Madoff expected to plead guilty, faces up to 150 years

NEW YORK -- Bernard Madoff is expected to plead guilty to 11 criminal charges with a combined maximum penalty of 150 years in prison, enough to all but ensure the disgraced financier dies behind bars, his attorneys said Tuesday.

He also faces mandatory restitution to thousands of investors victimized in a decades-long investment scam and billions of dollars in fines.

IN-DEPTH:Prosecutor's press release | The charges | Sentencing guidelines

The announcements came in a court hearing at which Madoff — a onetime respected Nasdaq chairman now reviled as the mastermind of one of the largest financial scams in history — waived potential legal conflicts involving lead defense attorney Ira Lee Sorkin.

Sorkin, asked by U.S. District Judge Denny Chin whether Madoff would plead guilty at a plea proceeding set for Thursday, replied, "I think that is a fair expectation."

Chin, noting that prosecutor Marc Litt said "there is no plea agreement with the defendant," stressed that the 70-year-old money manager would be required to plead guilty to all 11 counts of securities fraud, investment adviser fraud, mail fraud, wire fraud, money laundering, false statements, perjury, false filings and theft from an employee benefit plan.

The charges were detailed in a 25-page document known as a criminal information, unexpectedly filed by prosecutors in advance of Thursday's hearing. The filing outlined an alleged scam in which Madoff lured hedge funds, pension funds, charities, celebrities and ordinary investors worldwide with eerily steady reports of positive returns and guarantees of 46% annual gains for certain clients.

But instead of pursuing the complex stock- and options-trading investment strategy promoted to investors, prosecutors charged that Madoff ran his investment business as "a massive Ponzi scheme" in which most investors' money was used to pay others.

He was also charged with taking at least $250 million as commissions during the last six years and using the money to support separate businesses that handled proprietary stock trading and matched stock buyers with sellers. Prosecutors also alleged that Madoff and others, who were not identified, received millions of dollars in benefits.

In all, prosecutors charged that the scam involved "billions of dollars," stretched at least as far back as the 1980s and continued until Madoff's Dec. 11 arrest. In the days before he was taken into custody, Madoff's records showed 4,800 client accounts and a total balance of approximately $64.8 billion, prosecutors alleged.

In reality, Madoff's investment business "held only a small fraction of that balance," prosecutors charged.

The filing did not specifically identify the alleged scam's size as $50 billion, the amount Madoff estimated to the FBI.

Although no one else has been charged, the filing accused Madoff of directing employees to "communicate with clients and generate false and fraudulent documents" that helped hide the scheme. Prosecutors allege that Madoff hired workers with little or no financial training to handle back-office duties while running the scam.

Big question remains

Still, the filing did not address a key question repeatedly raised by many of his alleged victims: whether Madoff was the only one knowingly involved in the scam, as he told the FBI.

"Everybody is going to think it's wonderful that justice is being done. But we still want to know, where is the money that we invested, where are the charges against all the people involved in this scheme?" demanded Ronnie Sue Ambrosino, a Madoff victim who runs a support group for 350 similarly victimized investors.

A court-appointed trustee has so far managed to locate roughly $1 billion in Madoff investments that would eventually be redistributed to investors.

A guilty plea to the criminal information filing would automatically require Madoff to make restitution to investors. He would also have to forfeit all illegal gains, along with all property involved in the money-laundering offenses and all property traceable to those crimes.

Madoff, speaking publicly for the first time since his arrest as he stood in a packed lower Manhattan courtroom, spoke in a quiet voice as he waived his right to have the evidence against him weighed by a federal grand jury for a potential criminal indictment.

The hearing marked Madoff's first appearance in a month outside the $7 million Manhattan apartment where he has been held under house arrest and 24-hour monitoring on $10 million bail. As a security precaution, federal authorities brought him to court more than three hours early.

The apartment is one focus of a potential legal showdown over the forfeiture requirement. Defense lawyers previously filed a motion arguing that the Upper East Side unit, $45 million in municipal bonds and $17 million in a Wachovia bank account belong to Ruth Madoff, the financier's wife, "are unrelated to the Madoff fraud" and should not be seized.

Sorkin also complained that the legal defense team has been unable to review documents showing the amounts of money that moved into and out of Madoff's investment business. His argument raised the possibility that some of Madoff's former institutional clients withdrew more than they invested.

Madoff's court appearance served as a warm-up to the Thursday morning hearing at which he's expected to formally plead guilty. Chin said he would allow an as-yet-undetermined number of victims to speak about just two issues: Whether the court should accept a guilty plea, and whether Madoff should be allowed to remain under house arrest pending sentencing.

Chin told prosecutors to relay the speaking restrictions to the more than 75 investors who had e-mailed speaking requests to Manhattan U.S. Attorney Lev Dassin's office as of Monday afternoon. The list is expected to continue growing until a 10 a.m. deadline today.

Victims range from mom-and-pop investors to notables such as Nobel Peace Prize winner Elie Wiesel, retired baseball great Sandy Koufax and international financial institutions such as Spain's Banco Santander.

Saying, "I understand that emotions are high," Chin said Madoff victims chosen to speak "must do so in a respectful and dignified manner."

The judge also said he did not expect to sentence Madoff for several months. The proposed schedule would give prosecutors time to continue their investigation of the alleged scam, as well as enable probation officers to research and complete a report on the money manager.

"Why don't they just give him the keys to the city?" Ambrosino asked, reacting angrily to the possibility that Madoff might not immediately be jailed after entering a guilty plea.

Possible conflict raised

Announcement of the specific charges against Madoff overshadowed Tuesday's legal arguments about potential legal conflicts involving Sorkin. Federal prosecutors argued that Sorkin could have divided loyalties representing Madoff, because he previously defended two clients linked to the money manager.

Prosecutors also cited a potential conflict involving a former $900,000 investment with Madoff that benefited Sorkin's sons, as well as thousands of dollars in a retirement investment the defense lawyer himself previously had with Madoff through a benefit account at a law firm where he once worked.

Madoff, responding to extensive questions from the judge, said he understood the potential conflicts and wished to keep Sorkin as his lead defense counsel.

Sorkin also told Chin an independent attorney had been added to the defense team in a bid to help address any real or potential conflicts.

Prosecutors said they did not object to Sorkin's continued participation in the case.

"This is all about making sure he (Madoff) can't in the future challenge a guilty plea based on a potential conflict of interest by his attorney," said Richard Strassberg, a Goodwin Procter law partner in Manhattan and a former major crimes unit chief for the Manhattan U.S. Attorney's office.