NBR Transcripts-June 29, 2009
Monday, June 29, 2009Bernard Madoff Gets The Max
SUZANNE PRATT: Bernard Madoff got life behind bars today for his multi-billion dollar Ponzi scheme. U.S. District Judge Denny Chen rejected Madoff's request for leniency and sentenced the convicted swindler to 150 years in prison. The judge felt he needed to send a symbolic message to the mastermind of the vast fraud. Erika Miller was in the Manhattan courtroom today and has more on Madoff's day of reckoning.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: In testimony that was often tearful and angry, nine Madoff investors shared their stories of financial ruin. Tom Fitzmorris and his wife lost their life savings and appealed to God to spare no mercy in punishing the Ponzi schemer. Miriam Siegman said she sometimes has to scrounge in dumpsters for food. She left the courtroom before the sentence was announced.
MIRIAM SIEGMAN, MADOFF INVESTOR: It's immaterial to me what sentence he received. In fact, when his lawyers stood up and started speaking, I got up and left. It's a form of showing my disdain for him and for the process.
MILLER: For some, like Michael de Vita, there's now a sense of closure.
MICHAEL DE VITA, MADOFF INVESTOR: After this, I never want to hear his name again because this is the end for him. We get rid of this man and one of the victims talked about him as being the beast. And that's exactly what he is
MILLER: Judge Chin stopped short of calling Madoff that. But he did characterize the crimes as extraordinarily evil. In determining Madoff's sentence, Judge Chin says he considered more than just the size and scale of the fraud. He also took into account the broken trust in the American financial system. Chin was not swayed by Madoff's request for leniency. Madoff says he lives in quote a tormented state now knowing all the pain and suffering I've created. At one point, he turned and faced some victims, saying I'm sorry. I know that doesn't help you. His only visible supporter was outside the courthouse. This afternoon, however, Madoff's wife Ruth broke her silence, issuing a statement that read in part quote, not a day goes by when I don't ache over the stories that I have heard and read. Many victims are now focusing on trying to recover money from SIPIC, the Securities Investor Protection Corporation. Some, like Richard Friedman, also want accountability from the Securities and Exchange Commission.
RICHARD FRIEDMAN, MADOFF INVESTOR: This was the largest fraud or Ponzi scheme in the history of the world. It was handed to them by Markopolos several times and they either turned their head away or they couldn't find it in front of them and that angers me.
MILLER: Madoff has 10 days to appeal his sentence. But attorney Steven Feldman says it's probably a lost cause.
STEVEN FELDMAN, PARTNER, HERRICK, FEINSTEIN: The court had the power here based on the sentencing guidelines which are advisory to sentence him to life and it sentenced him to 150 years. That's something that appeals courts generally defer to.
MILLER: One thing that Judge Chin does not get to decide is where Madoff will serve his time. That's up to the Federal Bureau of Prisons. But Chin is recommending that the jail be in the northeast, presumably so Madoff's family can visit him. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
Former Madoff Investor Burt Ross Reacts to Sentencing
PAUL KANGAS: The tentacles of Bernard Madoff's illegal financial dealings stretch around the world. In Europe Spain's Banco Santander lost $3 billion. Austria's bank Medici took a $2 billion hit, Dutch bank Fortis, a billion and a half dollars. Britain's HSBC lost a billion. Madoff's scam also made its way to Asia where Japan's Nomura Holdings lost $359 million and Singapore's Great Eastern Holding, $44 million. In the Middle East, Phoenix Holdings of Israel lost $13 million and in South America, Peru's Credicorp is out $4.5 million thanks to Madoff.
SUZANNE PRATT: Joining me now with his thoughts on the Madoff verdict is former Madoff investor Burt Ross. He was one of the nine victims chosen by the judge to speak at today's sentencing. Ross is an attorney and former mayor of Fort Lee, New Jersey. He lost millions with Madoff. Burt, welcome to the program.
BURT ROSS, MADOFF INVESTOR: Thank you Suzanne.
PRATT: I know it's been a frantic, hectic day for you. Thank you for coming on. Let me ask you if you'll begin by summarizing the statement that you made to the courtroom today.
ROSS: First of all, if anybody wants the full text of the statement, it's posted online on the Daily Beast. The main point I made and the judge in his opinion concurred and that is that this was far more than just the theft of billions of dollars, even though that would have been far bad enough to warrant the penalty he got, but it had to do with the violation of trust. And as the judge pointed out, this is the basis of our -- the foundation of our economy. Also, the basis for emotions like love and he violated that trust and I think the judge was right on point in mentioning that.
PRATT: And, Burt, how did you feel to be chosen to read that statement? There were hundreds of other victims and you were picked. How did you feel when you were reading it?
ROSS: Well, actually I -- they allowed everybody who wanted to speak to speak. There were only nine of us and I'm glad I had the opportunity to speak, because if nobody showed up and spoke, you would think it would be a victimless crime and it was anything but that. It was very emotional for me. I was talking about money that had been inherited from my parents and passed onto my children and it's one thing if money is stolen from you, but if you get something from your parents or your children have it and it's stolen, it's extremely painful. It was an emotional experience for me, a very draining experience today.
