Inside the Madoff courtroom

In a Manhattan courtroom where Bernie Madoff pleaded guilty, the disgraced financier had his first opportunity to publicly address the substance of his crimes.

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By Nicholas Varchaver, James Bandler and Doris Burke

NEW YORK (Fortune) -- The moment that Bernie Madoff lost his freedom was almost easy to miss. Federal district judge Denny Chin concluded this morning's hearing to accept the disgraced financier's guilty plea with a quick "we're adjourned," and disappeared off the bench within seconds. Audience members began gathering their belongings and preparing to leave. The shuffle of activity almost obscured Madoff, who pulled his shoulders back, shifted his arms behind him and waited docilely as handcuffs were placed on his wrists. The cuffs, which gleamed as if freshly polished, seemed somehow suited to the fastidious elegance of the defendant.

Moments later, Madoff was gone, now a man who most likely will never take a step outside of Federal property again.

In the little more than an hour that passed inside the Manhattan courtroom before that departure, Madoff had his first opportunity to publicly address the substance of his crimes. Lawyers call the process "allocution," but the judge articulated it in simpler words: "Mr. Madoff, tell me what you did."

And so the author of a $50 billion (or more) fraud confessed. "For many years," he began, "I operated a Ponzi scheme." He pronounced himself "actually grateful for this opportunity to publicly speak about my crimes, for which I am deeply sorry and ashamed." Reading from a six-page prepared statement that was crafted to cover responsibility for all 11 of the charges, he asserted that he was an accidental Ponzi scammer. He asserted that, "to the best of my recollection," the scam had begun in the early 1990s and that he had believed at the time that the liberties he was taking were temporary. "When I began the Ponzi scheme," Madoff asserted, "I believed it would end shortly and I would be able to extricate myself and my clients from the scheme. However, this proved difficult and, indeed, ultimately impossible. And as the years went by, I realized that my arrest and this day would inevitably come."

"I am painfully aware I have hurt many, many people," he continued, citing family members, close friends, and business associates, and thousands of clients. "I can not express how sorry I am."

In a flat voice with the accent of his native Laurelton, Queens, occasionally audible (mostly in references to the city of "New Yawk"), Madoff continued for just over 10 minutes, ticking off a litany of transgressions.

Still, once or twice you could sense the fallen financier clutching to vestiges of his ruined pride. "I want to emphasize," he noted, that while the investment advisory business was a fraud, "my other businesses were profitable and legitimate in all respects." This despite the fact that he acknowledged that huge sums of money had been transferred from the fraudulent operation to his two legitimate businesses, market-making and proprietary trading, actions he said were taken to support the illusion that the fraudulent business was engaging in real trades. (This discussion occasioned the closest thing to a personal rebuke from prosecutor Marc Litt, who told the judge later that "at times, his [legitimate] firm would've been unable to operate but for the cash generated by this Ponzi scheme.")

One statement was notable, perhaps, for its omission. When Madoff was arrested in December, the FBI agent who detained him, Theodore Cacioppi, described Madoff as saying "it was all his fault." Today, with Cacioppi turning to watch him from the prosecutors' table in front, Madoff made no such statement (though, in his only specific reference to individual family members, he noted that his brother and sons were involved only in the legitimate businesses).

When Madoff's confession was concluded, he intoned the word "guilty" 11 times in answer to Chin's question on each count, "how do you plead now--guilty or not guilty?"

After a brief period, in which a handful of victims were given an opportunity to raise issues only about the validity of the plea deal or the wisdom of Madoff remaining on bail, Madoff's lawyer made an extended argument that his client should remain on bail. Sorkin argued that Madoff presented no threat to the community and that the chances of his fleeing were "virtually nil." Before the prosecutor could even begin to respond, the mild-tempered Chin jumped in and said, "I don't need to hear from the government. It is my intention to remand Mr. Madoff." Two minutes later, the man once viewed as an investing genius was in handcuffs, with little chance of being seen in public before he is sentenced on June 16. To top of page

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