCUMENTELECTRONICALLY FILEDDOC#:

.DATE:;rtE-~'-D:=fi~ ::

We respectfully submit this letter on behalf of this Firm's client, Bernard . Madoff, inresponse to the government's letter to us, and filed with the Court, dated March ,2009 pursuantto United States v. Pimentel, in which the government indicated, among other things, that itintended to seek forfeiture from Mr. Madoff of $177,000,000,000 under 18 U.S.C. §§981 (a)(l)(C) and 28 U.S.c. § 2461. The government has indicated that this figure represents the"proceeds" of specified unlawful activity ("SUA") alleged in the Information it filed in thismatter.

We respectfully suggest that the amount of the government's forfeiture demand is grosslyoverstated - and misleading even for a case of this magnitude. The purpose of this letter is notto minimize Mr. Madoff s culpability. However, we wish to notify the Court that the issuesrelated to forfeiture, restitution and sentencing in this matter are highly complex and will requireextensive time to resolve and warrant discovery to the defense. However, it is important for usto inform the Court at this early stage that it disagrees with the government's theory as to whatconstitutes the "proceeds" of the specified unlawful activity in this case. I

The government has informed us that the purported $177,000,000,000 of "proceedstraceable to the commission of SUA offenses" represents the total amount of money deposited inthe Bernard L. Madoff Investment Securities, LLC ("BLMIS") bank account related solely toMr. Madoffs investment advisory business. Even assuming the accuracy of that number,however, the government's theory of the proceeds of SUA - in this case securities fraud, mailfraud, wire fraud and theft from an employee benefit plan - fails to account for or offset the

I We intend to address the other matters discussed in the Pimentel letter in our sentencing submission and atsentencing.

Washington, DC I New York, NY I Los .H.llgele~, CADOCSNY.353370.01


DICKSTEINSHAPI ROLLP

Honorable Denny ChinMarch 10, 2009Page 2

substantial amounts of money that Mr. Madoff paid from the aforementioned account toinvestors in the form of redemptions, a number likely in the billions. Under both statutorl andcase law, including recent decisions by the Supreme Coure and Judge Patterson of this Court,4 ina case like this involving a lawful activity (investment advisory business) conducted in anillegal manner the proceeds subject to forfeiture are limited to Mr. Madoffs net profits andshould not include his gross receipts. That distinction is of vital importance because, accordingto the Information, "Mr. Madoffused most of the investors' funds to meet the periodicredemption requests of other investors.,,5 While we do not ask the Court to resolve this issuenow, we have serious doubts that the government's definition of proceeds subject to forfeiturecomports with the law under u.s. v. Santos and u.s. v. Kalish. Moreover, if the governmentreally thought this was in fact a $177 billion fraud, it would have alleged it as such in the threecounts of money laundering charged in the Information.

We have not had an opportunity to analyze the government's claim about the proceeds ofSUA because we do not have access to a full set of the books and records of Mr. Madoffsbusiness or its bank accounts. Although the government has provided us with some records, todate we have not seen documentation that would support a finding of gross receipts by Mr.Madoffs investment advisory business amounting to $177 billion. To effectively represent Mr.Madoff, and assist the Court, on questions of forfeiture, restitution and sentencing, werespectfully request that the Court, pursuant to a set schedule, instruct the government to produceany and all records that inform questions of forfeiture and restitution, including all bank recordsfor Mr. Madoffs firm, the firm's generalledger(s) and customer account statements.

218 U.S.C. § 981(a)(2)(B).

3 United States v. Santos, 128 S. Ct. 2020 (2008) (applying the rule of lenity to affinn the district court'sdetermination that the tenn "proceeds" should be interpreted in favor of the defendant as "net proceeds").

4 See United States v. Kalish, 2009 WL 130215, 06 Cr. 656(RPP) (Jan. 13,2009) (applying Santos and holding that"proceeds" means "net proceeds" in a mail and wire fraud scheme).

5 United States v. Madoff, 09 Cr. _, ~8.

DOCSNY353370,OI


DICKSTEINSHAPI ROllP

Honorable Denny ChinMarch 10, 2009Page 3

In light of the government's filing of its Pimentel letter, we respectfully request theCourt's permission to file this response have included a SO ORDERED block below for theCourt to endorse should it grant our request.

Respectfully submitted,

cc. Marc Litt, Assistant United States Attorney

SO ORDERED

DOCSNY.353370.01

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1 UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF NEW YORK

2 ------------------------------x

1

3

4

UNITED STATES OF AMERICA,

v.

New York, N.Y.

08 MJ 2735(DC)

5 BERNARD L. MADOFF,

6 Defendant.

7 ------------------------------x

8

9

10Before:

11HON. DENNY CHIN,

12

13

March 10, 20093:04 p.m.

District Judge

14 APPEARANCES

15 LEV DASSINUnited States Attorney for the

16 Southern District of New YorkBY: MARC O. LITT

17 Assistant United States Attorney

18 DICKSTEIN SHAPIRO, LLPAttorneys for Defendant

19 BY: IRA LEE SORKINDANIEL J. HORWITZ

20 NICOLE DeBELLO

21 MINTZ, LEVINAttorney for Defendant

22 BY: PETER CHAVKIN

23

24

25

SOUTHERN DISTRICT REPORTERS, P.C.(212) 805-0300

2

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1

2

(In open court)

THE DEPUTY CLERK: United States of America versus

3 Bernard L. Madoff. Counsel, please state your name for the

4 record.

5 MS. BARONI: Good afternoon, your Honor. Lisa Baroni

6 and Marc Litt for the government. With us is Special Agent

7 Theodore Cacioppi from the FBI.

8

9

THE COURT: Good afternoon.

MR. SORKIN: Good afternoon, your Honor. From the

10 law firm of Dickstein Shapiro, LLP, Ira Lee Sorkin, Daniel

11 Horwitz and Nichole DeBello. And sitting just to the left of

12 Mr. Madoff is Peter Chavkin of the law firm of Mintz Levin.

13

14

15

THE COURT: Good afternoon.

MR. CHAVKIN: Good afternoon, your Honor.

THE COURT: All right. I think the first item of

16 business is addressing the potential conflicts of interest

17 presented by Mr. Sorkin's representation of Mr. Madoff.

18 MS. BARONI: Yes, your Honor. There are two issues

19 the government would like to raise with the Court as set forth

20 in our letter to you of March 3rd, and those issues present

21 potential conflict of interest matters with respect to

22 Mr. Sorkin's continued representation of the defendant in this

23 case. And as set forth more fully in the letter, the first

24 issue is Mr. Sorkin's prior representation of Frank Avellino

25 and Michael Bienes. And the second issue is Mr. Sorkin's


3

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1 family's investments, prior investments with Bernard L. Madoff

2 Investment Securities. And the government would request, your

3 Honor, that the Court advise the defendant of the potential

4 conf1icts--

5

6

THE COURT: All right.

MS. BARONI: and any issues that could arise from

7 those conflicts.

8

9

10

MR. SORKIN: Your Honor, may I be heard.

THE COURT: Yes.

MR. SORKIN: Anticipating this the government and I

11 spoke about this issue. And anticipating a Curcio hearing, we

12 went out and sought Mr. Chavkin, who is a partner at Mintz

13 Levin, as I just indicated. He was brought in as independent

14 counsel to advise Mr. Madoff of the potential conflict, and so

15 I'll defer to him, if your Honor has any questions to ask,

16 because it was he who dealt with that issue.

17 THE COURT: All right. That's fine. I gather, then,

18 having had these initial discussions, Mr. Madoff wishes to

19 continue with you?

20

21 issue.

22

MR. SORKIN: Well, I'll let Mr. Chavkin address that

MR. CHAVKIN: Absolutely, your Honor. And we've had a

23 number of meetings on that subject.

24 THE COURT: All right. Mr. Madoff, would you please

25 stand. Mr. Madoff, we're going to place you under oath, and


4

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1 then I am going to ask you some questions.

2 As you probably know, the purpose of this hearing, the

3 purpose of my questions is to make sure that you understand the

4 potential conflicts and to see whether you indeed want to

5 continue with Mr. Sorkin as your attorney. Understood?

6

7

8

9

THE DEFENDANT: Yes, I do.

THE COURT: We're going to place you under oath.

(Defendant sworn)

THE COURT: Mr. Madoff, would you state your full name

10 for the record, please.

11

12

13

14

THE DEFENDANT: Bernard L. Madoff.

THE COURT: And how old are you, sir?

THE DEFENDANT: Seventy years old.

THE COURT: And what is your highest level of

15 schooling?

16 THE DEFENDANT: I graduated Hofstra University,

17 attended one year at Brooklyn Law School.

18 THE COURT: Are you now or have you recently been

19 under the care or treatment of a doctor or psychiatrist?

20

21

THE DEFENDANT: No, I have not.

THE COURT: Have you ever been hospitalized for any

22 mental illness or treated for any mental illness or any type of

23 addiction, including drug or alcohol addiction?

24

25

THE DEFENDANT: No.

THE COURT: In the past 24 hours have you taken any


5

93aemadc

1 drugs, medicine or pills, or have you drunk any alcohol?

2

3

4

5

6

7

THE DEFENDANT: No.

THE COURT: Is your mind clear today?

THE DEFENDANT: Yes.

THE COURT: And are you feeling all right today?

THE DEFENDANT: Yes.

THE COURT: Now, you have been represented in this

8 matter by Mr. Sorkin?

9

10

THE DEFENDANT: Correct.

THE COURT: And are you satisfied with his

11 representation of you so far?

12

13

THE DEFENDANT: Yes, I am.

THE COURT: And do you understand that we are here

14 today to consider the potential conflicts of interest that

15 Mr. Sorkin may have in representing you?

16

17

THE DEFENDANT: Yes.

THE COURT: Now, there are two areas. I guess there's

18 a third area which I will be mentioning, but in particular

19 there are two areas.

20 The first, as I understand it, is that in the 1990s,

21 Mr. Sorkin represented Frank Avellino, Michael Bienes and their

22 accounting firm, Avellino & Bienes. Did Mr. Sorkin discuss

23 this with you?

24

25

THE DEFENDANT: Yes, he did.

THE COURT: And I gather you've also discussed it with


6

93aemadc

1 Mr. Chavkin?

2

3

THE DEFENDANT: I have.

THE COURT: And have you had enough time to discuss

4 this matter with both Mr. Sorkin and Mr. Chavkin?

5

6


THE COURT: Now, this representation by Mr. Sorkin of

7 Avellino and Bienes was in connection with a civil case brought

8 against them by the Securities and Exchange Commission. And as

9 I understand it, the matter was settled in 1993. You are aware

10 of these facts?

11

12

THE DEFENDANT: I am.

THE COURT: And, Mr. Sorkin, your representation of

13 them terminated when?

14 MR. SORKIN: At the time that the -- I believe the

15 consent injunction was filed. I thought it was '92, maybe '93,

16 but that was the end of my representation.

17

18

19

20

THE COURT: Whether it was '92 or '93, that was it?

MR. SORKIN: That was it, your Honor.

THE COURT: Thank you.

Now, Mr. Madoff, as I understand it, you had a

21 long-standing business relation with both Mr. Avellino and

22 Mr. Bienes, is that true?

23

24

THE DEFENDANT: That's true.

THE COURT: And after Avellino & Bienes dissolved, you

25 or your company took on some of their clients, is that true?


7

93aemadc

1

2

THE DEFENDANT: Correct, yes.

THE COURT: Now, these facts create a potential

3 conflict of interest because if this matter were to go to

4 trial, it is possible that the government might call

5 Mr. Avellino or Mr. Bienes to testify as witnesses against you.

6 Do you understand that that is a possibility?

7

8

THE DEFENDANT: I do.

THE COURT: And no one can say with any certainty at

9 this point whether these former clients of Mr. Sorkin would be

10 called to testify if the case were to go to trial. But if that

11 were to happen, Mr. Sorkin might be limited in his ability to

12 defend you. Do you understand that?

13

14


THE COURT: Because he might have limitations on his

15 ability to cross-examine them because they would be his former

16 clients. Do you understand that?

17

18

THE DEFENDANT: Yes, sir.

THE COURT: And the fact that Mr. Sorkin previously

19 represented these individuals and their company could cause him

20 to have divided loyalties between you and these potential

21 witnesses. Do you understand that?

22

23


THE COURT: And, for example, the communications that

24 Mr. Sorkin had with his former clients while he was

25 representing them would be privileged by the


covered by the

8

93aemadc

1 attorney-client privilege. And unless they waive that

2 privilege, he would not be able to use any of that information

3 that he gained while representing them in his efforts to defend

4 you. Do you understand that?

5

6


THE COURT: Because of his prior representation,

7 Mr. Sorkin might not be permitted to cross-examine his former

8 clients were they to testify against you. Do you understand

9 that?

