Bernie Madoff
Bernie Madoff ()

I love math. Always did. On June 29, 2009, Bernard Madoff, who founded and ran Bernard L. Madoff Investment Securities LLP and will go down as one of the most notorious Wall Street villains in history, was sentenced. He was 71 years old. He is now 77. U.S. Judge Denny Chin imposed a 150 year sentence. This article will address two points: 1) was that the maximum sentence? and 2) why would a federal court impose a sentence of 150 years upon a 71 year-old defendant?

The answers lie in an analysis of the U.S. Sentencing Guidelines, a federal statutory sentencing scheme that took effect (as the Sentencing Reform Act of 1984) in November 1987.

Prior to 1987, one federal judge in one part of the country might have sentenced a defendant to five years in prison on a statute providing for a penalty of between zero and five years, while another federal judge might have sentenced another defendant to probation for the identical offense. So, a plan emerged to enact a uniform set of sentencing guidelines, so that sentences would become more consistent nationally. The U.S. Sentencing Commission was formed. It adopted an elaborate scheme of sentencing guidelines which Congress subsequently enacted. Since there were judges on the commission, the guidelines were challenged on constitutional grounds (separation of powers) but the U.S. Supreme Court rejected the challenge and upheld the guidelines scheme.

The guidelines operate on a two axis grid.

From top to bottom (vertically) is the offense level, from 1 to 43, and across the top, from Roman numeral I through VI (horizontally) is the criminal history category. Thus, as we move down and to the right, the offense levels increase, the criminal history categories increase, and with it the sentencing ranges increase in severity.

Offense level 1, in all criminal history categories (the lowest sentence), provides for a range of 0-6 months; conversely offense level 43, also in all criminal history categories (the highest offense level), provides for life imprisonment.

Level 43 is the only level without a range, which becomes hugely relevant in the Madoff discussion. Level 42 below it provides for a range of 360 months to life, again in every criminal history category.

Generally, economic offenses are driven, not surprisingly, by the amount of the loss to the victim and/or gain to the perpetrator. Interestingly, more than $400 million is the maximum adjustment for loss (30 levels).

Then there are adjustments for role in the offense, the number of victims and other factors. If a defendant pleads guilty, there is a reduction for that. If a defendant cooperates, the court can sentence below the guidelines, upon motion by the prosecutors.

The last point is that between the time of their implementation in 1987 through 2005, the guidelines were mandatory, binding the sentencing judge. In 2005, the U.S. Supreme Court ruled them advisory. So while the courts must consult the guidelines, judges are free to go outside of them in particular cases and instances. The Madoff case certainly was not such a situation.

Now let’s look at the Madoff sentence as against the guidelines. According to the government, the final offense level was 54, or 11 levels higher than the maximum (43). According to commentary to the sentencing table, any level higher than 43 is treated as level 43. Level 43, as explained above, carries a sentence of life imprisonment. Again, there is no range, just life.

Here comes the rub. Since none of the various statutes that Madoff pleaded guilty to violating carries a statutory penalty which includes life imprisonment, Chin was not allowed to legally impose a life sentence, which would have been entirely logical, fair and reasonable. Given Madoff’s life expectancy, everyone would have easily understood such a sentence.

But now it gets tricky. Under another guidelines provision §5G1.1(a)), if the applicable guideline (in this case life) exceeds the maximum penalties of all of the statutes added together, then the court must impose the maximum term provided in each individual statute, and then must further impose them to run consecutively, in order to “reach” the minimum guideline.

If there is a conflict between the guidelines and the statutory maximum, the statute always controls. Life is thus apparently always and automatically considered greater than any amount of years and that is why the actual guidelines sentence provided for was 150 years, again because the required guideline of life imprisonment was higher than all of the statutes combined. Ironically, then, the 150 years operates as a “cap.”

And, that is where math and math theory come in. With a 71 year-old man, isn’t it actuarially speaking just silly that “life” is considered to be “more” than 150 years? Let’s change the facts a bit. Let’s say a 71 year-old defendant pleads guilty to a 90 count charging instrument, each carrying a maximum 20 year term, and the guidelines similarly provide for a life term. Since none of the 90 counts include the penalty of life imprisonment, the correct guidelines sentence in this hypothetical would be 1,800 years (21,600 months). Isn’t this just an example of a situation not properly contemplated in the formulation of the guidelines? Wouldn’t it make more sense to have language somewhere in the commentaries to the effect that “where a reasonable actuarial analysis is made, the court should take that into account?”

Probably so. At the end of the day, though, the sentence was largely symbolic and Chin did the right thing in this writer’s view. While there are still lingering questions about who else may have been involved, and the inefficiency of government agencies tasked with policing Wall Street abuse, the reality is that Madoff ended up exactly where he belongs, which is in prison until he reaches the ripe old age of 221.