Peter Madoff was "frankly, not believable" when he claimed he was as surprised as anyone to learn his brother had blown $20 billion of investor money in a massive Ponzi scheme that lasted for decades, a judge said as she sentenced him to 10 years in prison.
The disbelief was a recurring theme at the sentencing proceeding Thursday for the 67-year-old former chief compliance officer before U.S. District Judge Laura Taylor Swain in Manhattan. Two investors among 40 who wrote victim impact statements for the court expressed the same disbelief and a prosecutor was skeptical as well.
Investor Michael T. De Vita, 62, said he believed "it to be physically impossible for a single person to carry out such a gargantuan task all by himself."
"Four years later, Peter still has chosen to take no action and turn a blind eye, leaving us the true victims," said Amy Luria Nissenbaum, 49, whose home is in foreclosure as wave after wave of crippling financial news continues to hit her family. She choked back tears as she described her struggle to "clothe and feed my children" since Bernard Madoff four years ago revealed the Ponzi scheme that wiped out her family's life savings.
When Swain announced that Peter Madoff will not have to report to prison until February 6, Nissenbaum laughed out loud bitterly. The delay will let Peter Madoff attend his granddaughter's Bat Mitzvah on January 19.
The judge noted that 10 years was the maximum sentence allowed by the charges to which Madoff had pled and repeatedly urged Madoff to relieve the pain of investors by revealing more about the Madoff business.
"I challenge you to be honest about all that you have done and all that you have seen. In other words, all that you know," she said to Madoff, who wore a well-tailored charcoal suit. The judge said Peter Madoff was "frankly not believable" when he claimed he only learned of the fraud when his brother revealed it just before his arrest.
Peter Madoff had agreed when he pleaded guilty in June to conspiracy and falsifying the books and records of an investment adviser that he would not challenge a 10-year sentence. He follows to prison his 74-year-old brother, who is serving a 150-year sentence.
Peter Madoff spoke only briefly, saying: "I am deeply ashamed of my conduct and have tried to atone by pleading guilty and have agreed to forfeit all of my present and future assets." He added: "I am profoundly sorry that my failures let many people down, including my loved ones."
Assistant U.S. Attorney Lisa Baroni said it would have been easy for Peter Madoff to blow the whistle on the fraud. Instead, she said, he even conspired with his brother to distribute the remaining $300 million in the company's accounts to family, friends and favored clients before the FBI put an end to the plan by arresting his brother.
The sentencing comes four years and a week after Bernard Madoff first revealed the fraud, which occurred as the former NASDAQ chairman built a reputation for delivering unparalleled investment results, even in bad times. The revelation came only days after the business sent out statements that made investors think their investments had grown to a total of more than $65 billion.
Peter Madoff said at his plea that he had no idea his brother was running a massive Ponzi scheme, paying off longtime investors at times with money from newer investors.
"My family was torn apart as a result of my brother's atrocious conduct," he said. "I was reviled by strangers as well as friends who assumed that I knew about the Ponzi scheme."
Peter Madoff, who joined his brother's firm after graduating from Fordham Law School in 1970, has been free on $5 million bail after agreeing to surrender all of his assets.
Prior to sentencing, his lawyer, John Wing, said in a memorandum that Peter Madoff will "almost certainly live out his remaining days as a jobless pariah, in or out of prison." He called him a victim of his loyalty to his brother, saying he had been mistreated by the sibling who was eight years older and was viewed as "the prince" by his mother.
As part of a forfeiture agreement, Madoff's wife, Marion, and daughter Shana must forfeit nearly all of their assets. The government said those assets and assets that will be forfeited by other family members include several homes, a Ferrari and more than $10 million in cash and securities. It said his wife will be left with $771,733. Besides the Madoff brothers, no other family members have been arrested.
Though Peter Madoff had been the firm's chief compliance officer for nearly four decades, the government marked his start in the conspiracy as 1996, when he created false and misleading compliance documents and false reports for the Securities and Exchange Commission.
Since the fraud was revealed, a court-appointed trustee has reached agreements to recover approximately $9.3 billion and is hoping to recover another $3 billion over the next 18 months. About $3 billion has been approved for redistribution to victims through an ongoing claims process.
Besides his brother, Peter Madoff is among six who have pleaded guilty, including the former finance chief, a payroll manager, an accountant, a comptroller and a securities trader.
Five others face trial next year, including Bernard Madoff's longtime secretary. All have pleaded not guilty.
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