10

11

THE DEFENDANT: Yes.

THE COURT: Do you understand that these are only

12 examples, and that it is possible that other scenarios might

13 unfold where Mr. Sorkin's prior representation of these

14 individuals could ask -- adversely affect his ability to

15 represent you in this case?

16

17


THE COURT: Now, so that I can be sure that you

18 understand, would you tell me in your own words what you

19 understand this potential conflict to be.

20 THE DEFENDANT: Well, I understand that if there

21 were -- if there was a trial, and if these gentlemen were

22 called as witnesses, then Mr. Sorkin would be limited in

23 revealing any confidential client privileged information,

24 attorney-client privilege information he may have. I also

25 realize that he might not be -- he would not be able to


9

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1 cross-examine them. I do realize that if that were to arise, I

2 could have an independent counsel cross-examine them, and that

3 he would have to be available immediately, providing the Court

4 allow that to occur.

S I understand that his -- he might have compromised

6 interests because his son -- sons had a --

7 THE COURT: Well, let's hold off on the sons for a

8 moment. I'll come to that in a bit. All right. I'm satisfied

9 you understand the potential conflict with respect to the

10 former client, so let's turn to the second area of potential

11 conflict.

12 As I understand it, at some point Mr. Sorkin's parents

13 had invested approximately $900,000 with your company, the

14 Bernard L. Madoff Investment Securities. And as I understand

15 it, when Mr. Sorkin's parents died, the $900,000 investment was

16 transferred into trust accounts that had been established for

17 the benefit of Mr. Sorkin's sons. I understand that Mr. Sorkin

18 himself never had a beneficial interest in the funds, and that

19 further, the funds were transferred to Merrill Lynch in

20 approximately August of 2007.

21 You are aware of these facts?

22

23


THE COURT: And you've discussed them with both

24 Mr. Sorkin and Mr. Chavkin?

25 THE DEFENDANT: I have.


10

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1 THE COURT: And have you had enough time to discuss

2 this matter with both Mr. Sorkin and Mr. Chavkin?

3

4

THE DEFENDANT: Yes.

THE COURT: Now, as I understand it, Mr. Sorkin's sons

5 did not lose any moneys because the full $900,000 was

6 transferred to Merrill Lynch in 2007. But there is a

7 possibility that the Court appointed trustee from Madoff

8 Securities could bring litigation against Mr. Sorkin's sons to

9 try to undo the transfer, to try and bring the moneys back into

10 a larger pot for victims. In other words, it is possible the

11 trustee could sue Mr. Sorkin's sons to get the money back, and

12 if the trustee were to do this, then it is possible that they

13 then would turn around and sue you.

14 Do you understand that that is a possibility?

15

16


THE COURT: And if that were to happen, then

17 Mr. Sorkin's loyalties could be divided between you and his

18 sons. Do you understand that?

19

20

THE DEFENDANT: Yes.

THE COURT: For example, these divided loyalties could

21 possibly affect the way Mr. Sorkin represented you in

22 challenging any requests by the government for restitution or

23 for fines. Do you understand that?

24

25


THE COURT: These divided loyalties could affect


11

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1 Mr. Sorkin's representation of you with respect to arguments

2 that he might make to the Court at sentencing, should you be

3 convicted, or as to decisions as to what witnesses to call or

4 what evidence to present, should there be a hearing required

5 for sentencing or should there be a trial required. Do you

6 understand that?

7

8


THE COURT: Okay. So now, so that I can be sure you

9 understand, tell me in your own words what you understand this

10 potential conflict to be.

11 THE DEFENDANT: I understand that potentially in the

12 issue of restitution, his interests would be divided or might

13 be divided and that he might not defend me in a way that's most

14 beneficial to me.

15

16

THE COURT: Okay.

MR. SORKIN: Your Honor, may I just make one

17 respectfully, your Honor said the trust account was

18 transferred. The only point I wanted to make is the trust

19 account was closed to Bernard L. Madoff on my mother's death,

20 and then the money was transferred out.

21 THE COURT: All right. The accounts were closed first

22 and then the moneys?

23 MR. SORKIN: First, and then the money was transferred

24 out, the one account was closed and then the accounts -- the

25 account was transferred out. Thank you.


12

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1 THE COURT: Okay. That doesn't affect the analysis.

2 Thank you for pointing that out. Let me just mention the third

3 area, then I'm going to ask you some more general questions. I

4 don't think the third area presents a problem or even a

5 potential conflict, but I should mention it.

6 As I understand it, in the early 1990s, when

7 Mr. Sorkin was with another law firm, the firm had some kind of

8 a retirement plan and Mr. Sorkin had some $60,000, a little bit

9 more than that invested in the plan. And the plan invested

10 certain of its funds with Madoff Securities. Are you aware of

11 these facts?

12

13

THE DEFENDANT: Yes.

THE COURT: And did you discuss them with Mr. Sorkin

14 and Mr. Chavkin?

15

16

THE DEFENDANT: I did.

THE COURT: Now, as I understand it, Mr. Sorkin

17 resigned from the law firm in 1995 and the funds were rolled

18 over into a retirement account that he had at Merrill Lynch or

19 that he traded at Merrill Lynch and that Mr. Sorkin has made --

20 has had no further investments with you or your company since

21 then.

22 Now, I think it's unlikely that these facts would

23 present even a potential conflict of interest, but we just

24 don't know. It is possible that they could lead to

25 complications. But you are aware of these facts?


13

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1

2


THE COURT: And you've discussed them with both

3 Mr. Sorkin and Mr. Chavkin?

4

5

THE DEFENDANT: Yes.

THE COURT: All right. Now, do you understand with

6 respect to all of these things that we have discussed that you

7 have the right to be represented by a lawyer, who is free of

8 any conflict of interest?

9

10


THE COURT: You have a right to be represented by a

11 lawyer who is free of any potential conflict of interest?

12

13


THE COURT: You have a right to an attorney whose

14 loyalty to you is absolutely undivided, who is not subject to

15 any circumstance that might intrude on his loyalty to you?

16

17

THE DEFENDANT: Yes.

THE COURT: For example, you have a right to be

18 represented by a lawyer who would not have any reason to

19 hesitate to cross-examine a witness, as Mr. Sorkin might have

20 if he had to cross-examine a former client who was testifying

21 against you. Do you understand that?

22

23

THE DEFENDANT: Yes.

THE COURT: You have a right to be represented by a

24 lawyer who would not hesitate to make any argument with respect

25 to a request for restitution or fines because the lawyer's


14

93aemadc

1 family member might be arguably a victim of your conduct and

2 your firm's conduct. Do you understand that?

3

4


THE COURT: Do you understand that it may be ill

5 advised to be represented by a lawyer who is operating under a

6 potential conflict of interest?

7

8


THE COURT: And Mr. Chavkin is independent of

9 Mr. Sorkin, and he is not affiliated with Mr. Sorkin, is that

10 correct, Mr. Chavkin?

11

12

MR. CHAVKIN: That's correct, your Honor.

THE COURT: Have you consulted with any other lawyers

13 about these potential conflicts?

14

15

THE DEFENDANT: No, I have not.

THE COURT: And just for the record, Mr. Chavkin, you

16 are not operating under any potential conflicts of interest

17 yourself, correct?

18

19

MR. CHAVKIN: That is correct, your Honor.

THE COURT: Now, Mr. Madoff, if you want more time to

20 think about these issues, or if you want more time to consult

21 further with Mr. Chavkin or some other independent counsel, I

22 would be prepared to adjourn these proceedings and to give you

23 the opportunity to have that further consultation. Do you

24 understand you have that right?

25 THE DEFENDANT: Yes, I do.


15

1 II93aemadc

'rHE COURT: Would you like more time --

2

3

4 matters?

5

6

THE DEFENDANT: No, your Honor.

THE COURT: to talk to someone else about these


THE COURT: And have you had adequate time to consult

7 with Mr. Chavkin about these matters?

8

9


THE COURT: Now, after having heard what I've said

10 today, is it your wish to continue with Mr. Sorkin as your

11 lawyer in this case?

12

13

THE DEFENDANT: Yes, your Honor.

THE COURT: And that is so even in light of the

14 potential conflicts we have discussed?

15

16

THE DEFENDANT: Yes.

THE COURT: Do you believe it is in your best interest

17 to continue with him as your lawyer?

18

19


THE COURT: Do you understand that by choosing to

20 continue with Mr. Sorkin as your attorney, you are waiving your

21 right to be represented by an attorney who is free of any

22 conflict or any potential conflict of interest?

23

24


THE COURT: Do you understand that if you choose to

25 continue with Mr. Sorkin as your lawyer now, you will not be


16

93aemadc

1 able to appeal, should you be convicted and receive a sentence

2 you do not like, on the grounds that you were deprived of

3 effective assistance of counsel because of these matters that

4 we have discussed?

5

6

THE DEFENDANT: I do, your Honor.

THE COURT: Do you understand that you are giving up

7 your right to appeal or to otherwise complain at a later date

8 that Mr. Sorkin was operating under a conflict of interest or

9 potential conflict of interest?

10

11


THE COURT: Do you agree to waive any post conviction

12 argument, on appeal or otherwise, that by virtue of

13 Mr. Sorkin's prior representation of Mr. Avellino, Mr. Bienes,

14 their company or by virtue of Mr. Sorkin's sons' investments

15 with your company, that you were denied effective assistance of

16 counsel?

17

18

THE DEFENDANT: Yes.

THE COURT: Is there anything else you would like me

19 to explain to you?

20

21

22

23


THE COURT: Do you have any questions for me?


THE COURT: Are you knowingly and voluntarily waiving

24 your right to conflict-free representation?

25 THE DEFENDANT: Yes.


17

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1

2

3

THE COURT: Ms. Baroni, have I covered everything?

MS. BARONI: Yes, your Honor.

THE COURT: And the parties agree that these potential

4 conflicts are waivable conflicts, yes?

5

6

7

8

9

10

11

MS. BARONI: Yes, from the government, your Honor.

THE COURT: Mr. Sorkin?

MR. SORKIN: Yes, your Honor.

THE COURT: Mr. Chavkin, you agree as well?

MR. CHAVKIN: I do agree.

THE COURT: Mr. Madoff, you can be seated. Thank you.

I find that the conflicts here are waivable. I find

12 further that Mr. Madoff understands his right to conflict-free

13 counsel and that he is waiving that right. I find that he is

14 doing so knowingly and voluntarily. And accordingly, I hold

15 that the conflicts are waived and Mr. Sorkin may continue to

16 represent Mr. Madoff in this matter.

17

18 point.

19

20

MR. SORKIN: Your Honor, may I just make one factual

THE COURT: Yes.

MR. SORKIN: Since we do have several members of the

21 fourth or fifth estate here, your Honor, I know the government

22 sent a letter to the Court saying that the total amount

23 invested was $18,860. And I believe I sent to your Honor

24 THE COURT: When I described the fact pattern before,

25 I used a number 60,000-plus to incorporate the additional


18

93aemadc

1 information --

2 MR. SORKIN: And that came a little bit later in '95

3 with additional contributions to the plan.

4 THE COURT: There was another 3,000 or so. So all

5 together it was roughly 64, $65,000.

6 MR. SORKIN: And that information only came to my

7 attention last night when I provided it to the Court and

8 government this morning.

9 THE COURT: I understand that, and it does not change

10 my analysis.

11

12

MR. SORKIN: Thank you.

THE COURT: Now, I believe the next order of business

13 is that Mr. Madoff is prepared to waive indictment and to

14 consent to being charged on an information?

15

16

17

18

19


THE COURT: We'll do the waiver now.

THE DEPUTY CLERK: You are Bernard L. Madoff?

THE DEFENDANT: Yes.

THE DEPUTY CLERK: Did you sign this waiver of

20 indictment?

21

22


THE DEPUTY CLERK: Before you signed it did you

23 discuss it with your attorneys?

24

25

THE DEFENDANT: Yes.

THE DEPUTY CLERK: Do you understand what you are


19

93aemadc

1 doing?

2

3


THE DEPUTY CLERK: Do you understand you are under no

4 obligation to waive indictment?

5

6


THE DEPUTY CLERK: Do you understand that if you do

7 not waive indictment and if the government wants to prosecute

8 you, they have to present this case to a grand jury, which may

9 or may not indict you?

10

11

THE DEFENDANT: Yes.

THE DEPUTY CLERK: Do you realize that by signing this

12 waiver of indictment, you've given up your right to have this

13 case presented to a grand jury?

14

15

16 is?

17

18


THE DEPUTY CLERK: Do you understand what a grand jury

THE DEFENDANT: Yes.

THE DEPUTY CLERK: Have you seen a copy of the

19 information?

20

21

22 you?

23

24

25

THE DEFENDANT: Yes.

