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updated: 12/14/2012 7:45 AM

U.S. Says Madoff's brother peter should get 10-year prison term

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  • David Sheehan, representing the trustee for Bernard Madoff's fraud victims, leaves federal court in New York.

    David Sheehan, representing the trustee for Bernard Madoff's fraud victims, leaves federal court in New York.
    Associated Press

Bloomberg News

Bernard Madoff's brother, Peter Madoff, should get a 10-year prison term for his role in perpetuating the multibillion-dollar fraud, U.S. prosecutors said.

Peter Madoff pleaded guilty in June in federal court in Manhattan to helping his brother pull off the biggest Ponzi scheme in U.S. history, though Peter denied knowing the business was a sham until the firm collapsed. As part of his plea agreement, Madoff agreed not to seek a sentence other than the 10-year term, prosecutors said.

"The government submits that a sentence of 10 years is reasonable and appropriate in this case," assistant U.S. attorneys Lisa Baroni and Julian Moore said yesterday in a memo to the judge who will sentence Madoff.

Peter Madoff, who served as the chief compliance officer of Bernard L. Madoff Investment Securities LLC, helped his brother run the firm for four decades. Peter Madoff is scheduled to be sentenced Dec. 20 by U.S. District Judge Laura Taylor Swain.

Prosecutors said Madoff, who trained as a lawyer, repeatedly lied and violated the trust investors put in the firm and also made false statements to regulators and auditors. The government said his crimes began in about 1996 and continued until December 2008 when the firm collapsed, which the U.S. said was the only reason his crimes stopped.

Victims' Compensation

As part of his plea, Madoff agreed to forfeit $143 billion, "representing the amount of proceeds obtained as a result of the commission of the offenses," Baroni and Moore said. The government will file a separate memo about victims' compensation, prosecutors said.

"The defendant's false statements, and his complete failure to fulfill his duties as the chief compliance officer of the firm, served to perpetuate the multibillion-dollar fraud in which thousands of investors were defrauded," prosecutors said.

Had regulators and clients known the truth about the sham compliance program, "it is possible that the fraud would have been detected years earlier and losses to the many victims would have been avoided," Baroni and Moore said.

'Massive' Scheme

Madoff also engaged in a ''massive tax fraud scheme'' that enriched him and his family, the U.S. said. He transferred millions of dollars to relatives to avoid paying taxes to the Internal Revenue Service. The money he took permitted him to enjoy a "lavish" lifestyle that included homes on Park Avenue in Manhattan, in Palm Beach, Florida, and in Old Westbury, on New York's Long Island, prosecutors said.

Bernard Madoff gave about $15.7 million to Peter, who then executed sham promissory notes to make it appear the funds were loans to avoid paying taxes, prosecutors said. Peter Madoff also received about $7.7 million out of BLMIS bank accounts that held investors' money and received an addition $16.8 million from Bernard Madoff in two sham stock trades which he didn't pay taxes on, the U.S. said.

Peter Madoff and his family benefited from the fraud in other ways, including his obtaining a no-show job at the firm for his wife in which she received as much as $160,000 a year for no work, prosecutors said.

$300 Million

After learning of the Ponzi scheme, Peter Madoff said he helped his brother parcel out the $300 million remaining in the firm to select friends and family members.

"His actions in 2008 demonstrate his character," Baroni and Moore wrote. "Rather than contacting law enforcement, Madoff participated in a scheme to attempt to distribute the last remaining $300 million of BLMIS investors' funds to his own family and close friends."

Several victims of the fraud scheme have asked to speak at Madoff's sentencing, including Marion Wiesel, wife of Nobel laureate Elie Wiesel, the U.S. said. The scheme hurt both the personal finances of the Wiesels and the Elie Wiesel Foundation for Humanity, which lost $15.2 million, or "substantially" all of its assets, Marion Wiesel said in a letter to the court.

"The dissipation of these funds meant a crippling inability to meet outstanding obligations in both the immediate short term as well as long term," she wrote.

Other Victims

Michael and Emma De Vita, who were also victims of the fraud, wrote that Peter Madoff could have stepped forward to stop the fraud from continuing.

"He chose not to!" they wrote. "The entire investment advisory team waited -- until the scheme collapsed. Then they played the part of three blind mice -- hear no evil, see no evil and do no evil."

Peter Madoff's sentencing memo to the court wasn't filed publicly. John Wing, a lawyer for Madoff, didn't immediately respond to a phone message after regular business hours seeking comment on yesterday's filing.

Peter Madoff pleaded guilty June 29 to one count of conspiracy to commit securities fraud and one count of falsifying records. The plea came three years to the day after his brother was sentenced to 150 years in prison.

During his plea, Peter Madoff told the court he had no knowledge of his brother's scheme until Dec. 9, 2008, the night Bernard Madoff confessed to him that the investment business was a sham. Bernard Madoff was arrested and confessed to authorities two days later, on Dec. 11.

The case is U.S. v. Madoff, 10-cr-00228, U.S. District Court, Southern District of New York (Manhattan).

--Editors: Peter Blumberg, Michael Hytha

To contact the reporter on this story: Patricia Hurtado in New York at

To contact the editor responsible for this story: Michael Hytha at

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