Bernard L. Madoff appears set to plead guilty in the multibillion-dollar Ponzi scheme that shocked the nation.
Madoff, 70, is scheduled to appear before Southern District of New York Judge Denny Chin at 10 a.m. on Thursday and is expected to be arraigned on an information and, absent a change of heart, enter a guilty plea.
Assistant U.S. Attorneys Marc Litt and Lisa Baroni Friday morning informed Chin that the government will file an information upon Madoff's waiver of indictment. Madoff's attorney, Daniel J. Horwitz of Dickstein Shapiro, confirmed Friday that Madoff would indeed waive indictment.
Lead defense lawyer Ira L. Sorkin declined to discuss details or even whether his client would actually plead, saying only, "The document speaks for itself."
Friday's notice of intent to file an information was filed one week before a March 13 deadline to indict Madoff under the Speedy Trial Act.
One issue the parties must resolve before any plea is the allegations by prosecutors that Sorkin is laboring under a conflict of interest in his representation of Madoff.
Sorkin disputes there is a conflict but said that, in any event, he believes the prosecution would not object to Madoff waiving any future claim that a conflict rendered his counsel ineffective.
Under this scenario, the prosecutors would merely want the defendant to make a clear waiver to ensure that any guilty plea could not be attacked later by Madoff on the grounds that Sorkin was hamstrung by the conflict.
A hearing on the conflict issue under United States v. Curcio, 680 F.2d 881 (2d Cir. 1982), has been scheduled for Tuesday at 3 p.m. before Judge Chin.
The potential conflict stems from the fact that Sorkin's late father had an account with Madoff and Sorkin represented the principals of Avellino & Bienes, an investment firm that funneled its clients' money to Madoff and was sued by the Securities and Exchange Commission in 1992.
Madoff was arrested on Dec. 11 on one count of securities fraud. After initially being allowed to walk free on $10 million bail, he was ordered confined to his Park Avenue penthouse for all but court appearances. He wears an electronic monitoring bracelet and his front door is watched around-the-clock by security guards.
Madoff angered prosecutors by mailing more than $1 million in jewelry to family and friends in late December, a move that prompted Litt to seek to have bail revoked. Magistrate Judge Ronald Ellis and then Judge Lawrence McKenna refused to order detention.
But the bail calculus could be altered by a decision by Madoff to plead guilty.
Litt could then argue, now before a new judge, that the defendant faces what is in essence a life sentence in prison and, with the end drawing near, has every incentive to flee. If Judge Chin agrees with Judge McKenna, however, Madoff could still remain out of jail until he is sentenced.
McKenna found in January that the possibility of Madoff fleeing was "as close to nil as you can get at this point."
In the vast majority of cases where the defendant waives indictment and pleads guilty to an information, the defendant has entered into a cooperation agreement with prosecutors, hoping to receive in return a 5K.1 letter from the government. The letter informs the sentencing judge that the defendant performed substantial assistance in the investigation and prosecution of others in the ongoing criminal case and should therefore be considered for a lower sentence.
It is only the rare case where the defendant opts to plead guilty to an information without an agreement, and that is because the evidence is overwhelming and the defendant is seeking a measure of goodwill from the judge at sentencing.
It is not clear into which category Madoff fits.
EXTENT OF FRAUD
Madoff is alleged to have admitted his crimes to his sons and then later to the FBI officer who came to arrest him.
Prosecutors are attempting to find out who else was involved in the scheme, but because Madoff is the mastermind of what might be the most notorious financial crime in history, it is hard to see the government willing to exchange anything of value for information that convicts lesser actors, and certainly not a lighter sentence.
One attorney said it would be "extraordinary" for the government to make that kind of offer given the high-profile nature of the case and the scope of Madoff's crimes.
Madoff, through his attorneys, claims to have been working with the government by providing details needed to help locate assets and unravel the fraud.
If Madoff has pledged to cooperate with the government in a plea deal, it would signal that the government considers the investigation far from over and may be close to obtaining charges against others in the scheme.
Several legal observers say it is clear Madoff will plead guilty.
Veteran defense attorney Elkan Abramowitz of Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer said Friday's filing of the notice by the prosecutors indicates an agreement to plead guilty.
"If he had not already agreed to plead, you can't file an information on a felony charge because only a grand jury can charge felonies," Abramowitz said. "We know that he has agreed to at least waive indictment and I'm not aware of any situation where that hasn't already included an agreement to plead guilty."
An information will normally contain fewer counts and be less complicated than an indictment, Abramowitz said.
In any event, even if Madoff has reached an agreement to plead guilty to an information, there is nothing that prevents him from changing his mind.
VICTIMS OF FRAUD
Meanwhile, Stephen Harbeck of the Securities Investor Protection Corp. told The Associated Press that checks were sent on Friday to two investors who were victims of Madoff's fraud.
The Securities Investor Protection Corp. is an industry-funded organization that steps in when a brokerage firm fails. It has been helping process hundreds of claims by investors hoping to recoup losses.
Investors are eligible for up to $500,000 from the organization, and have until July to file claims. Harbeck would not disclose how much money was sent to the first two investors to receive checks.
For more information on the Madoff case see the Law.com Madoff Watch page.