Bernie Madoff, the man behind one of the largest investment frauds of all time, was sentenced Monday to 150 years in prison by U.S. District Court Judge Denny Chin. The former Nasdaq chairman was facing a sentence ranging from 12 years to 150 years. In his sentencing, Judge Chin called the case "unprecedented", based mostly on the crime's impact on its victims. But there is another precedent-setting element to this case: the length of Madoff's prison sentence to compared to other corrupt white-collar criminals who came before him. (For background reading, see The Biggest Stock Scams Of All Time.)
Madoff's victims, some of whom lost their life savings in the scam, cheered as the 150-year sentence was delivered. But does Bernie Madoff's time fit his crime? Let's take a look at some other notorious white-collar criminals to see how he fared in comparison.
Crime Vs. Time: White Collar Criminals and Prison Sentences
- Charles Ponzi: $15 million = 14 Years (five federal, nine state)
The Ponzi scheme traces its origins back to one of the greatest scam artists of all time, Charles Ponzi. He made millions by promising investors a 50% return in 45 days, or a 100% return in 90 days. Ponzi used the incoming flow of cash from new investors to pay off existing investors, and this cycle created what is known today as the Ponzi scheme. Charles Ponzi's scheme unraveled as the cash flow stopped coming in fast enough to cover the outflow of cash. He was eventually charged and convicted of mail fraud in 1920 and sentenced to five years in prison. After being released, he was charged and convicted at the state level and sentenced to an additional nine years in prison. After being released a second time, he was immediately deported to Italy to live out the rest of his life.
- Reed Slatkin: $593 Million = 14 Years
Reed Slatkin was the mastermind behind one of biggest Ponzi schemes of all time. As a Scientology minister and cofounder of EarthLink (Nasdaq:ELNK), Slatkin was able to lure hundreds of investors into his scheme by posing as an investment advisor. In his persuasiveness, he was much like Madoff: able to get A-list celebrities and high-level executives to invest in his scheme. Slatkin was eventually charged with 15 felony charges and sentenced to 14 years in prison in 2003.
- Lou Pearlman: $300 Million = 25 Years
The former manager of famous boy bands 'N Sync and The Backstreet Boys was also the architect of - you guessed it - a massive Ponzi scheme. For more than 20 years, Pearlman managed to get investors to invest in his "Employee Investment Savings Account" program, using forged Federal Deposit Insurance Corporation (FDIC) documents along with forged bank guarantees to create the illusion of safety. Pearlman was convicted and sentenced to 25 years in prison for his crimes in 2008. However, U.S. District Judge G. Kendall Sharp allowed Pearlman to reduce his sentence by one month for every million dollars he helped his victims recover.
- Jeff Skilling: Estimated $62 Billion = 24 Years, 4 Months
As the former CEO of Enron, Jeffrey Skilling received 24 years and four months in jail and was fined $45 million for his role in the Enron scandal. Enron collapsed in 2001 when it was revealed that the firm had used numerous accounting tricks to hide mounting debts and falling profits. It is estimated that investors lost about $60 billion, while pensioners lost about $2 billion. Enron's founder, Kenneth Lay, also faced a sentence of up to 40 years, but he died prior to sentencing. (Read more about the Enron scandal in Enron's Collapse: The Fall Of A Wall Street Darling.)
- Bernard Ebbers: Estimated $175 billion Dollars = 25 years
Bernard Ebbers received 25 years in prison for his role in the massive WorldCom accounting fraud. Between 1999 and 2002, during which time Ebbers served as Worldcom's CEO, the company used fraudulent accounting to cover up declining earnings. 17,000 employees lost their jobs at the company, which at its peak had a market capitalization of about $120 billion. The fraud caused more than $175 billion in investors' losses.According to the Assistant U.S. Attorney at the time, David B. Anders, the WorldCom case created "the standard for large frauds".
It is estimated that Bernie Madoff defrauded his victims of $65 billion. That's a lot of money, and it represents the life savings of some clients, many of whom could not afford to lose these assets. Clearly, this man had it coming, but his sentence still outpaces those of his contemporaries by three or four times. It is likely the 71-year-old Madoff will spend his last days in prison, but based on the severity of his sentence, his case is likely to live on long beyond his time.