PRATT: And what was your reaction to the 150 years when you heard the judge actually say that number?
ROSS: I was not surprised, because his comments before handing down the sentence made me think that he was going to sentence Madoff to the maximum. It was a sense of relief. The judge made it clear that it was symbolic. Obviously, there's very little difference from a practical standpoint if he was sentenced to 50 years or 150 years. He's already 71 years old but symbolism is important in the law and I thought it was important. I was gratified that the judge threw the book at him.
PRATT: And what did you make of the Madoff apology? Did you feel that it was sincere in any way?
ROSS: It didn't strike me as that. At one point, he referred to what he did as an error in judgment. To me that's just sheer fantasy. You know, an error in judgment is not something that you do in a premeditated, calculated manner for 20 years. You also talked about the shame he felt in hurting the industry that he had helped build and he keeps talking about the industry and I don't think that is what this is about.
PRATT: If you had one piece of advice for other would-be investors, what would you tell them after the last nine months or so?
ROSS: It's hard to put in one piece of advice. I would say to be extremely careful to diversify and diversify in this case would be more than just with one individual, diversify your strategies, diversify your portfolio. Fortunately, I did not have everything with Madoff but I had far too much.
PRATT: What's next for you? Where do things stand with SIPIC in terms of seeing any of your money come back to you?
ROSS: I'm one of the fortunate ones. We filed early. Our money that was invested directly with Madoff, we invested three years ago and never took any money out, so about a month ago, we got a half million dollar check and although half a million is not comparable to the $5 million I lost, I'm very grateful for it. Ten percent of the loaf is better than no loaf. We immediately paid off the mortgage on our house and our home equity loan so we should be able to keep our home where I've lived for 34 years and that's very important to me. And others are not that fortunate. There is an issue -- it's a big issue -- and that is regarding people in the feeder funds. There may be as many people who invested in the feeder funds (INAUDIBLE) as invested with Madoff directly. Those people according to the trustee's interpretation of the law are not entitled specific reimbursement and that's quite serious and that's something that will probably be litigated and it's important to those investors, otherwise, if you happen to have gotten hurt by Madoff indirectly, you'll end up with nothing.
PRATT: I think we have to leave it there. Thank you so much for joining us. My guest Burt Ross, former Madoff investor.
ROSS: Thank you.
The Impact of SCOTUS Rulings on the Business World
PAUL KANGAS: From employment discrimination to regulating bank lending, the nation's highest court wrapped up its latest term with some important rulings for U.S. businesses. One key decision, a ruling the city of New Haven, Connecticut, violated the civil rights of some of its firefighters, discriminating against them on the basis of race. The U.S. Supreme Court also bid farewell to retiring Justice David Souter. Stephanie Dhue looks at what the high court's decisions could mean for corporate America.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The New Haven firefighters' decision could narrow employers' legal protections if a hiring practice has racial implications. But Supreme Court watcher Jonathan Massey says the unusual facts in that case that the employment test at issue was tossed out by the city may make it less significant for business law.
JONATHAN MASSEY, FOUNDING PARTNER, MASSEY & GAIL LLP: The luxury of being able to throw out an entire batch of applicants and not promote anybody is usually a luxury business doesn't have. It's engaged in a hiring or promotion decision precisely because it has a need to find an applicant, so the kind of decision that New Haven made here is probably not one that a lot of businesses will be making in the future.
DHUE: The high court also today ruled states can regulate lending practices of national banks. Those were just two decisions of an entire term that impact business. The court took the states' side in cases involving cigarette labeling and pharmaceutical liability. But Massey says the most important ruling for business had nothing to do with business at all.
MASSEY: It was a case involving someone who had been detained after the September 11 attacks, who claimed that government officials had discriminated against him in detaining him and the court said, in a decision which will be widely cited by business, that a plaintiff can't just proceed in court with sort of bare bones legal allegations.
DHUE: That decision could help companies by reducing time spent fighting frivolous lawsuits. Also surprising to court observers this term, the panel's decisions on environmental cases. Attorney Thomas Goldstein says the high court ruled against the environmentalist position in all five cases it heard.
THOMAS GOLDSTEIN, PARTNER, AKIN GUMP: It was a sweeping term in environmental regulation, where for example, in the Cercla context, which is disposing of hazardous waste that was a major victory for the business community on how much they can be held financially liable, but in case after case after case the deregulatory side won in the Supreme Court on environmental cases this term.
DHUE: Today, Justice David Souter said good bye to his colleagues. Supreme Court watchers say his retirement and his replacement likely won't change much.
GOLDSTEIN: For the business community, I think this term shows us that Judge Sotomayor's appointment to the Supreme Court probably won't make a difference, because Justice Souter in these cases generally tended to be on the left anyway, where we expect she'll end up.
DHUE: While this term wasn't a blockbuster one for business cases, the next term has more potential. The high court will hear a challenge to the Financial Accounting Standards Board. That's the agency that sets the rules for how all American companies keep their books. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
"Commentary"-A Look At The Big Picture
SUZANNE PRATT: Tonight's commentator says when it comes to economic recovery, the markets may be self- correcting. He's Douglas Holtz-Eakin president of DHE Consulting and former director of the Congressional Budget office.