THE DEPUTY CLERK: Would you like me to read it to

THE DEFENDANT: No.

THE DEPUTY CLERK: Thank you.

THE COURT: All right. Mr. Madoff, you may be seated.


1II

93aemadc

All right. So the government will file the

20

2 information promptly after this hearing and, among other

3 things, get us a docket number.

4 MR. LITT: Yes. We've provided the package to the

5 courtroom deputy, and we would ask that it be filed as soon as

6 possible.

7

8

THE COURT: All right.

MR. LITT: We've also supplied, through your deputy,

9 the Court with a Pimentel letter in this case, and we would ask

10 that that, too, be filed and be made part of the Court record

11 in this matter.

12 THE COURT: Yes. I have a Pimentel letter dated

13 March 10, 2009, addressed to Mr. Sorkin. And we will file that

14 as well.

15 MR. SORKIN: Your Honor, we have seen the Pimentel

16 letter. We've gone over it. We would like the opportunity to

17 respond with our own letter, which we'd ask the Court's

18 permission to hand up and it be filed as well.

19

20 filed.

21

22

THE COURT: You can hand it up and I will have it

MR. SORKIN: Thank you, your Honor.

THE COURT: This sets forth the defendant's

23 calculation as to a guideline range or --

24 MR. SORKIN: No. It addresses certain issues with

25 respect to -- if I may for just a second, certain issues, your


21

93aemadc

1 Honor, with respect to how the government arrived at the

2 number. And in this letter we've asked the Court to request of

3 the government at this point to provide us with the necessary

4 documents so that we can review them independently to determine

5 how the gover~~ent arrived at the number that's listed in the

6 Pimentel letter.

7 Prior to your Honor taking the bench, Mr. Litt and I

8 chatted, and we would agree at this point that maybe we can

9 work it out before invoking the Court's authority to direct the

10 government to provide us with those documents. So we'd like to

11 hand this up. We don't have time obviously to withdraw the

12 request that your Honor direct the government to do so, and

13 maybe we can work it out before we have to invoke the Court's

14 authority.

15 THE COURT: You can hand it up. I'll refrain from

16 ruling on the request.

17

18


THE COURT: Now, I gather it is the expectation that

19 Mr. Madoff will plead guilty to the information on Thursday?

20

21 Honor.

22

MR. SORKIN: I think that is a fair expectation, your

THE COURT: And that would be to all eleven counts of

23 the information?

24

25


THE COURT: Okay. Now, in light of the Crime Victim's


22

93aemadc

1 Protection Act, I issued an order last week that gives

2 victims -- that gave notice to victims. And we need to talk a

3 little bit about the opportunity for victims to speak.

4 And so I think it would be helpful if the goverrlinent

5 were to describe the information, what the counts are, and then

6 just to tell us what the government's position is with respect

7 to a guideline range. And the reason for that is Thursday I

8 think there are two issues to address. One is whether to

9 accept the plea, should Mr. Madoff plead guilty. Two is I

10 don't know whether the government is going to ask for a remand,

11 but there is the issue of remand or bail.

12 Now, under the statute victims have a right to be

13 reasonably heard with respect to, among other things, both plea

14 and release. Those are the words in the statute. And so with

15 respect to plea, I think it would be helpful if the government

16 could give a description of what's anticipated, including, for

17 example, whether there is a plea agreement.

18 MR. LITT: Yes, your Honor. I'm happy to do so. The

19 information which the government filed contains eleven counts.

20 They are securities fraud, investment adviser fraud, mail

21 fraud, wire fraud, three counts of money laundering, false

22 statements, perjury, false filing with the SEC and theft from

23 an employee benefit plan. There is no plea agreement with the

24 defendant.

25 THE COURT: And that means if Mr. Madoff wishes to


23

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1 plead guilty on Thursday, as far dS the government's concerned,

2 he would have to plead guilty to the entire information?

3

4

MR. LITT: That's correct.

THE COURT: All right. Would you tell us what the

5 exposure is in terms of the maximum possible sentence of

6 imprisonment, taking the eleven counts together?

7 MR. LITT: In total it's 150 years. The guidelines

8 range is life, but the guidelines further provide that in a

9 case where no count, no individual count provides for a life

10 sentence

11

12

THE COURT: Which is the case here.

MR. LITT: -- which is the case here, the recommended

13 guideline sentence is the statutory maximum, which is 150

14 years.

15 THE COURT: And this calculation is the government's

16 calculation based on currently available information;

17 apparently Mr. Madoff may challenge that, but in any event the

18 calculation is not binding on the Court or the probation

19 department, correct?

20 MR. LITT: That's correct. And I would just note with

21 respect to Mr. Sorkin's letter, responding to the Pimentel

22 letter, which we just received that, it relates to a very

23 narrow part of the government's Pimentel letter, and that is

24 the sums of money related to the forfeiture allegations. So

25 that's what Mr. Sorkin's letter addresses. It doesn't address


24

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1 the guidelines calculation in any way.

2 THE COURT: All right. Now, thank you.

3 With respect to Thursday, I have reviewed the e-mails

4 that have been submitted to the government, and I know that

5 there are investors and victims from all around the country who

6 have expressed a desire to be heard, a desire to address the

7 Court on Thursday.

8 And I just want it to be clear, there really are only

9 the two issues I've mentioned on Thursday: Whether, assuming

10 Mr. Madoff pleads guilty, I will accept that plea; and second,

11 whether he will remain out on bailor whether he will be

12 remanded. I am not sentencing Mr. Madoff on Thursday. Even if

13 he pleads guilty then, the sentence would not take place -- the

14 sentencing would not take place for several months. And

15 victims will be given a chance to be heard before or at

16 sentencing, depending on how many victims want to be heard.

17 We'll have to figure out the mechanics. But the point is

18 Thursday is not the time for victims to be heard with respect

19 to sentencing.

20 With respect to pleading guilty, some of the e-mails

21 or many of the e-mails objected to a -- what was called a plea

22 bargain, or some kind of a deal whereby Mr. Madoff would be

23 permitted by the government to plead guilty to lesser charges.

24 I think as these proceedings this afternoon make

25 clear, there is no plea agreement. There is no plea bargain


25

93aemadc

1 here. And so as I understand it, if Mr. Mddoff wishes to plead

2 guilty, he must plead guilty to all eleven counts of the

3 information. And, therefore, those victims who objected to a

4 p1~a bargain no longer have a basis to object, and I would

5 think they would not need to be heard on Thursday.

6 And so on Thursday, if Mr. Madoff still wishes to

7 plead guilty, I will conduct an allocution. I will ask him a

8 series of questions. When we complete the allocution, I will

9 indicate whether I am inclined to accept the allocution. If

10 so, if I am inclined to accept the allocution, I will then give

11 victims who wish to object to my accepting the plea an

12 opportunity to be heard. I will then make a final decision on

13 whether to accept the plea.

14 And we'll do the same thing with respect to release.

15 I'll give the lawyers a chance to be heard. I'll give a

16 preliminary indication of what I am inclined to do. I would

17 then give victims a reasonable opportunity to be heard. In

18 other words, there's no reason for someone to speak if they

19 agree with my decision. I'm trying to do this in a way that

20 will streamline it but give those who wish to be heard an

21 opportunity to be heard.

22 Any thoughts on that?

23 MR. LITT: I think it's -- that's an acceptable

24 approach to the government. I think the only issue is going to

25 be a logistical one in terms of --


26

93aemadc

1 THE COURT: I'll corne to that in a second. But the

2 logistics are difficult. Mr. Sorkin?

3

4

MR. SORKIN: No, your Honor.

THE COURT: I think the government should contact the

5 victims who have indicated a desire to be heard. The

6 government can explain what we've just discussed, that the

7 proceedings on Thursday are limited to plea and release, that

8 sentencing will take place at some point in the future. So,

9 therefore, those who want to be heard on sentencing will have

10 to be heard on another day. And only those who want to address

11 these issues will be permitted to speak. And we'll see how

12 many want to speak, and only those really who are -- want to

13 try to convince me to do something different from what I am

14 inclined to do would be given a chance to be heard.

15 I don't think, otherwise, there is any reason for them

16 to speak. And depending on how many people express a desire to

17 speak, we'll put some limits on the number of speakers, the

18 amount of time that each person may speak. And the government

19 should just remind victims who want to speak that if they are

20 going to speak, they must do so in a respectful and dignified

21 manner. I understand that emotions are high, but we have to

22 remember to conduct ourselves in a manner that is appropriate

23 to a courtroom proceeding.

24 So the government will let me know how many victims

25 still want to be heard on Thursday, and we'll make a final


27

93aemadc

1 decision before that.

2 MR. LITT: We will. Your Honor's earlier order

3 provided that individuals could notify us up until 10:00

4 Wednesday morning, so we will endeavor to collect the

5 information as soon as possible thereafter so that early

6 Wednesday afternoon we can communicate with the Court and with

7 Mr. Sorkin.

8 THE COURT: Many of the people who wanted to be heard

9 don't really explain what they want to say or what they want to

10 be heard on. And it's just not the time for victims to speak

11 in terms of sentencing.

12 Mr. Sorkin?

13 MR. SORKIN: One point, your Honor, and I won't

14 belabor it, because I don't think we need to belabor it now.

15 What I'm about to say by no means suggests that there

16 were no victims, but one of the difficulties we have, your

17 Honor, in setting forth to some extent our response to the

18 Pimentel letter is that we have been unable to review a vast

19 amount of documents reflecting moneys going in and moneys

20 corning out. And in certain instances which have been public

21 since Mr. Madoff's arrest, there are certain individuals but I

22 think more likely institutions that have claimed they lost

23 money but after analysis discovered that they received

24 redemptions that exceeded the amount of money that they claimed

25 they lost.


28

93aemadc

1 And so one of the points I want to raise is, a\jain,

2 and I emphasize we're not suggesting there weren't victims, but

3 unless and until we get to see records that were viewed by the

4 government, and perhaps even reviewed by the trustee in

5 bankruptcy, Mr. Pickard, for us to identify loss as well as

6 victims, because I think they go together. I'm not going to

7 make a determination respectfully as to whether someone who

8 appears is a victim who has lost money. I think that's one of

9 the difficulties we have at this point.

10 THE COURT: Well, the statute, you know, contemplates

11 giving victims an opportunity to be heard even before there is

12 a finding of guilt. And I suppose one could argue that we

13 should use the phrase alleged victims for now, but I don't

14 know. But I understand you to be saying that you're not

15 obviously Mr. Madoff isn't agreeing to the extent of the losses

16 or the specifics.

17 MR. SORKIN: I don't think we possibly can. And,

18 again, it's difficult to identify at this point the real

19 victims of this until we have access to the appropriate

20 records. And that's the point I want to make.

21

22

23

THE COURT: All right. I understand.

Anything else today?

MR. SORKIN: There is one other thing, your Honor.

24 Mr. Chavkin has something.

25 MR. CHAVKIN: Your Honor, if I may take one more

SOUTHERN DISTRICT REPORTERS, P.C.(212) 805 0300

29

93aemadc

1 moment of the Court's time. I've been reflecting on one of the

2 questions your Honor asked, and although I don't believe that

3 it poses any potential conflict, I thought out of an abundance

4 of caution I would j1Jst bring the Court's attention to the

5 following.

6 First, my firm has represented several investors in

7 guiding them to file claims with the SIPC, period. Secondly, I

8 understand that I may be considered as a potential counsel for

9 Mrs. Madoff in the regulatory or civil sphere. I don't believe

10 either of them changes the analysis, but I wanted to make sure

11 the record was clear.

12 THE COURT: That's fine.

13 Does the government have a problem with either of

14 those?

15

16

17

18

19

20

MS. BARONI: No, your Honor.

THE COURT: I don't have a problem.

MS. BARONI: Thank you.


THE COURT: Anything else today from the government?

MR. LITT: The only thing is just in an effort to get

21 out the information as quickly as possible, I would ask the

22 permission of the Court to publish the information in the

23 Pimentel letter prior to them getting docketed, in case it

24 takes time to do that.

25 THE COURT: Permission granted. The docketing


30

93aemadc

1 sometimes doesn't move as quickly as we would like. Permission

2 granted.

3 We're adjourned.

4 MR. SORKIN: Your Honor, may we also ask that our

5 letter be filed as well?

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

THE COURT: Yes.

(Adjourned)


Plea Allocution of Bernard L. Madoff

Your Honor, for many years up until my arrest on December 11, 2008, I operated a Ponzi

scheme through the investment advisory side of my business, Bernard L. Madoff Securities LLC,

which was located here in Manhattan, New York at 885 Third Avenue. I am actually grateful for

this first opportunity to publicly speak about my crimes, for which I am so deeply sorry and

ashamed. As I engaged in my fraud, I knew what I was doing was wrong, indeed criminal.

