Bernard Madoff arrived in a New York courtroom last week to plead guilty to masterminding the largest Ponzi scheme in history wearing a designer suit, a silver tie—and a bulletproof vest. The new face of financial corruption on a previously unimaginable scale, whose charming demeanor and robust returns lured investors from Elie Wiesel to Steven Spielberg to modest retirees, told a federal judge what he had already admitted to his family months ago: His $65 billion money management scheme was "one big lie."
"I never invested the funds in securities as promised," Madoff told U.S. District Court Judge Denny Chin. Madoff admitted that his scheme, which wiped out nearly 5,000 client accounts, had unraveled in December when the slowing economy led to a rush of investor redemptions. "I believed it would end shortly and I would be able to extricate myself and my clients from the scheme," Madoff said in a statement. "I cannot adequately express how sorry I am for what I have done."
Madoff pleaded guilty to 11 counts of fraud, money laundering, perjury, and theft—a collection of crimes that carry a maximum prison time of 150 years. He has been free on bail since he was arrested just before Christmas, but after his guilty plea, he was ordered immediately jailed. "He has incentive to flee, he has the means to flee, and thus he presents the risk of flight," Judge Chin said. "Bail is revoked."
While Madoff's days in designer suits will officially come to an end when he is sentenced in June, the fallout from his financial misdeeds may be only beginning. Federal investigators are preparing to seize more than $100 million of Madoff's personal assets, from a Manhattan condominium to a villa on the coast of France. And they are continuing to look at Madoff's wife, Ruth, as well as some of the employees of his investment firm, Madoff Securities, to see how many people around Madoff may have known about the fraud. One attorney close to the case has suggested that as many as 20 indictments could be brought against suspected coconspirators. On Friday, Madoff filed court papers estimating the net worth of his business at only $700 million.
At a time when some of Wall Street's biggest banks are teetering on the brink of insolvency and smaller-scale financial fraudsters are being run to ground by investigators, the Madoff affair is also likely to pave the way to a new era of stricter financial regulation. After it was revealed that tipsters had tried to alert officials at the Securities and Exchange Commission for years about the possibility that Madoff was a fraud, several top regulators, including Linda Thomsen, the agency's director of enforcement, stepped down.
The new SEC chief, Mary Schapiro, a respected advocate of financial industry reform, has already made it clear that Wall Street's go-go days are over. "The world has changed dramatically in the last year," Schapiro said at a hearing on Capitol Hill last week, asking Congress for broader authority to supervise the financial industry. "There will be no sacred cows."
Wall Street's biggest bull may spend the rest of his days behind bars, but his legacy appears likely to last much longer.