Victory 'bittersweet' for Madoff victims

Guilty plea to 11 criminal counts of swindling up to US$65 billion in biggest ever fraud means little to distraught, bankrupt investors.

NEW YORK // The dispatch to jail of Bernard Madoff, the disgraced financer who swindled up to $65 billion, ended but one chapter in a story of financial ruin and turmoil that so many Americans are grappling with. The 70-year-old former money manager will probably spend the rest of his life in prison after he pleaded guilty on Thursday to 11 criminal counts including securities fraud, money laundering, theft from an employee benefit plan and false statements to the US Securities and Exchange Commission.

But Madoff was not charged with conspiracy in what many consider to be the biggest ever financial fraud. Many investors still feel bitter and angry because they believe he must have had accomplices and he failed to give a full account of his activities. "It's a Pyrrhic, bittersweet victory," said Miriam Siegman, 65, who said she lost her life savings. She was outside the federal courtroom with scores of others during Madoff's hearing.

"I have no one to help me. That he's in jail doesn't change that. I still have the rest of my life to live, or try to live, in incredible stress and in total poverty. He took everything." Madoff became the personification of Wall Street greed for many Americans although his scheme did not involve the highly complex financial instruments that helped to inflate a property and asset bubble before the recession kicked in last year.

He ran a simple Ponzi, or pyramid scheme, in which returns were paid by subsequent investors rather than from profits. But he and his wife, Ruth, did live a lavish lifestyle, just like many of the executives who have since been forced to run to Washington for government bailout cash to prop up their ailing companies in recent months. Madoff's guilty plea and apology in court failed to satisfy most of his victims, who did not believe his remorse. Prosecutors were not convinced by his account either.

Marc Litt, assistant US attorney, told the judge the "government does not entirely agree with [Madoff's] descriptions of all his conduct". In particular, it believes the fraud started in the 1980s, not the 1990s as stated by Madoff. Madoff also said he never invested clients' funds from his investment advisory business in the securities arm of his company. He said he acted to "ensure" that expenses associated with the investment fraud would not be paid by the securities business, which was run by his brother and two sons.

But Mr Litt said the securities arm would not have been able to operate without the cash generated by the Ponzi scheme. These disputes ensure continued legal wrangling for some years, long after Madoff is sentenced on June 16. His victims were pleased by the fact his bail was revoked and he was imprisoned while waiting to heart the term of his punishment - he faces a maximum 150 years. He had been under house arrest since early December in his luxurious, $7 million apartment in Manhattan's Upper East Side.

"I think we're all just very satisfied with what happened. We're pleased that he's going to be where he deserves to be," said Brian Felsen, an investor with Madoff's company. Prosecutors said they would bring additional charges against Madoff or anyone else they found involved in the case. "[The guilty plea] is one step in an ongoing investigation," Lev Dassin, the acting US attorney for Manhattan, said in a statement.

"While we do not agree with the assertions made by Mr Madoff today, his admissions certainly establish his guilt." The government wants Madoff to forfeit all money and property that can be traced back to the alleged fraud, estimated at more than $170bn although prosecutors have not explained how they arrived at this figure. "I would gladly trade his having a relatively minor jail sentence for his turning up where the assets are. I think that's true of a lot of people. I hope that he gets the most restrictive, worst environment possible." said Jesse Cohen, another investor.

Prosecutors said earlier this week that Madoff had about 4,800 clients as of Nov 30 2008 and he issued statements reporting that the client accounts held about $64.8bn. But Madoff's company actually "held only a small fraction" of that balance for clients, they said. Madoff's victims included individuals who invested on behalf of Jewish charities as well the rich and famous, like the actors Kevin Bacon and Kyra Sedgwick, Senator Frank Lautenberg of New Jersey and Sandy Koufax, a baseball player.

Elie Wiesel, the Nobel Prize winner and Holocaust survivor whose charity was also defrauded, said "psychopath" was "too nice a word" to describe Madoff. Some legal experts and investors, like Judith Welling, have speculated that he is sacrificing himself to protect his wife, family and friends. "He's trying to save the rest of his family," said Ms Welling. "We need to find out who else was involved, and we need, obviously, to freeze the assets of all those people involved, to help the victims."