When I began the Ponzi scheme I believed it would end shortly and I would be able to extricate

myself and my clients from the scheme. However, this proved difficult, and ultimately

impossible, and as the years went by I realized that my aLTest and this day would inevitably

come. I am painfully aware that I have deeply hurt many, many people, including the members

of my family, my closest friends, business associates and the thousands of clients who gave me

their money. I cannot adequately express how sorry I am for what I have done. I am here today

to accept responsibility for my crimes by pleading guilty and, with this plea allocution, explain

the means by which I caLTied out and concealed my fraud.

The essence of my scheme was that I represented to clients and prospective clients who

wished to open investment advisory and individual trading accounts with me that I would invest

their money in shares of common stock, options and other securities of large well-known

corporations, and upon request, would return to them their profits and principal. Those

representations were false because for many years up and until I was arrested on December 11,

2008, I never invested those funds in the securities, as I had promised. Instead, those funds were

deposited in a bank account at Chase Manhattan Bank. When clients wished to receive the

profits they believed they had earned with me or to redeem their principal, I used the money in

the Chase Manhattan bank account that belonged to them or other clients to pay the requested

funds. The victims of my scheme included individuals, charitable organizations, trusts, pension

funds and hedge funds. Among other means, I obtained their funds through interstate wire

transfers they sent from financial institutions located outside New Yark State to the bank account

of my investment advisory business, located here in Manhattan, New York and through mailings

delivered by the United States Postal Service and private interstate carriers to my firm here in

Manhattan.

I want to emphasize today that while my investment advisory business - the vehicle of

my wrongdoing - was part of my firm Bernard L. Madoff Securities, the other businesses my

firm engaged in, proprietary trading and market making, were legitimate, profitable and

successful in all respects. Those businesses were managed by my brother and two sons.

To the best of my recollection, my fraud began in the early 1990s. At that time, the

country was in a recession and this posed a problem for investments in the securities markets.

Nevertheless, I had received investment commitments from certain institutional clients and

understood that those clients, like all professional investors, expected to see their investments

out-perform the market. While I never promised a specific rate ofreturn to any client, I felt

compelled to satisfy my clients' expectations, at any cost. I therefore claimed that I employed an

investment strategy I had developed, called a "split strike conversion strategy," to falsely give

the appearance to clients that I had achieved the results I believed they expected.

Through the split-strike conversion strategy, I promised to clients and prospective clients

that client funds would be invested in a basket of common stocks within the Standard & Poor's

100 Index, a collection of the 100 largest publicly traded companies in terms of their market

capitalization. I promised that I would select a basket of stocks that would closely mimic the

price movements of the Standard & Poor's 100 Index. I promised that I would opportunistically

2

time these purchases and would be out of the market intermittently, investing client funds during

these periods in United States Government-issued securities such as United States Treasury bills.

In addition, I promised that as part of the split strike conversion strategy, I would hedge the

investments I made in the basket of common stocks by using client funds to buy and sell option

contracts related to those stocks, thereby limiting potential client losses caused by unpredictable

changes in stock prices. In fact, I never made the investments I promised clients, who believed

they were invested with me in the split strike conversion strategy.

To conceal my fraud, I misrepresented to clients, employees and others, that I purchased

securities for clients in overseas markets. Indeed, when the United States Securities and

Exchange Commission asked me to testify as part of an investigation they were conducting about

my investment advisory business, I knowingly gave false testimony under oath to the staff of the

SEC on May 19, 2006 that I executed trades of common stock on behalf of my investment

advisory clients and that I purchased and sold the equities that were part of my investment

strategy in European markets. In that session with the SEC, which took place here in Manhattan,

New York, I also knowingly gave false testimony under oath that I had executed options

contracts on behalf of my investment advisory clients and that my firm had custody of the assets

managed on behalf of my investment advisory clients.

To further cover-up the fact that I had not executed trades on behalf of my investment

advisory clients, I knowingly caused false trading confirmations and client account statements

that reflected the bogus transactions and positions to be created and sent to clients purportedly

involved in the split strike conversion strategy, as well as other individual clients I defrauded

who believed they had invested in securities through me. The clients receiving trade

confirmations and account statements had no way of knowing by reviewing these documents that

3

I had never engaged in the transactions represented on the statements and confirmations. I knew

those false confirmations and account statements would be and were sent to clients through the

U.S. mails from my office here in Manhattan.

Another way that I concealed my fraud was through the filing of false and misleading

certified audit reports and financial statements with the SEC. I knew that these audit reports and

financial statements were false and that they would also be sent to clients. These reports, which

were prepared here in the Southern District of New York, among things, falsely reflected my

firm's liabilities as a result of my intentional failure to purchase securities on behalf of my

advisory clients.

Similarly, when I recently caused my firm in 2006 to register as an investment advisor

with the SEC, I subsequently filed with the SEC a document called a Form ADV Uniform

Application for Investment Adviser Registration. On this form, I intentionally and falsely

certified under penalty of perjury that Bernard L. Madoff Investment and Securities had custody

of my advisory clients' securities. That was not true and I knew it when I completed and filed

the form with the SEC, which I did from my office on the 17th floor of 855 Third Avenue, here

in Manhattan.

In more recent years, I used yet another method to conceal my fraud. I wired money

between the United States and the United Kingdom to make it appear as though there were actual

securities transactions executed on behalf of my investment advisory clients. Specifically, I had

money transferred from the U.S. bank account of my investment advisory business to the London

bank account of Madoff Securities International Ltd., a United Kingdom corporation that was an

affiliate ofmy business in New Yark. Madoff Securities International Ltd. was principally

engaged in proprietary trading and was a legitimate, honestly run and operated business.

4

93CMMADP1

UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF NEW YORK------------------------------x


1

v.

BERNARD L. MADOFF,

Defendant.

------------------------------x

Before:

HON. DENNY CHIN,

APPEARANCES

LEV L. DASSINUnited States Attorney for theSouthern District of New York

MARC O. LITTLISA BARONI

Assistant United States Attorneys

DICKSTEIN SHAPIRO LLPAttorneys for Defendant

BY: IRA LEE SORKINDANIEL J. HORWITZNICOLE P. DE BELLOMAURO M. WOLFE

09 CR 213 (DC)

New York, N.Y.March 12, 200910:00 a.m.

District Judge

ALSO PRESENT: STEVEN GARFINKEL, FBIKEITH KELLY, FBIJULIA SCHULTE HANISH, USDOJ, FBITHEODORE V. CACIOPPI, FBI

SOUTHERN DISTRICT REPORTERS, P.C.(212) 805-'-0300

2

93CMMADPI

1

2

(Case called)

MR. LITT: Marc Litt for the United States. With me

3 at counsel table are Lisa Baroni, an Assistant U.S. Attorney,

4 and four FBI agents: Steven Garfinkel, Keith Kelly, Julia

5 Hanish, and Ted Cacioppi. Good morning, your Honor.

6 MR. SORKIN: Good morning, your Honor. On behalf of

7 the defendant Bernard L. Madoff, the law firm of Dickstein

8 Shapiro LLP. Mr. Madoff is sitting to my left. To my right is

9 Daniel Horwitz of my firm. To Mr. Madoff's left is Mauro Wolfe

10 from my firm, and to Mr. Wolfe's left is Nicole De Bello from

11 my firm. Good morning.

c12

13

THE COURT: Good morning.

Mr. Sorkin, your client is still prepared to plead

14 guilty today as we discussed on Tuesday?

15

16


THE COURT: Mr. Madoff, if you would stand, please,

17 and the deputy clerk will administer the oath.

18 (Defendant sworn)

19 MR. SORKIN: Your Honor, before you begin the

20 allocution, we have provided the government and the court

21 reporter with a copy of the allocution that Mr. Madoff will

22 read, and we have a copy if the Court wishes to see it as well.

(

23

24

25

THE COURT: Yes. Thank you.

MR. SORKIN: May I hand it up?

THE COURT: Yes.


93CMMADP1

UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF NEW YORK------------------------------x


1

v.

BERNARD L. MADOFF,

Defendant.

------------------------------x

Before:

HON. DENNY CHIN,

APPEARANCES

LEV L. DASSINUnited States Attorney for theSouthern District of New York

MARC O. LITTLISA BARONI

Assistant United States Attorneys

DICKSTEIN SHAPIRO LLPAttorneys for Defendant

BY: IRA LEE SORKINDANIEL J. HORWITZNICOLE P. DE BELLOMAURO M. WOLFE

09 CR 213 (DC)

New York, N.Y.March 12, 200910:00 a.m.

District Judge

ALSO PRESENT: STEVEN GARFINKEL, FBIKEITH KELLY, FBIJULIA SCHULTE HANISH, USDOJ, FBITHEODORE V. CACIOPPI, FBI

SOUTHERN DISTRICT REPORTERS, P.C.(212) 805-'-0300

2

93CMMADPI

1

2

(Case called)

MR. LITT: Marc Litt for the United States. With me

3 at counsel table are Lisa Baroni, an Assistant U.S. Attorney,

4 and four FBI agents: Steven Garfinkel, Keith Kelly, Julia

5 Hanish, and Ted Cacioppi. Good morning, your Honor.

6 MR. SORKIN: Good morning, your Honor. On behalf of

7 the defendant Bernard L. Madoff, the law firm of Dickstein

8 Shapiro LLP. Mr. Madoff is sitting to my left. To my right is

9 Daniel Horwitz of my firm. To Mr. Madoff's left is Mauro Wolfe

10 from my firm, and to Mr. Wolfe's left is Nicole De Bello from

11 my firm. Good morning.

c12

13

THE COURT: Good morning.

Mr. Sorkin, your client is still prepared to plead

14 guilty today as we discussed on Tuesday?

15

16


THE COURT: Mr. Madoff, if you would stand, please,

17 and the deputy clerk will administer the oath.

18 (Defendant sworn)

19 MR. SORKIN: Your Honor, before you begin the

20 allocution, we have provided the government and the court

21 reporter with a copy of the allocution that Mr. Madoff will

22 read, and we have a copy if the Court wishes to see it as well.

(

23

24

25

THE COURT: Yes. Thank you.

MR. SORKIN: May I hand it up?

THE COURT: Yes.


3

93CMMADPI

1

2

This statement is intended to cover all 11 counts?

MR. SORKIN: Yes, your Honor. After your Honor goes

3 through, he will give a statement which we believe will cover

4 all the elements. Thank you.

5 THE COURT: Mr. Madoff, do you understand that you are

6 now under oath and that if you answer my questions falsely,

7 your untrue answers may later be used against you in another

8 prosecution for perjury or making false statements?

9

10


THE COURT: Try to keep your voice up so that I can

11 hear you, please.

(12

13

14

15

THE DEFENDANT: Yes, I do, your Honor.

MR. SORKIN: Can we get some water, your Honor?

THE COURT: Yes.

MR. LITT: I would note that the defendant has not yet

16 been arraigned on the information.

17 THE COURT: All right. That's true. Technically, we

18 did the first part of it. We never did the final part. Let me

19 just ask the final question.

20 Mr. Madoff, the other day you waived indictment and

21 you consented to being charged by an information of the

22 government, correct?

23

24

THE DEFENDANT: Yes.

THE COURT: And how do you now plead to the

25 information, guilty or not guilty?


4

93CMMADPI

1

2

THE DEFENDANT: Guilty.

THE COURT: Before I accept the plea I will conduct

3 the allocution.

4 Would you state your full name for the record, please.

5

6

THE DEFENDANT: Bernard L. Madoff.

THE COURT: On Tuesday you told me your age and

7 educational background. We talked a little bit about your

8 medical condition. Has your medical condition changed since

9 Tuesday?

12 drugs, medicine, or pills, or have you drunk any alcohol?

c

10

11

13

14

15

16

THE DEFENDANT: No, it has not.

THE COURT: In the past 24 hours, have you taken any

THE DEFENDANT: No.

THE COURT: Is your mind clear today?

THE DEFENDANT: Yes, it is.

THE COURT: And are you feeling all right today under

17 the circumstances?

18

19


THE COURT: Do either counsel have any doubt as to Mr.

20 Madoff's competence to plead at this time?

21

22

23

MR. LITT: The government does not.

MR. SORKIN: No, your Honor.

THE COURT: Now, Mr. Madoff, as I understand it, you

24 wish to plead guilty today to all 11 counts of the information,

25 is that correct?


5

93CMMADPl

1

2

THE DEFENDANT: Yes, it is correct.

THE COURT: Have you had a full opportunity to discuss

3 your case with Mr. Sorkin and to discuss the consequences of

4 pleading guilty?

5

6

THE DEFENDANT: Yes, I have.

THE COURT: You told me on Tuesday that you were

7 satisfied with Mr. Sorkin and his representation of you. Are

8 you still satisfied?

