Madoff victims unlikely to be satisfied with sentence Monday
But even if he gets a term of life without parole, victims won't be guaranteed any significant return of their lost funds. So many victims now want him to suffer more public humiliation. "He should be strapped into a Six Flags Stunt Man Drop, in a tuxedo, for five hours per day, on television," says one victim, who asked U.S. District Judge Denny Chin, who will sentence Madoff, if this could be done as a clip for YouTube. "Between "rides" he should pick up garbage in the park, also on television. He should only be allowed to eat greasy foods that are likely to make him puke often."
While that wish isn't likely to be granted, more reasonable requests may be. Many said that they wanted Madoff to be confined to prison for the rest of his life with all his assets seized, as well as the assets of his family. On Monday, the judge will only address his prison time, but already most of Madoff's personal assets have been seized by trustee Irving Picard, who raced around the world to gather about $1 billion dollars in personal and business assets
As to the assets of his family members --that issue has not yet been determined by the courts and Madoff's decision to stay mum after pleading guilty will make it more difficult for investigators to charge family members. Even so, family members may still face problems. So far, four other people and one feeder firm have been charged by the civil division of the Securities & Exchange Commission (SEC) and they may be willing to talk to minimize their fines or other punishments. What they say could have a direct impact on the outcome of family assets. Those charged recently include:
1. Cohmad Securities chairman Maurice Cohn. Cohmad was a feeder firm that brought in more than 800 accounts worth billions of dollars.
2. Chief Operating Officer of Cohmad, Marcia Cohn
3. Broker Robert Jaffee, who the SEC alleges received "outsized returns" to his personal account that he knew or should have known were fictitious.
4. Investment Adviser Stanley Chais, who the SEC alleges turned a blind eye to "suspicious practices that clearly indicated" Madoff was scamming investors using a money pyramid scheme.
Prior to these civil charges, the only other person charged with fraud in this Ponzi scheme is Madoff's accountant, David Friehling, who was arrested on fraud charges in March. He is accused of aiding Madoff in cheating thousands of investors out of billions of dollars over the past two decades
In addition to civil charges, trustee Picard is beginning to file clawback suits against Madoff investors who he claims got oversized returns. Picard may be successful in gathering more assets for victims using clawback suits.
In the ProPublica blog on June 23, reporter Jake Bernstein wrote that he believes Madoff client Jeffry Picower netted $5 billion from the Madoff scheme - more than Madoff made. He wrote that the Picower family, between December 1995 and December 2008, withdrew $5.1 billion more than they invested from their various Madoff accounts according to a clawback lawsuit filed by Picard. Other clawbacks suits will likely follow as Picard sorts out who made money and who lost money in this Ponzi scheme.
Some investors aren't waiting for Picard to finish his work and are looking for someone else to sue. Lawsuits have been filed against Madoff, feeder funds, investment advisers and others, but the most novel to date is a claim for damages filed against the SEC. The SEC rejected the claim, but the attorney for the claimant will likely file a suit in federal court. The attorney also indicated he will likely file SEC claims for other investors who lost money in the Ponzi scheme.
Lawsuits will probably be filed for years as investors and trustees look for whatever money can be found. Historically, bankruptcy courts have allowed a trustee to look back as far as six years, so even if an investor who made money hasn't yet been sued, they're not off the hook. In fact one of the reasons there is still some question about how much money was taken is that some people who do have a profit are afraid to file a claim for the lost balances.
The big question many people now ask is how they can avoid this type of Ponzi scheme in the future. I wrote about the warning signs you should look for in March.
Don't expect closure when Madoff is sentenced on Monday. An investigation into where all these funds went continues. We're still in for a long ride.
Lita Epstein has written more than 25 books including Reading Financial Reports for Dummies and Trading for Dummies.