Disgraced financier Bernard Madoff's victims got what they wanted to see, but not what they wanted to hear. Saying he was "deeply sorry and ashamed," he pleaded guilty on Thursday to perhaps the biggest swindle in Wall Street history and was led off in handcuffs to begin serving a sentence set at up to 150 years in prison.
While some bilked investors were delighted by the spectacle, the bigger questions were left unanswered: What happened to all the money, people's life savings, their college tuition, as much as $65 billion in all? Who helped him pull off the fraud that turned a well-respected investment professional into a symbol of Wall Street greed amid the economic meltdown?
"So he spends the rest of his life in jail, is that justice? People's lives are ruined," said Adriane Biondo of Los Angeles, one of five members of her family who lost money with Madoff. "Where's the money, Bernie?"
Because Madoff pleaded guilty as charged, without any kind of deal with prosecutors, he is under no obligation to cooperate with them. As a result, some legal experts and others have speculated that he is sacrificing himself to protect his wife, his family and friends.
"He's trying to save the rest of his family," said investor Judith 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."
The 70-year-old financier who was once chairman of the Nasdaq exchange will be sentenced June 16 on 11 counts, including securities fraud and perjury. He could also be fined and ordered to pay restitution to his victims and forfeit any ill-gotten gains. "I am actually grateful for this opportunity to publicly comment about my crimes, for which I am deeply sorry and ashamed," Madoff, a dapper figure, clad in a charcoal-gray suit, with swept-back, wavy gray hair, said in his first public comments about his crimes since the $65 billion scandal broke in early December.
In a long, detailed statement delivered in a soft but steady voice, Madoff implicated no one but himself in the vast Ponzi scheme. He said he started it as a short-term way to weather the early-1990s recession, and was unable to extricate himself as the years went by.
"I realized that my arrest and this day would inevitably come," Madoff said in a courtroom crammed with many of the investors he cheated out of billions of dollars.
US District Judge Denny Chin promptly revoked the $10 million bail that had allowed Madoff to remain free since he confessed to his sons three months ago. In ordering him jailed, the judge said Madoff had the means to flee and an incentive to do so because of his age.
The courtroom erupted in applause after the judge announced Madoff would go directly to jail, the drab, windowless high-rise Metropolitan Correctional Center next door to the courthouse to await sentencing. But that did not slake his victims' anger. DeWitt Baker, an investor who attended the hearing and said he lost more than $1 million with Madoff, said: "I'd stone him to death."
The public fury toward him was so great that he was known to wear a bulletproof vest to court. Before the court hearing Thursday, helicopters circled above the courthouse, and federal officers with automatic weapons stood outside. Investors signed in before entering the courtroom.
"I wanted him to see some of the faces of the people he lied to and destroyed," said Cynthia Friedman, 59, of Jericho, New York. She and her husband, Richard, said Madoff defrauded them of their life savings of $3 million. They learned it was gone months before Richard Friedman was supposed to retire, a plan now on hold. Prosecutors gave assurances they are investigating Madoff's wife and other family members and employees to determine what role, if any, they played in the scam.
"A lot of resources and effort are being expended, both to find assets and to find anyone else who may be responsible for this fraud," federal prosecutor Marc Litt said.
In court documents, prosecutors put the amount of the fraud at $64.8 billion. However, experts said that the actual loss was probably much less and that the higher number reflect the false profits Madoff told investors they were making. So far, authorities have located only about $1 billion for investors.
Prosecutors have already said that low-level employees in Madoff's New York offices participated by mailing out tens of thousands of phony monthly statements and trading confirmations to make it look as if customers were making money in the market. Some investors suspect their money ended up in the hands of Madoff's wife, Ruth.
She was not in court Thursday. But the mere mention of her name in the courtroom drew jeers and laughter. In one instance, defense lawyer Ira Sorkin was describing how Madoff had, "at his wife's own expense," paid for security at his $7 million penthouse in Manhattan. Loud laughter erupted among some of the more than 100 spectators crammed into the courtroom on the 24th floor of the federal courthouse in lower Manhattan. There was more snickering when Sorkin mentioned Mrs. Madoff's "small residence in France."
Madoff's thousands of victims included individuals, trusts, pension funds, hedge funds and nonprofit organizations. The scheme wiped out people's fortunes, ruined charities and foundations, and apparently pushed at least two investors to commit suicide. Investors big and small were swindled, from Florida retirees to celebrities such as Steven Spielberg, actor Kevin Bacon and Hall of Fame pitcher Sandy Koufax. Many of Madoff's victims were Jews and Jewish charities, which trusted in Madoff because he is Jewish. Those cheated included Nobel Peace Prize winner and Holocaust survivor Elie Wiesel.
In court Thursday, he said he began the scheme during the last recession, when "I felt compelled to satisfy my clients' expectations, at any cost." He did not put his investors' money into the market, as he claimed. Instead, it was a Ponzi scheme, or a pyramid, in which early investors are paid off with money taken in from later ones.
"When I began the Ponzi scheme, I believed it would end shortly and I would be able to extricate myself and my clients from the scheme," he said. "However, this proved difficult, and ultimately impossible."
Madoff said he falsely told investors he was employing a "split strike conversion strategy": He claimed he invested their money in a batch of stocks from the Standard & Poor's 100 that closely tracked the price movements of the index. He also told investors that he would periodically pull their money out of the market and put it in Treasury bills. And he claimed he bought stock options to hedge against losses. All of that was false.
Madoff also said that to fool his clients into thinking he was buying and selling stocks, he transferred money from his fraudulent operations into his wholesale stock-trading firm, which he otherwise described as an honest, legitimate business.
In Washington, White House spokesman Robert Gibbs said: "The president is glad that swift justice will happen." Gibbs said the Obama administration will do everything possible to ensure strict enforcement of securities regulations "and hope that through those actions that that kind of greed and irresponsibility and that kind of criminal activity never happens again."