9

10


THE COURT: On the basis of Mr. Madoff's responses to

11 my questions and my observations of his demeanor, I find that

12 he is fully competent to enter an informed plea at this time.

( 13 Now, Mr. Madoff, before I accept any plea from you I

14 am going to ask you some additional questions that are intended

15 to satisfy me that you wish to plead guilty because you are

16 guilty and that you fully understand the consequences of your

17 plea. If you do not understand any of my questions, please ask

18 me or Mr. Sorkin to explain.

19 I am going to describe to you certain rights that you

20 have under the Constitution and laws of the United States. You

21 will be giving up these rights if you plead guilty, so please

22 listen carefully.

23 Under the Constitution and laws of the United States,

24 you have a right to a speedy and public trial by a jury on the

25 charges against you which are contained in the information. If


6

93CMMADPI

( 1 there were a trial, you would be presumed innocent and the

2 government would be required to prove your guilt by competent

3 evidence beyond a reasonable doubt. You would not have to

4 prove that you were innocent if you were to go to trial.

5 If there were a trial, you would have the right to be

6 represented by an attorney. And if you could not afford one,

7 an attorney would be provided for you free of cost.

8 If there were a trial, you would have a right to see

9 and hear all the witnesses against you and your attorney could

10 cross-examine them. You would have a right to have your

11 attorney object to the government's evidence and to offer

12 evidence on your own behalf if you so desired, and you would

( 13 have the right to have subpoenas issued or other process used

14 to compel witnesses to testify in your defense.

15 If there were a trial, you would have the right to

16 testify if you wanted to, but no one could force you to testify

17 if you did not want to. Furthermore, no inference or

18 suggestion of guilt could be drawn if you chose not to testify

19 at trial.

20 Mr. Madoff, do you understand each and everyone of

21 these rights?

24 today you are giving up each and everyone of these rights, you

(

22

23

25


THE COURT: Do you understand that by pleading guilty

are waiving these rights, and you will have no trial?


7

93CMMADP1

( 1

2


THE COURT: Do you understand that you have the right

3 even now to refuse to plead guilty?

4

5


THE COURT: You do not have to enter a plea of guilty

6 if you do not want to, for any reason.

7 Do you understand that?

8

9

THE DEFENDANT: Yes.

THE COURT: Now, did you receive a copy of the

10 information?

c11

12

13


THE COURT: And as we discussed on Tuesday and as we

discussed a moment ago, do you understand that you have waived

14 your right to be charged by an indictment, which is issued by a

15 grand jury, and you have consented to being charged by the

16 information which is issued by the prosecutor?

17

18

THE DEFENDANT: Yes.

THE COURT: And did you waive that right voluntarily

19 and knowingly?

20

21

THE DEFENDANT: Yes.

THE COURT: Now, I am going to review the counts with

22 you. As we said, the information contains 11 counts.

23

24

25

Count One charges securities fraud.

Count Two charges investment adviser fraud.

Count Three charges mail fraud.


4~

2

3

4

5

6

7

8

9

10

11

12

(~ 13

14

15

16

17

18

19

20

21

22

23

24

25

93CMMADPI

Count Four charges wire fraud.

Count Five charges international money laundering to

promote fraud in the sale of securities.

Count Six charges international money laundering to

conceal the proceeds of fraud in the sale of securities.

Count Seven charges money laundering.

Count Eight charges making false statements.

Count Nine charges perjury.

Count Ten charges making a false filing with the

Securities and Exchange Commission.

And Count Eleven charges theft from an employee

benefit plan.

Do you understand that those are the charges against

you?


THE COURT: 1 1 11 ask the government to advise the

defendant of the elements of the crimes.

MR. LITT: Yes, your Honor. With respect to Count

One, securities fraud --

THE COURT: Hold on one second.

Mr. Madoff, you can be seated. Pour yourself some

water.

THE DEFENDANT: Thank you.

MR. LITT: With respect to Count One, securities

fraud, in order to prove the crime of securities fraud, the


8

9

93CMMADPI

1 government must establish each of the following three elements

2 beyond a reasonable doubt:

3 First, that in connection with the purchase or sale of

4 a security, the defendant did anyone or more of the following:

5 (1) employed a device, scheme, or artifice to defraud or (2)

6 made an untrue statement of a material fact or omitted to state

7 a material fact which made what was said under the

8 circumstances misleading; or (3) engaged in an act, practice,

9 or course of business that operated or would operate as a fraud

10 or deceit upon a purchaser or seller.

12 and with the intent to defraud;

c11

13

Second, that the defendant acted knowingly, willfully,

And, third, that the defendant knowingly used or

14 caused to be used any means or instruments of transportation or

15 communication in interstate commerce or the use of the mails in

16 furtherance of the fraudulent conduct.

17 With respect to investment adviser fraud, the

18 government would have to prove beyond a reasonable doubt all

19 four of the following elements: First, that the defendant was

20 an investment adviser; second, that the defendant either (A)

21 employed a device, scheme, or artifice to defraud clients and

22 prospective clients; (B) engaged in a transaction, practice, or

23 course of business which operated as a fraud or deceit upon

24 those clients and prospective clients; or (C) engaged in an

25 act, practice, and course of business that was fraudulent,


10

93CMMADPI

1 deceptive, and manipulative.

2 Third, that the defendant devised or participated in

3 such alleged device, scheme, or artifice to defraud or engaged

4 in such alleged transaction, practice, or course of business,

5 knowingly, willfully, and with intent to defraud.

6 And, fourth, that the defendant employed such alleged

7 device, scheme, or artifice to defraud or engaged ln such

8 alleged transaction, practice, or course of business by use of

9 the mails or other instrumentality of interstate commerce.

10 In order to prove the crime of mail fraud, the

11 government must establish beyond a reasonable doubt the

12 following four elements:

( 13 First, that at or about the time alleged in the

14 indictment there was a scheme or artifice to defraud in order

15 to obtain property or money by false and fraudulent pretenses,

16 representations, or promises;

17 Second, that the false or fraudulent statements and

18 representations concerned material facts;

19 Third, that the defendant knowingly and willfully

20 devised or participated in the scheme or artifice to defraud

21 with knowledge of its fraudulent nature and with specific

22 intent to defraud;

23 And, fourth, that the United States Mails were used in

24 furtherance of the scheme as specified in the information.

( 25 In order to prove the crime of wire fraud the


11

93CMMADP1

1 government must establish the following four essential

2 elements:

3 First, that at or about the time alleged in the

4 information there was a scheme or artifice to defraud in order

5 to obtain property or money by false and fraudulent pretenses,

6 representations, or promises;

7 Second, that the false or fraudulent statements and

8 representations concerned material facts;

9 Third, that the defendant knowingly and willfully

10 devised or participated in the scheme or artifice to defraud

11 with knowledge of its fraudulent nature and with specific

12 intent to defraud

c 13 And, fourth, that interstate or foreign wire

14 facilities were used in furtherance of the scheme to defraud as

15 specified in the information.

16 In order to prove the crime of unlawful transportation

17 of funds or monetary instruments with the intent to promote the

18 carrying on of specified unlawful activity, in violation of

19 Section 1956(a) (2) (A), the government must establish beyond a

20 reasonable doubt each of the following elements:

21 First, that the defendant transported a monetary

22 instrument or funds from a place in the United States to or

23 through a place outside the United States, or to a place in the

24 United States from or through a place outside the United

( 25 States;


12

93CMMADP1

1 And, second, that the defendant did so with the intent

2 to promote the carrying on of specified unlawful activity.

3 In order to prove the crime of unlawful transportation

4 of funds or monetary instruments to conceal and disguise the

5 proceeds of specified unlawful activity, the government must

6 establish beyond a reasonable doubt each of the following:

7 First, that the defendant transported a monetary

8 instrument or funds from a place in the United States to or

9 through a place outside the United States, or to a place in the

10 United States from or through a place outside the United

11 States;

12 And, second, that the defendant did so with the

13 knowledge that the monetary instrument or funds involved

14 represent the proceeds of some form of unlawful activity;

15 And, third, that the defendant did so with knowledge

16 that the transportation was designed in whole or in part to

17 conceal or disguise the nature, location, source, ownership, or

18 control of the proceeds of securities fraud, mail fraud, wire

19 fraud, and theft from an employee benefit plan.

20 In order to prove the crime of engaging ln monetary

21 transactions in property derived from specified unlawful

22 activity in violation of Section 1957, the government must

23 establish the following beyond a reasonable doubt:

24 First, that the defendant engaged or attempted to

(~ 25 engage in a monetary transaction in or affecting interstate


13

93CMMADPl

1 commerce;

2 Second, that the monetary transaction involved

3 criminally derived property of a value greater than $10,000;

4 Third, that the property was derived from specified

5 unlawful activity; in this case, from securities fraud, mail

6 fraud, wire fraud, or theft from a pension benefit plan;

7 Fourth, that the defendant acted knowingly; that is,

8 with knowledge that the transaction involved proceeds of a

9 criminal offense;

10 And, fifth, that the transaction took place in the

11 United States or that the defendant is a united States person.

12 In order to prove the crime of making false statements

( 13 to the SEC, in violation of 18 U.S.C. 1001, the government must

14 establish the following elements beyond a reasonable doubt:

15 First, that the defendant made a statement or

16 representation;

17 Second, that the statement or representation was

18 material;

19 Third, that the statement or representation was false,

20 fictitious or fraudulent;

21 Fourth, that the false, fictitious or fraudulent

22 statement was made knowingly or willfully;

23 And, fifth, that the statement or representation was

24 made in a matter within the jurisdiction of the government of

( 25 the United States.


14

93CMMADP1

To prove the crime of perjury the government must

prove beyond a reasonable doubt each of the following:

First, that the defendant took an oath to testify

truly before the Securities and Exchange Commission, a body

authorized by law to administer oaths;

Second, that the defendant made false statements as to

matters about which the defendant testified under oath as set

forth in the information;

Third, that the matters as to which it is charged that

the defendant made false statements were material to the issues

under inquiry by the Securities and Exchange Commission;

And, fourth, that such false statements were willfully

made.

To prove the offense of making a false filing with the

SEC the government must prove beyond a reasonable doubt each of

the following:

First, that the defendant was required to file an

application, report, or document with the SEC under the

Securities Exchange Act of 1934 and the rules and regulations

thereunder;

Second, that the application, report, or document

filed with the SEC contained false or misleading statements;

Third, that the false or misleading statements were

material;

And, fourth, that the defendant acted knowingly and


15

93CMMADPl

1 willfully.

2 To prove the offense of theft from an employee pension

3 benefit plan the government must prove beyond a reasonable

4 doubt the following elements:

5 First, that the defendant abstracted or converted to

6 his own use or the use of others the monies, funds, securities,

7 premiums, credits, property, or other assets of an employee

8 welfare benefit plan;

9 Second, that the funds abstracted or converted from

10 excuse me, that the fund abstracted or converted from was an

11 employee welfare benefit plan within the meaning of the

c12 statute;

13 And, third, that the defendant acted knowingly and

14 willfully.

15 THE COURT: Thank you.

16 Mr. Madoff, would you rise again, please.

17 Mr. Madoff, do you understand that if you were to go

18 to trial the government would have to prove all of those

19 elements beyond a reasonable doubt?

20

21


THE COURT: Now I am going to review with you the

22 maximum possible penalties for the crimes in question.

23 Count One charging securities fraud carries a maximum

24 sentence of 20 years' imprisonment, a maximum fine of the

25 greatest of $5 million, or twice the gross gain or twice the


16

93CMMADP1

1 gross loss, a mandatory special assessment of $100, and a

2 maximum term of supervised release of three years.

3 In fact, each count carries a mandatory special

4 assessment of $100, so I am not going to repeat that for each

5 of the 11 counts.

6 Count Two charges investment adviser fraud. It

7 carries a maximum sentence of five years' imprisonment, a

8 maximum fine of the greatest of $10,000, or twice the gross

9 gain or twice the gross loss, and a maximum term of supervised

10 release of three years.

12 sentence of 20 years' imprisonment, a maximum fine of the

(

11

13

Count Three, the mail fraud count, charges a maximum

greatest of $250,000, or twice the gross gain or twice the

14 gross loss, and a maximum term of supervised release of three

15 years.

16 In fact, all 11 counts carry the same maximum term of

17 supervised release of three years, so I won't repeat that

18 either.

19 I'm up to Count Four, the wire fraud count. That

20 carries a maximum sentence of 20 years' imprisonment, a maximum

21 fine of the greatest of $250,000, or twice the gross gain or

22 twice the gross loss.

23 Count Five, the international money laundering count,

24 the first of those counts, carries a maximum sentence of 20

( 25 years' imprisonment, a maximum fine of the greatest of


17

93CMMADPI

1 $500,000, twice the value of the funds involved, or twice the

2 gross gain to any person or twice the pecuniary loss to any

3 person other than yourself.

