EDITORIAL - Deterrent

Only last year, Bernard Madoff lived in a $7-million Upper East Side apartment, served as non-executive chairman of the NASDAQ and was estimated to be worth billions. Today he is prisoner #61727-054 at the Metropolitan Correctional Center in New York, where he is serving a 150-year sentence without parole for a Ponzi scheme that defrauded thousands of investors.

A district judge has ordered the seizure of $171 billion worth of Madoff’s assets, leaving his wife Ruth with only $2.5 million in cash and requiring her to move out of their Manhattan home. Speculation focuses on whether Ruth and her two sons, who had reported Madoff’s fraud to federal authorities last December, would be among 10 other individuals who also face prosecution for the fraud that eroded public faith in the US financial system.

The US Securities and Exchange Commission had been alerted as far back as 1999 about the Ponzi scheme, but the warnings were ignored. This makes the American SEC no better than its Philippine counterpart, which also ignored red flags about the pre-need and rural banking operations of Legacy owner Celso de los Angeles.

But the US criminal justice system moves many times faster. Last Monday, just a little over six months after his arrest, Madoff was sentenced and started serving his life term. He apologized to his victims, referring to his crime as “an error of judgment” and ruing his “legacy of shame.” The judge called the fraud “extraordinarily evil” and said the maximum sentence was imposed as a deterrent.

Filipinos have yet to see a similar deterrent in the Legacy case, where the thousands of victims are mostly middle-income or poor investors. There is also no assurance that the SEC can prevent a repeat of the Legacy mess. Jesus Enrique Martinez was forced to step down on the eve of his retirement as SEC commissioner amid allegations that he received lavish gifts from De los Angeles. Martinez died before he could be indicted for any offense. He was replaced by Manuel Gaite, who as deputy executive secretary had been tagged by ZTE scam witness Rodolfo Lozada Jr. as the point man in government efforts to prevent him from testifying at the Senate.

Madoff, now 71, is expected to die in prison. In contrast, at the rate the cases against De los Angeles are moving, he may no longer be around when final judgment is handed down in any of the cases against him.