Saturday, March 7, 2009

Bernard Madoff to Face New Charges, May Be Nearing Plea Deal

Bernard Madoff, the alleged mastermind of a $50 billion Ponzi scheme, may be nearing a guilty plea after federal prosecutors filed a notice that they intend to bring new criminal charges against the New York money manager.

Assistant U.S. Attorney Marc Litt yesterday filed a one-page document in Manhattan federal court indicating the government will file an “information,” or charging document, after Madoff agrees to waive a grand jury indictment. Defendants who agree to plead guilty to an information often first waive indictment.

“Madoff is about to enter his guilty plea,” Jacob Frenkel, a former Securities and Exchange Commission attorney, said in an interview. “A criminal information is a consented-to criminal charge used to enter a guilty plea.”

The case has been assigned to U.S. District Judge Denny Chin in New York, according to court papers. Court filings by both Chin and prosecutors yesterday referred to “the plea proceeding” on March 12, although they don’t specifically say what Madoff’s plea will be.

“He intends to waive” an indictment, Madoff lawyer Dan Horwitz said in an interview yesterday. No waiver or criminal information has been filed in court, Horwitz said, declining to comment on what plea Madoff may enter.

Madoff is also scheduled to appear in court on March 10 for the judge to explore whether there is a conflict of interest involving another of his lawyers, Ira Sorkin, a clerk for Chin said. Sorkin’s now-deceased father had an account with Madoff, and in 1992 the lawyer represented a Florida investment firm, Avellino & Bienes, that invested with Madoff. That issue will be the subject of the March 10 hearing.

Waived the Indictment

Yesterday’s court filing didn’t indicate that Madoff, who was arrested in December for allegedly defrauding investors of billions of dollars, has yet waived an indictment. Nor did it say when prosecutors will file an information.

Madoff, 70, was arrested Dec. 11 and charged with one count of securities fraud for running a massive Ponzi scheme that paid off old investors with money from new investors. He allegedly told investigators that his investors lost $50 billion. Madoff hasn’t formally responded to the charge.

Under the one existing count, Madoff faces as much as 20 years in prison if convicted. He may face as much as life imprisonment if additional charges are filed.

Madoff has been confined to his multimillion dollar apartment on Manhattan’s Upper East Side. He is free on $10 million bail, which prosecutors agreed to after his arrest. They later asked a judge to jail him. It’s likely they will again ask the judge to lock Madoff up if he pleads guilty to the new charges, Frenkel said.

Additional Questions

As a result of any guilty plea, Madoff would have to explain how he broke the law, and Chin has authority to pose additional questions.

Frenkel said Madoff appears to be aiding the government in its investigation.

“There is no question that he’s been cooperating because of both the plea to the information and because his lawyer has said as much,” Frenkel said, referring to prior comments by Sorkin that Madoff is talking to prosecutors.

Chin said in a filing yesterday that he wants notification by March 11 from victims who wish to speak at “the plea proceeding.”

Earlier this week, a different judge said in court papers in a related lawsuit by the Securities and Exchange Commission that the money manager’s lawyers claim that Madoff’s wife, Ruth, is the sole owner of the couple’s Manhattan apartment, $45 million in bonds and $17 million in cash. These assets are “unrelated” to Bernard Madoff’s alleged fraud scheme, his attorneys said, according to the judge.

Retain His Freedom

Former federal prosecutor Christopher Steskal said Madoff may want to retain his freedom through a plea deal and protect family assets by agreeing to help prosecutors find stolen funds.

“Maybe he would be allowed to stay out on bail for the time he’s cooperating,” said Steskal, now a white collar defense lawyer at Fenwick & West LLP in San Francisco. “Maybe there’s some understanding as to what his wife gets to keep.”

“I’m not going to comment on gossip,” said Sorkin, who represents both Bernard and Ruth Madoff.

Rebekah Carmichael, a spokeswoman for Acting U.S. Attorney Lev Dassin in Manhattan, declined to comment.

Prosecutors may ask at the March 12 hearing that Madoff be jailed if he pleads guilty.

Brenda Sharton, a litigation partner at Goodwin Protect LLP in Boston, said the government may want Bernard Madoff to reconstruct the fraud as part of any plea deal.

“Who was involved? How long did it go on? Where is the money?” Sharton said. “That’s where they need his help.”

The criminal case is U.S. v. Madoff, 08-mag-2735, U.S. District Court for the Southern District of New York (Manhattan).