4 Count Six, the second international money laundering

5 count, carries a maximum sentence of 20 years' imprisonment, a

6 maximum fine of the greatest of $500,000, or twice the value of

7 the funds involved or twice the gross gain or twice the

8 pecuniary loss.

9 Count Seven, a money laundering count, charges a

10 maximum sentence of ten years' imprisonment, a maximum fine of

11 the greatest of $250,000, or twice the gross gain or twice the

12 pecuniary loss.

c 13 Count Eight, which charges making false statements,

14 carries a maximum sentence of five years' imprisonment, a

15 maximum fine of $250,000, or twice the gross gain or twice the

16 pecuniary loss.

17 Count Nine charges perjury. It carries a maximum

18 sentence of five years' imprisonment, a maximum fine of the

19 greatest of $250,000, or twice the gross gain or twice the

20 pecuniary loss.

21 Count Ten charges making a false filing with the SEC.

22 It carries a maximum sentence of 20 years' imprisonment, a

23 maximum fine of the greatest of $5 million, or twice the gross

24 gain or twice the pecuniary loss.

25 Finally, Count Eleven, which charges theft from an


1

2

3

4

5

6

7

8

9

10

11

12

(- 13

14

15

16

17

18

19

20

21

22

23

24

25

18

93CMMADPI

employee benefit plan, carries a maximum sentence of five

years' imprisonment, a maximum fine of the greatest of

$250,000, or twice the gross gain or twice the pecuniary loss.

Do you understand that those are the possible maximum

sentences?


THE COURT: Now, taking all the counts together, do

you understand that the total maximum sentence of incarceration

that you face is 150 years' imprisonment?


THE COURT: In addition, do you understand that as

part of your sentence I can order restitution to any person or

entity injured as a result of your criminal conduct?

THE DEFENDANT: Yes.

MR. LITT: Your Honor, I would just note that

restitution is mandatory, not discretionary.

THE COURT: I will order restitution if it's

mandatory.

You understand that?


THE COURT: I mentioned supervised release. By that I

mean that you would be subject to monitoring when you were

released from prison under terms and conditions that could lead

to reimprisonment without a jury trial if you were to violate

them. And if you were to violate the terms of your supervised


19

93CMMADP1

release you could be sent back to prison for the entire term of

your supervised release.

Do you understand that?

THE DEFENDANT: Yes.

THE COURT: Are you a citizen of the United States?


THE COURT: Do you understand that as a result of your

guilty plea you may lose certain valuable civil rights, such as

the right to vote, the right to hold public office, the right

to serve on a jury, and the right to possess any kind of

firearm?


THE COURT: Now, have you talked to Mr. Sorkin about

the federal sentencing guidelines?


THE COURT: Do you understand that the guidelines are

now advisory only and that they are no longer mandatory?

THE DEFENDANT: Yes.

THE COURT: Nonetheless, before I can sentence you I

still have to determine what your sentencing range is under the

guidelines. I can't do that until after the probation

department prepares a presentence report and you, your lawyer,

and the government have had a chance to review the report and

to make any objections.

Do you understand that?


20

93CMMADPI

1

2

THE DEFENDANT: Yes.

THE COURT: And even after I decide what your

3 guideline range iS t I still have the authority in appropriate

4 circumstances to impose a sentence that is above or below the

5 guideline range.


7

8


THE COURT: Do you understand that parole has been

9 abolished in the federal system and t thus t you would not be

10 released from prison any earlier on parole?

c11

12

13

THE DEFENDANT: Yes.

THE COURT: Do you understand that if your attorneys

or anyone else has attempted to predict what your sentence will

14 be that the prediction could be wrong?

15

16

THE DEFENDANT: Yes.

THE COURT: And that is because no one t not your

17 attorneYt not the government t can or should make any promises

18 to you as to what your sentence will be as your sentence cannot

19 be decided until after the presentence report is completed, I

20 have ruled on any objections, and I have decided whether there

21 is any basis to go above or below the guideline range.


23

24

25

THE DEFENDANT: Yes.

THE COURT: FinallYt do you understand that even if

your sentence turns out to be different from what your attorney

SOUTHERN DISTRICT REPORTERS t P.C.(212) 805-0300

21

93CMMADP1

1 or anyone else has told you it might be, or even if your

2 sentence turns out to be different from what you expect, you

3 will still be bound to your guilty plea and you will not be

4 allowed to withdraw your plea of guilty?

5

6

THE DEFENDANT: Yes.

THE COURT: Do you understand that by pleading guilty

7 you may be giving up or waiving certain aspects of your right

8 to appeal?

9

10

THE DEFENDANT: Yes.

THE COURT: The government provided your lawyers with

11 a letter, dated March 10, 2009, which we call a Pimentel

c12 letter?

13

14

15

16

THE DEFENDANT: Yes.

THE COURT: Did you review that with your lawyers?


THE COURT: And that Pimentel letter explains that

17 your guideline sentence is 150 years.


19

20


THE COURT: That's the government's calculation.

21 That's the government's position and you and your lawyers will

22 have the opportunity to comment on that.


(24

25

THE DEFENDANT: Yes.

THE COURT: And do you understand also that this


22

93CMMADPI

1 calculation that's set forth in the government's letter is not

2 binding on the Court?

3

4

THE DEFENDANT: Yes.

THE COURT: Has anyone offered you any inducements or

5 threatened you or forced you to plead guilty?

6

7

THE DEFENDANT: No.

THE COURT: Mr. Sorkin, do you know of any valid

8 defense that would prevail at trial, or do you know any reason

9 why your client should not be permitted to plead guilty?

(

10

11

12

13

THE DEFENDANT: I do not, your Honor.

THE COURT: Mr. Madoff, tell me what you did.

MR. SORKIN: Your Honor, may I make one,

respectfully -- according to the Pimentel letter, we agree that

14 while the maximum statutory penalty in terms of imprisonment is

15 150 years, the guideline range -- and this can be found on page

16 6 of the Pimentel letter is life imprisonment. The criminal

17 history category I yields a sentencing range of life

18 imprisonment.

19 THE COURT: I understand. But the government goes on

20 further to take the position that when a count does not permit

21 life, then you look at the statutory maximum. That's the

22 government's position.

24 understood that. Thank you, your Honor.

(

23

25

MR. SORKIN: I just want to make sure Mr. Madoff

THE COURT: Mr. Madoff, you understand that?


23

93CMMADP1

1

2


THE COURT: Technically, the guideline range is life,

3 but none of the counts in question carries a sentence that can

4 go up to life. The top is 20 years. According to the

5 government, in that circumstance then the guideline range is

6 the maximum and the government's position is that the guideline

7 range is 150 years. Again, I don't know whether Mr. Sorkin

8 agrees or disagrees, but we will deal with that before

9 sentencing.

10

11


THE COURT: Mr. Madoff, would you tell me what you

12 did, please.

13

14

THE DEFENDANT: Yes, your Honor.

Your Honor, for many years up until my arrest on

15 December 11, 2008, I operated a Ponzi scheme through the

16 investment advisory side of my business, Bernard L. Madoff

17 Securities LLC, which was located here in Manhattan, New York,

18 at 885 Third Avenue. I am actually grateful for this

19 opportunity to publicly speak about my crimes, for which I am

20 so deeply sorry and ashamed. As I engaged in my fraud, I knew

21 what I was doing wrong, indeed criminal. When I began the

22 Ponzi scheme I believed it would end shortly and I would be

23 able to extricate myself and my clients from the scheme.

24 However, this proved difficult, and ultimately impossible, and

25 as the years went by I realized that my arrest and this day


24

93CMMADP1

would inevitably come. I am painfully aware that I have deeply

hurt many, many people, including the members of my family, my

closest friends, business associates, and the thousands of

clients who gave me their money. I cannot adequately express

how sorry I am for what I have done. I am here today to accept

responsibility for my crimes by pleading guilty and, with this

plea allocution, explain the means by which I carried out and

concealed my fraud.

The essence of my scheme was that I represented to

clients and prospective clients who wished to open investment

advisory and individual trading accounts with me that I would

invest their money in shares of common stock, options, and

other securities of large well-known corporations, and upon

request, would return to them their profits and principal.

Those representations were false for many years. Up until I

was arrested on December 11, 2008, I never invested these funds

in the securities, as I had promised. Instead, those funds

were deposited ln a bank account at Chase Manhattan Bank. When

clients wished to receive the p~ofits they believed they had

earned with me or to redeem their principal, I used the money

in the Chase Manhattan bank account that belonged to them or

other clients to pay the requested funds. The victims of my

scheme included individuals, charitable organizations, trusts,

pension funds, and hedge funds. Among other means, I obtained

their funds through interstate wire transfers they sent from


25

93CMMADP1

financial institutions located outside New York State to the

bank account of my investment advisory business, located In

Manhattan, New York, and through mailings delivered by the

United States Postal Service and private interstate carriers to

my firm here in Manhattan.

I want to emphasize today that while my investment

advisory business, the vehicle of my wrongdoing, was part of my

firm, Bernard L. Madoff Securities, the other businesses my

firm engaged in, proprietary trading and market making, were

legitimate, profitable, and successful in all respects. Those

businesses were managed by my brother and two sons.

To the best of my recollection, my fraud began in the

early 1990s. At that time, the country was in a recession and

this posed a problem for investments in the securities markets.

Nevertheless, I had received investment commitments from

certain institutional clients and understood that those

clients, like all professional investors, expected to see their

investments out-perform the market. While I never promised a

specific rate of return to my client, I felt compelled to

satisfy my clients' expectations, at any cost. I therefore

claimed that I employed an investment strategy I had developed,

called the split strike conversion strategy, to falsely give

the appearance to clients that I had achieved the results I

believed they expected.

Through the split strike conversion strategy I


26

93CMMADP1

1 promised to clients and prospective clients that client funds

2 would be invested in a basket of common stocks within the

3 Standard & Poors 100 index, a collection of the 100 largest

4 publicly-traded companies in terms of their market

5 capitalization. I promised that I would select a basket of

6 stocks that would closely mimic the price movements of the

7 Standard & Poors 100 index. I promised that I would

8 opportunistically time those purchases and would be out of the

9 market intermittently, investing client funds during these

10 periods in United States Government-issued securities, such as

11 United States Treasury bills. In addition, I promised that as

12 part of the split strike conversion strategy, I would hedge the

( 13 investments I made in the basket of common stocks by using

14 client funds to buy and sell option contracts related to those

15 stocks, thereby limiting potential client losses caused by

16 unpredictable changes in stock prices. In fact, I never made

17 those investments I promised clients, who believed they were

18 invested with me in the split strike conversion strategy.

19 To conceal my fraud, I misrepresented to clients,

20 employees, and others that I purchased securities for clients

21 in overseas markets. Indeed, when the United States Securities

22 and Exchange Commission asked me to testify as part of an

23 investigation they were conducting about my investment advisory

24 business, I knowingly gave false testimony under oath to the

25 staff of the SEC on May 19, 2006 that I executed trades of


27

93CMMADP1

~~-,

1 common stock on behalf of my investment advisory clients and

2 that I purchased and sold the equities that were part of my

3 investment strategy in European markets. In that session with

4 the SEC, which took place here in Manhattan, New York, I also

5 knowingly gave false testimony under oath that I had executed

6 options contracts on behalf of my investment advisory clients

7 and that my firm had custody of the assets managed on behalf of

8 my investment advisory clients.

9 To further cover up the fact that I had not executed

10 trades on behalf of my investment advisory clients, I knowingly

11 caused false trading confirmations and client account

12 statements that reflected the bogus transactions and positions

c 13 to be created and sent to clients purportedly involved in the

14 split strike conversion strategy, as well as other individual

15 clients I defrauded who believed they had invested in

16 securities through me. The clients receiving trade

17 confirmations and account statements had no way of knowing by

18 reviewing these documents that I had never engaged in

19 transactions represented on the statements and confirmations.

20 I knew those false statements and account statements would be

21 and were sent to clients through the u.S. Mails from my office

22 here in Manhattan.

23 Another way that I concealed my fraud was through the

24 filing of false and misleading certified annual reports and

25 financial statements -- excuse me. Another way that I


28

93CMMADP1

concealed my fraud was through the filing of false and

misleading certified audit reports and financial statements

with the SEC. I knew that these audit reports and financial

statements were false and that they would also be sent to

clients. These reports, which were prepared here in the

Southern District of New York, among other things, falsely

reflected my firm's liabilities as a result of my intentional

failure to purchase securities on behalf of my advisory

clients.

