The Great Madoff Cop-Out

As half the world now knows, Bernie Madoff isn’t going to trial.  He’s expected to plead guilty on Thursday.

From a legal strategy standpoint, the news isn’t very surprising. After all, the case is just about as open and shut as any you can imagine. 1) Investors gave Madoff a lot of money. 2) Madoff had a fiduciary responsibility to look after that money. 3) The money is gone and no-one knows where exactly it went. So Madoff really didn’t have a lot of options. At the same time, the government frees up its prosecutors and creates space on the docket, while the money that would otherwise be consumed by lawyers fees can go to remuneration for Madoff’s victims. A win-win situation, no?

I’m not so sure. To the first part, plea bargains are terribly anticlimactic . It seems to me that $50 billion should buy you quite a bit of cantharis. In all frankness, I’d rather news of the Madoff trial than the latest leading indicator dominate the financial pages for the next couple months, today’s rally nonwithstanding.

More seriously, it’s easy to forget, but plea bargains are equally bargin as plea. In the typical plea, the government grants a defendant a more lenient sentence in exchange for something else, such as testimony. Yet Madoff doesn’t look like he’s traded information for jail time; he’s likely to go in for life. The conspiracy theorist in me wonders. Madoff really had no incentive not to go to trial; if he wins he’s free, if he loses, he was going to jail anyway ,and the lawyers fees would go to his victims instead. There’s one more piece of the puzzle. A financial executive once asserted to me his extreme skepticism that Madoff’s family remained ignorant of the scheme. “Imagine, you’re one of Madoff’s children. Dad tells you he has the secret formula to success on Wall Street. You’re not going to wonder how he does it? After 30 years of working there, you still don’t know what’s going on? Dad’s getting up there in years, and you’re not going to ask your father what the secret is? “Hey Dad, is this the year you’re going to tell me how you make so much money?” “No son, maybe next year!” Just how likely is that?”

Madoff’s fraud was indeed one of the most audacious ever perpetuated in the financial industry. But it would be a pity if in our desire to prosecute the mastermind we acquit by omission those who enabled his deeds.

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