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Saturday, December 11, 2010

More Indictments in Madoff Scandal?


As the two-year deadline approaches (today) for Madoff entity bankruptcy trustee Irving Picard to file clawback suits, Friday brought the bombshell lawsuit against an Austrian bank and its founder and alleged Madoff co-conspirator Sonja Kohn.  (The New York Times article to which we link also contains a link to the filed lawsuit, which is in excess of 100 pages and lists the alleged involved entities.  Happy reading.)

UPDATE SATURDAY MORNING:  Multiple news organizations report that Bernie Madoff's son Mark Madoff was found dead Saturday morning of an apparent suicideMark Madoff was sued by the trustee earlier, was reportedly under criminal investigation and had been a broker at his father's firm for many years.

More...after the break...

If you are asking why criminal charges have not been brought against additional people (aside from the top-line suspects Frank DiPascali, the two secretaries, the accountant David Friehling, et al.), understand that the scam is probably very complex, and that the list of "cooperating" witnesses may not be very long.  It is likely that many people who were involved and/or suspected of criminality were deposed in various lawsuits, exercised their Fifth Amendment rights (not that there's anything wrong with that -- the Fifth Amendment protects plenty of innocent people afraid of being railroaded), thus depriving investigators of information.  (Their silence also ensures that some "cooperating witnesses" are not disseminating what's called "disinformation" in order to protect others as well as minimize their own misdeeds and gain favorable treatment from prosecutors and, ultimately, leniency from the sentencing judge.)  In other cases, the government may be waiting to see if its war of attrition, trying to wear down and break the resistance of recalcitrant witnesses whom it thinks (rightly or wrongly) have valuable information so that they agree to divulge information.  (Skeptics would argue that the government wants only witnesses who are willing to confirm, or perjure themselves, in order to corroborate the government's theories.)  There may also be strategic considerations; waiting for private third parties to investigate and publish their findings and theories (through lawsuits) conserves government resources.
The same reasoning outlined above should hold true for both the Allen Stanford and Marc Dreier frauds.
Eric Dixon is a New York lawyer and Yale Law School graduate.  Mr. Dixon provides legal services, strategic analysis and investigative analysis for clients through his firm, Eric Dixon LLC.   Mr. Dixon does not represent anyone in connection with the Madoff investigation.  He is available for comment at 917-696-2442 and via email at edixon@NYBusinessCounsel.com.

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