Similarly, when I recently caused my firm in 2006 to

register as an investment adviser with the SEC, I subsequently

filed with the SEC a document called the form ADV uniform

application for investment adviser registration. On this form

I intentionally and falsely certified under penalty of perjury

that Bernard L. Madoff Investment Securities had custody of my

advisory clients' securities. That was not true, and I knew it

when I completed and filed the form with the SEC, which I did

from my office on the 17th floor of 885 Third Avenue, here in

Manhattan.

In more recent years, I used yet another method to

conceal my fraud. I wired money between the United States and

the United Kingdom to make it appear as though there were

actual securities transactions executed on behalf of my

investment advisory clients. Specifically, I had money

transferred from the U.S. bank account of my investment


29

93CMMADP1

advisory business to the London bank account of Madoff

Securities International Limited, a United Kingdom corporation

that was an affiliate of my business in New York. Madoff

Securities International Limited was principally engaged in

proprietary trading and was a legitimate, honestly run and

operated business. Nevertheless, to support my false statement

that I purchased and sold securities for my investment advisory

clients in European markets, I caused money from the bank

account of my fraudulent advisory business, located here in

Manhattan, to be wire transferred to the London bank account of

Madoff Securities International Limited.

There were also times in recent years when I had

money, which had originated in the New York Chase Manhattan

bank account of my investment advisory business, transferred

from the London bank account of Madoff Securities International

Limited to the Bank of New York operating bank account of my

firm's legitimate proprietary and market making business. That

Bank of New York account was located in New York. I did this

as a way of ensuring that the expenses associated with the

operation of the fraudulent investment advisory business would

not be paid from the operations of the legitimate proprietary

trading and market making businesses.

In connection with the purported trades, I caused the

fraudulent investment advisory side of my business to charge

the investment advisory clients four cents per share as a


30

93CMMADPI

1 commission. At times in the last few years, these commissions

2 were transferred from Chase Manhattan bank account of the

3 fraudulent investment advisory side of my firm to the account

4 at Bank of New York, which was the operating account for the

5 legitimate side of Bernard L. Madoff Investment Securities, the

6 proprietary trading and market making side of my firm. I did

7 this to ensure that the expenses associated with the operation

8 of my fraudulent investment advisory business would not be paid

9 from the operations of the legitimate proprietary trading and

10 market making business. It is my belief that the salaries and

11 bonuses of the personnel involved in the operation of the

12 legitimate side of Bernard L. Madoff Investment Securities were

13 funded by the operations of the firm's successful proprietary

14 trading and market making businesses.

15 Your Honor, I hope I have conveyed with some

16 particularity in my own words the crimes I committed and the

17 means by which I committed them. Thank you, your Honor.

18

19

THE COURT: Thank you, Mr. Madoff.

Mr. Sorkin, I don't think there was mention of an

20 employee benefit plan.

21

22 Honor.

23

24

MR. SORKIN: The pension fund was mentioned, your

THE COURT: What page that?

MR. SORKIN: I think it's page 2. If you look at the

25 top, the victim -- I'm quoting -- the victims of my scheme


31

93CMMADP1

1 included individuals, charitable organizations, trusts, pension

2 funds, and hedge funds.

3 THE COURT: I see.

4 And those pension funds include employee welfare

5 benefit plans?

6

7

8

9

10 'moment.


Is that correct?

THE DEFENDANT: Yes.

THE COURT: Mr. Madoff, you can be seated for a

Does the government believe that Mr. Madoff's

admissions cover the elements of the crimes of each count?

MR. LITT: Yes, your Honor. The government does not

entirely agree with all of the defendant's description of his

conduct. However, the government does believe that his

allocution does cover each of the elements of the charged

offenses.

THE COURT: Would you summarize what the government's

evidence would be if the defendant were to go to trial?

MR. LITT: Yes.

Had this case proceeded to trial, the government would

have proven through testimony and evidence beyond a reasonable

doubt all of the facts set forth in the criminal information.

In summary, the government would have proven the

following: The defendant operated a massive Ponzi scheme


32

93CMMADP1

through his company, Bernard L. Madoff Investment Securities,

beginning at least as early as the 1980s. Over the decades

working from his New York City office and elsewhere, Madoff

solicited and caused others to solicit prospective clients to

open accounts with his company. His clients included

individuals, charitable organizations, trusts, pension funds,

and hedge funds, among others, and those clients were also his

victims.

Madoff told those clients that he would invest their

funds in publicly-traded securities, options, and treasury

bills. In fact, over the life of his scheme Madoff did not buy

stocks or options as he had promised. Instead, Madoff used

client funds to pay other clients who sought to redeem their

investments, and used so-called commission revenue generated by

charging clients four cents per share for shares that he never,

in fact, purchased to generate revenue for his firm. At times,

his firm would have been unable to operate but for the cash

generated from this Ponzi scheme. Madoff repeatedly lied to

clients in person, on telephone calls, and through mailings,

including account statements and confirmations of purchases and

sales of securities that he mailed through the u.S. Postal

Service.

Some investors sent checks to Madoff through the

mails, others wired money to Madoff, and many of those wires

came from outside New York State into the Southern District of


33

93CMMADP1

New York. Madoff also caused hundreds of millions of dollars

of client funds to be wired overseas to accounts in London.

Some of that money was sent back to his firm and used to pay

its expenses. Other money was sent back and forth between New

York and London to give the false impression that he was

actually buying and selling securities in European markets

when, in fact, he was not.

Madoff also used some of the money funneled through

London to support his lavish lifestyle. Madoff also used other

means of deception to hide his scheme. He lied when he told

clients that he was purchasing securities on their behalf.

He also lied to regulators, including the SEC. He

filed false and fraudulent certified financial statements with

the SEC that failed to disclose his fraud scheme, failed to

disclose his liabilities to the victims of his Ponzi scheme,

and contained false certifications that the audited statements

had been prepared in accordance with generally-accepted

auditing standards and principles.

Mr. Madoff lied in a form that he was required to file

with the SEC as an investment adviser, claiming that his

company had custody of client securities when, in fact, he had

not purchased any securities for those clients.

He also lied at least seven separate times ln an SEC

deposition in 2006.

At the end, Madoff told his clients that he was


34

93CMMADPI

f- -\- 1 holding nearly $65 billion in securities on behalf of those

2 clients. In fact, he had only a small fraction of that amount.

3

4

5

6

7

8

9

10

11

14

15

16

17

18

19

20

21

22

23

24

25

(Continued on next page)


35

93CGMADP2

THE COURT: Thank you. Mr. Madoff, please stand.

When you did the things you told me you did in your

statement, did you know that what you were doing was wrong and

illegal?

THE DEFENDANT: Yes, I did, your Honor.

THE COURT: How do you now plead to Count One of the

information, guilty or not guilty?


THE COURT: How do you now plead to Count Two of the

information, guilty or not guilty?


THE COURT: How do you now plead to Count Three,

guilty or not guilty?


THE COURT: How do you now plead to Count Four, guilty

or not guilty?


THE COURT: How do you now plead to Count Five, guilty

or not guilty?


THE COURT: How do you now plead to Count Six, guilty

or not guilty?


THE COURT: How do you now plead to Count Seven,

guilty or not guilty?


36

93CGMADP2

1

2

3

4

5


THE COURT: How do you plead to Count Eight, guilty or

not guilty?


THE COURT: How do you plead to Count Nine, guilty or

6 not guilty?

7

8


THE COURT: How do you now plead to Count Ten, guilty

9 or not guilty?

10

11


THE COURT: And finally, how do you now plead to Count

12 Eleven, guilty or not guilty?

( 13

14

THE DEFENDANT: Guilty, your Honor.

THE COURT: Did you do the things that you are charged

15 with doing in all 11 counts of the information?

16

17

THE DEFENDANT: Yes, I did, your Honor.

THE COURT: And are you pleading guilty because you

18 are guilty?

19

20


THE COURT: Are you pleading guilty voluntarily and of

21 your own free will?

(

22

23

24

25


THE COURT: All right. Mr. Madoff, you may be seated.

Based on what I have heard, I am inclined to accept

Mr. Madoff's guilty plea.


37

93CGMADP2

t-~~. - 1 As I stated the other day, the government received a

2 number of e-mails from victims objecting to any plea bargain or

3 any plea deal. As it is clear that there is no plea bargain or

4 plea deal, there is no basis for these objections. At this

5 time, nonetheless, if there is any victim who signed our

6 sign-in sheet who wishes to be heard on the question of whether

7 I should accept Mr. Madoff's guilty plea, you can have a chance

8 to speak now. We have a list.

12 And remember that today is not the sentencing. Victims will

c

9

10

11

13

Mr. Nierenberg, do you want to speak?

MR. NIERENBERG: Yes.

THE COURT: All right, sir. Come to the microphone.

have a chance to speak at sentencing. Go ahead.

14 MR. NIERENBERG: I am one of the many victims of

15 Madoff's egregious crimes. I don't know whether you had a

16 chance to turn around and look at the victims --

17

18

19

20

THE COURT: Mr. Nierenberg, Mr. Nierenberg

MR. NIERENBERG: I just wanted to

THE COURT: Remain at the podium, please.

MR. NIERENBERG: All right. I know that the

21 operation -- Madoff's operation was massive, that he didn't

22 commit these crimes alone, and I don't understand why

23 conspiracy is not a part of one of his pleas. Just to produce

24 the reams of documents that were received and the elaborate

( 25 data that went into them must have required an army of people

SOUTHERN DISTRICT REPORTERS, P.C.(212} 805-0300

38

93CGMADP2

to produce. And we all know that Madoff wasn't around a lot at

his operation. There were other people that were there who

handled it when he was gone. 1--

THE COURT: I gather your point is that I should

reject the plea because the government has not charged

conspiracy?

MR. NIERENBERG: No. The question is -- I'm not

suggesting that you reject the plea. What I'm suggesting is

that there's an additional crime that was committed that wasn't

included in the plea that needs to be considered.

THE COURT: All right. What I want to hear from now

are victims who object to my accepting the plea.

MR. NIERENBERG: Okay.

THE COURT: Do you object to my accepting the plea?

MR. NIERENBERG: No, I don't.

THE COURT: Well, thank you, then. You can have your

seat.

MR. NIERENBERG: Okay.

THE COURT: Mark Labianca? No.

Brian Felsen? Mr. Felsen, do you want to be heard?

MR. FELSEN: I would like to be heard, but I do not

object to the plea.

THE COURT: All right. If you want to be heard with

respect to sentencing, we will make sure we have procedures to

give victims an opportunity to be heard at sentencing.


39

93CGMADP2

1

2

3

4

5

MR. FELSEN: Okay.

THE COURT: All right. Thank you.

Bennett Go1dwait? I can't quite read the handwriting.

MR. GOLDWORTH: Go1dworth. No thank you.

THE COURT: Ronnie Sue and Dominic Ambrosino, do you

6 wish to be heard?

7

8

MS. AMBROSINO: Yes, I do.

THE COURT: All right. Come forward, please. And say

9 your name again when you get to the microphone.

10 MS. AMBROSINO: My name is Ronnie Sue Ambrosino, and I

11 would object to the plea I just need to find a spot. I have

12 taken a lot of notes. Judge, I believe that you have the

( 13 opportunity today to find out information as to where the money

14 is and to find out who else may be involved in this crime. And

15 if that plea is accepted without those two pieces of

16 information, then I do object. If you can ascertain that you

17 can get those two pieces of information, I would love to see

18 this man, who admits that he lied under oath in May of 2006 and

19 sat here and took an oath today -- I would like to see him

20 guilty.

21

22

23

24

25

THE COURT: All right. Thank you.

MS. AMBROSINO: Thank you, sir.

THE COURT: Maureen Aebel? Go ahead.

MS. AEBEL: Judge Chin, I would like to present you

with a different scenario that our country could witness if you


40

93CGMADP2

1 reject Mr. Madoff's plea. If we go to trial, we will show our

2 people in this struggling country and the world, who looks to

3 us as the global moral leader, that we hold all people

4 accountable. If we go to trial, we can show all our world that

5 all crimes, all crimes, including crimes of greed, can be

6 dissected, ruled upon, and punished. And we can demonstrate

7 that we are a country that can learn from our mistakes, and we

8 will be then able to reexamine and improve the mechanisms that

9 exist for our protection that have failed so completely. If we

10 go to trial, we have more of a chance to comprehend the global

11 scope of this horrendous crime. At trial we can hear and bear

12 witness to the pain that Mr. Madoff has inflicted on the young,

13 the old, and the infirmed. No man, no matter who he knows or

14 who he is able to influence, is above the law. Thank you,

15 Judge Chin.

16 THE COURT: Thank you. All right. That is it with

17 respect to the victims who signed up on the acceptance of the

18 plea. Does the government or the defense want to respond to

19 anything? Does the government want to respond to anything?

20

21

22

MR. LITT: May I just have a moment?