DOUGLAS HOLTZ-EAKIN, PRESIDENT, DHE CONSULTING: Am I the only one who is a little confused by financial market reform and economic recovery? It is really easy to lose perspective in the middle of a meltdown and severe recession. Losing over 300,000 jobs a month is greeted happily, because it is not losing over 600,000. Chrysler's bankruptcy is a triumph because it is short, never mind the taxpayer financing and pain on creditors, workers and suppliers. And a few banks paying back the government is touted as the end of financial distress.
A few months ago there was a consensus that there was no sustained economic recovery until financial markets were fixed. Three key ingredients would be needed: Number one, fix the mortgage market. No housing market recovery, no economic recovery; number two, get toxic assets off bank balance sheets. Weak banks don't lend; and three, reform had to radically consolidate and simplify market regulators.
A funny thing happened on the way to reform. There has been no widespread reworking of mortgages. Housing values continue to decline and there still is no vision for the future of the mortgage giants Fannie Mae and Freddie Mac, who remain wards of the state. The Treasury announced and now has quietly shelved a plan to remove toxic assets from bank balance sheets.
The administration plan for radical consolidation? Kill off one agency, the Office of Thrift Supervision and replace it with a new one, the Consumer Financial Protection Agency. Simplification? Give the Fed authority to take over market-threatening institutions, as long as it asks a Treasury committee first and then hands the job off to the FDIC to finish. Maybe there is a lesson here. Markets work pretty well, even when damaged, perhaps even better than our government. I'm Doug Holtz-Eakin.
Paul Kangas' Stocks in the News
PAUL KANGAS: Wall Street came alive on the upside today, especially the blue chips. Helping those gains, buying linked to end of quarter portfolio shuffling by the institutions. The market held its early gains throughout the mid-session period and also into the afternoon. So stocks managed to close near their best levels of the day. The Dow Industrial Average ended with a gain of 90.99 at 8529.38. The NASDAQ Composite was up 5.84 closing at 1844.06. Standard & Poor's 500 Index rose 8.33 to 927.23. In the bond market, the 10-year note climbed 13/32 putting the yield at 3.48 percent.
Big board volume leader on a little over 70 million shares, Bank of America (BAC) moving up $0.44.
Then MetroPCS Communications (PCS) down $0.41. This stock was added to the Standard & Poor's 500 Index after the close today so you saw a lot of index fund buying, hence the active list for the stock.
Citigroup (C) down a penny.
American International Group (AIG) down $0.13.
And then Ford Motor Co (F) moved up $0.17.
Wells Fargo & Co (WFC) $0.66 gain.
General Electric (GE) edged a penny higher.
ExxonMobil (XOM) in a strong oil group, up $1.53 after oil jumped over $2 a barrel to $71.50 a barrel.
JPMorgan Chase (JPM) was up $0.15.
And then Regions Financial (RF) with a $0.12 gain.
Alcoa (AA) down $0.32. FBR Capital markets up -- I should say downgraded the stock from "market perform" to "under perform."
Another Dow stock, Hewlett-Packard (HPQ) doing well, up $1.37. Deutsche Bank brokerage made positive comments about the company's push for netbooks.
SLM Corp (SLM), the old Sallie Mae, up $0.78. Student lending stocks like this one were higher today after the Department of Education released details of contracts for servicing student loans that had been recently awarded like one that SLM got. The terms sat well on Wall Street.
And that went for other student lending company, Nelnet (NNI) which was up $1.31 on the news.
TRW Automotive (TRW) doing well, up $2.35. The company received a favorable amendment to its credit facility and JPMorgan brokerage upgraded it from "neutral" to "over weight."
Ball Corp (BLL) up $2.36. This company makes beverage containers of all types and the Baird brokerage upgraded it from "neutral" to "out perform."
Interoil (IOC) gained $4.52 on speculation that two major Chinese oil companies want a stake in IOC's natural gas venture in Papua, New Guinea.
And Aecom Technology (ACM), this is an architectural and engineering firm. The stock up $2.76. The Sterne Agee brokerage is confident about the company's prospects for global growth and also impressed by its considerable backlog of work.
NASDAQ's most active, there you see it, Apple (AAPL) down $0.47. You heard about Steve Jobs coming back to work.
Microsoft (MSFT) up $0.51. Deutsche Bank boosted its price target on Microsoft from $22 to $30 a share.
Intel (INTC) a $0.09 gain.
Cisco Systems (CSCO) rose $0.08.
Google (GOOG) down $1.18.
Research in Motion (RIMM) fell $1.02.
Then Amgen (AMGN) rising $0.31.
Oracle (ORCL) a $0.26 gain there.
A dime loss in Qualcomm (QCOM).
And then Baidu (BIDU) with a $3 loss.
Biogen Idec (BIIB) down $2.75. Last Friday late, the tenth patient that is taking its multiple sclerosis drug Tysabri was diagnosed with the same rare brain infection as the other nine patients contracted.
And those are the stocks in the news tonight.