THE COURT: Yes.

MR. LITT: I think the only thing the government would

23 say is that the government's investigation continues. It is

24 continuing. A lot of resources and effort are being expended,

( 25 both to find assets and to find anyone else who may be


41

93CGMADP2

responsible for this fraud.

THE COURT: Thank you. Mr. Sorkin?

MR. SORKIN: Nothing at this time, your Honor. Thank

you.

THE COURT: First of all, I appreciate the comments

from the victims. With respect to Ms. Ambrosino's comments

about where the money is, as the government has just said, it

is continuing its investigation, and this guilty plea certainly

does not preclude the government from proceeding.

with respect to Ms. Aebel's comment about how a trial

would show the world that we hold all people accountable, I

believe that these proceedings will do the same thing.

Mr. Madoff, please stand. I am accepting the plea.

Mr. Madoff, because you acknowledge that you are guilty as

charged in Counts One through Eleven of the information,

because you know your rights and are waiving them, because your

plea is entered knowingly and voluntarily and is supported by

an independent basis in fact for each of the elements of the 11

offenses, I accept your guilty plea and adjudge you guilty on

Counts One through Eleven of the information. You can be

seated.

Mr. Madoff, the probation department will prepare a

presentence report to assist me in sentencing you. You will be

interviewed by the probation department, and it is important

that you give the probation officer truthful and accurate


42

93CGMADP2

1 information, for the report is important in my decision as to

2 what your sentence will be. You and your attorney have a right

3 and will have an opportunity to review the report, to challenge

4 or comment upon it and to speak on your behalf before

5 sentencing.

6 Sentencing is set for June 16th at 1:30 p.m.

7 Turning to bail, is the government requesting that I

8 remand Mr. Madoff pending sentencing?

9 MR. LITT: Yes. The government moves for remand at

10 this time pursuant to 18 USC 3143, which puts the burden on the

11 defendant to show by clear and convincing evidence that he can

12 be trusted to appear for future court appearances.

c 13 The defendant has now pled guilty and been found

14 guilty of 11 -- or does the Court wish to hear argument now

15 or--

16 THE COURT: Well, let me ask Mr. Sorkin whether he

17 opposes remand.

18 MR. SORKIN: We do, your Honor, and I'd like to be

19 heard on that point.

20

21

22

23

24

25

THE COURT: Let me hear from Mr. Sorkin.

MR. SORKIN: Thank you, your Honor. May I go to the

podium, your Honor?

THE COURT: Yes, wherever you would like.

MR. SORKIN: Thank you. Thank you, your Honor. Your

Honor, let me take just a little bit of while, because I want


43

93CGMADP2

1 to review the history of the bail as it related to this case.

2 THE COURT: Yes. The government provided me with the

3 transcripts and the letter briefs, and I've reviewed them too.

4 MR. SORKIN: I'm not going to go through every one of

5 them, but I think it's important that I list the chronology and

6 how we got to this point today.

7

8

THE COURT: That's fine. That's fine.

MR. SORKIN: Your Honor, this case started when

9 Mr. Madoff on December 10th confessed his wrongdoing to his two

10 sons, knowing full well that his two sons were going to turn

11 him in. He didn't run. He didn't attempt to flee at that

12 time. When he was arrested by the FBI the next morning, he

(~ 13

14

confessed to the FBI.

He appeared on December 11th before Magistrate Judge

15 Eaton, and a personal recognizance bond of ten million dollars

16 was signed by Mr. Madoff and his wife. There were three

17 additional cosigners that were required, and it was secured by

18 Mr. Madoff's residence in Manhattan. Surrender of Mr. Madoff's

19 travel documents took place, and his travel was restricted to

20 the Southern and Eastern Districts of New York and the District

21 of Connecticut.

22 The Pretrial Services at the time, your Honor, did not

23 recommend In its initial recommendation that Mr. Madoff be

24 remanded, and I add additionally that the government had noc 25 difference and no objection with any of the conditions that


44

93CGMADP2

1 were imposed on December 11th. That was before Magistrate

2 Judge Eaton.

3 On December 17th, your Honor, before another

4 magistrate judge, Magistrate Judge Gorenstein, Mr. Madoff

5 and it was ratcheted up -- was placed on home detention in his

6 apartment with electronic ankle bracelet monitoring. He was

7 permitted to travel only to his attorney's offices and to the

8 court. A curfew of 7:00 p.m. through 9:00 a.m. was imposed,

9 and this was done in addition to the entry of confession of

10 judgments with respect to his wife's properties on Montauk, New

11 York, and Palm Beach, Florida, a surrender of Mrs. Madoff's

12 passport and a reduction of the number of cosigners on the bond

c 13 from four to two. This, too, your Honor, was consented to by

14 the government. Indeed, I believe it was done by stipulation

15 without argument before Magistrate Judge Gorenstein.

16 On December 19th, again, on consent of the government,

17 a ten million dollar personal recognizance bond was signed by

18 Mr. Madoff, his wife, and his brother, secured by confessions

19 of judgment on his wife's properties in Montauk, in New York,

20 and Palm Beach. The passports of both Mrs. Madoff had already

21 been surrendered, and other than scheduled court appearances,

22 Mr. Madoff was confined to his home 24 hours a day. He was no

23 longer permitted to visit his counsel. And they had, in

24 addition to the 24-hour-a-day confinement, an electronic

25 monitoring device, which is still attached to his ankle.


45

93CGMADP2

1

2

At his wife's own expense --

THE COURT: Would the audience please remain quiet.

3 Go ahead.

4 MR. SORKIN: Because Mr. Madoff's assets were all

5 frozen, but his wife's were not, although she later voluntarily

6 committed to a freeze of her assets under certain restrictions.

7 So with the government's consent, Mrs. Madoff's own assets,

8 which were not frozen by Judge Stanton or any judge in this

9 court -- she agreed to pay a security firm acceptable to the

10 government to provide the following services to prevent harm or

11 flight.

12 And with these unfrozen assets, not objected to by the

( 13 government, Mr. Madoff has round-the-clock monitoring at his

14 building 24 hours a day, including video monitoring of all of

15 his apartment, doors, communications devices, and services

16 permitting security to send a direct signal from an observation

17 post to the FBI in the event of even the suspicion of harm or

18 flight. This is known as a panic button. There are additional

19 guards available on request, if necessary, to prevent flight or

20 harm, both inflicted by Mr. Madoff -- I'm dealing with the

21 danger to the community issue -- and also harm to Mr. Madoff.

22 On January 12th, your Honor -- and again, this was by

23 consent of the government. On January 12th, Magistrate Judge

24 Ronald Ellis imposed additional restrictions. This was

25 briefed, as your Honor well knows. It was argued by Magistrate


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(-~ 1 Judge Ellis. And on that date, Magistrate Judge Ellis

2 incorporated the restrictions set forth in the order of Judge

3 Stanton, who has jurisdiction over the SEC matter, including

4 restrictions on the transfer of all property whatsoever

5 wherever located ln the possession or under the control of

6 Mr. Madoff. And that was part of the SEC consent under the TRO

7 and also the consent under the preliminary injunction, which

8 Mr. Madoff consented to. Magistrate Judge Ellis incorporated

9 these restrictions to a voluntary restraint agreement, which

10 the government agreed to, involving Mrs. Madoff's assets and

11 restricted the transfer of all assets owned by her voluntarily,

12 your Honor.

( 13 Additionally, Magistrate Judge Ellis directed the

14 compilation of an inventory of all valuable portable items in

15 the Manhattan home, which is to be checked once every two weeks

16 by government-approved security, who are also required to

17 inspect all outgoing mail.

18 The government appealed Magistrate Judge Ellis'

19 ruling, and before District Judge Lawrence McKenna on January

20 16th, 2009, argument was held. The matter was briefed, and

21 Judge McKenna added additional conditions: One, a compilation

22 of any inventory of all valuable portable items in the homes in

23 Montauk, Palm Beach, as well as any property owned by

24 Mrs. Madoff in a small residence in France.

25 I quote, which your Honor, I'm sure, has read, from


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1 Judge McKenna's statement in court after hearing argument and

2 seeing papers, that, quote -- and this is from Judge McKenna --

3 I think the chances of Mr. Madoff fleeing at this point are as

4 close to nil as you can get in any bail package, period,

5 unquote.

6 Now, nothing has changed, your Honor, and I agree it

7 has changed substantially in terms of the plea. And I agree

8 with Mr. Litt that the burden is upon us to show by clear and

9 convincing evidence that Mr. Madoff is neither a flight risk

10 nor a risk to the community.

11 As far as we are aware, your Honor, Pretrial Services

12 has not found that Mr. Madoff has been negligent or careless in

c 13 complying with all of the bail conditions. There has been no

14 incident at all, as far as we are aware, that has been conveyed

15 to us by Pretrial or the government that Mr. Madoff has

16 attempted at any time to flee or certainly, which the

17 government conceded before Magistrate Judge Ellis and Judge

18 McKenna, posed any risk of harm. The argument before Judge

19 Ellis and Judge McKenna was the risk of harm was in the

20 financial world, that he would dissipate assets. That was

21 taken care of, your Honor, respectfully, by Magistrate Judge

22 Ellis and by Judge McKenna. All mail going out, all packages

23 going out are inspected by the security firm approved by the

24 government.

c 25 I respectfully submit, your Honor, that the change has


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been the media attention and the increased and, ln many cases,

justifiable anger by people who claim they lost money, but the

Bail Reform Act doesn't deal with those two issues. I do not

believe, your Honor, that the precedent set in this court where

such individuals as Rigas in the Adelphia case, Ebbers in the

WorldCom case, Messrs. Skilling and Lay -- Mr. Lay passed away

before sentencing -- all of whom were facing substantial years

in prison, Rigas and Ebbers in this court, Mr. Skilling in

Texas. All were released on bail pending sentence. All went

to trial but did not plead guilty, and all, your Honor, as far

as I am aware, never once confessed at the get-go to the

wrongdoing that you heard Mr. Madoff confess to today.

So I would respectfully submit, your Honor, that there

is no chance that Mr. Madoff will certainly be a risk to the

community, a danger to the community. And his risk of

flight -- and I agree with Judge McKenna -- is virtually nil

with all of the restrictions that have been imposed on him. So

I respectfully request that his bail be continued.

I would also add, your Honor again, I refer to the

Bail Reform Act as not being relevant on those two other

issues. What is also relevant, your Honor, is that Mr. Madoff

is going to have the opportunity, I am sure, if the government

and the defense can come to some agreement, to review literally

thousands of thousands of documents which the trustee and the

government have been reviewing to discover where this


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1 forfeiture number comes from. And we've been able to

2 communicate with him in his apartment, and I think that is a

3 factor that your Honor should consider, even though that is not

4 my argument with respect to the Bail Reform Act. I think we

5 have met all the conditions under the act.

6 So by clear and convincing evidence, I don't think he

7 is a risk of either danger to the community, flight, and I

8 would respectfully request that his bail be continued. Thank

9 you, your Honor.

10 THE COURT: I don't need to hear from the government.

11 It is my intention to remand Mr. Madoff.

12 Please, ladies and gentlemen, please.

c 13 Now, I have a number of people who signed in who

14 wanted to be heard on the issue of bail, and I think you should

15 only be heard if you object to remand.

24 entitled to the presumption of innocence. The exposure is

(

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Adriane Biondo? Mr. Ross? Helen Chaitman?

MS. CHAITMAN: No objection.

THE COURT: Donald Schupak?

MR. SCHUPAK: I do not object.

THE COURT: Mark Labianca?

MR. LABIANCA: I do not object.

THE COURT: Sharon Lissauer?

As Mr. Madoff has pled guilty, he is no longer

great, 150 years in prison. In light of Mr. Madoff's age, he


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1 has an incentive to flee, he has the means to flee, and thus,

2 he presents a risk of flight. Bail is revoked, and the

3 defendant is remanded.

4 MR. SORKIN: Your Honor, would your Honor consider,

5 respectfully, a stay so that we might appeal your Honor's bail

6 decision? We intend to do it expeditiously.

7

8

9

THE COURT: The request for a stay is denied.

MR. SORKIN: Thank you.

THE COURT: Sentencing, as I said, is set for June

10 16th, 1:30 p.m. Some of the victims may wonder why do we need

11 so much time. Well, the probation department has to prepare a

12 presentence report. By law, the defendant is entitled to 35

( 13 days to review the presentence report before sentencing. We

14 also have to give the parties an opportunity to submit written

15 materials.

16 Mr. Madoff, I will see you at sentencing. We are

17 adjourned.

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Documents

Relevant Persons and Entities - The New York Timesgraphics8.nytimes.com/packages/images/nytint/docs/...BERNARD L. MADOFF, the defendant, was the founder of BLMIS, and served as its