Legal News

LA District Atty: Budget Cuts Would Help the Next Madoff Avoid Prison

By Chris Herring

After getting slammed for not being more proactive while Bernie Madoff’s Ponzi scheme was in full effect, the SEC in January vowed to be more attentive, in order to prevent future scandals.

But that’s the SEC. Apparently not everyone’s got the money to just beef up enforcement in the midst of these dire times. Take California. On Thursday, the Los Angeles district attorney said that if a Madoff-like fraud were to hit the Golden State, state officials there wouldn’t have the resources to put the fraudster in jail.

Steve Cooley, the city’s DA, argued that Gov. Arnold Schwarzenegger’s most recent budget proposal — one that calls for moving 23,000 state prisoners into local jails to save money — would so weaken California’s sentencing guidelines that a scam like Madoff’s would only draw a misdemeanor.

Schwarzenegger claims his proposal could save the state nearly $1 billion over the next three years. California, the state with the nation’s lowest credit rating, currently faces a $24 billion shortfall.

The LA Times obtained a copy of a letter that Cooley sent to Schwarzenegger, expressing his displeasure with the proposal. He wrote:

“If Bernie Madoff had committed his crime in California under the proposed statute, his . . . scam which has destroyed countless lives and fortunes, would have been a misdemeanor,” Cooley wrote to the governor. “Such scams are commonplace in California.”

Schwarzenegger’s office did not respond to a request for comment from the LA Times.

Photo: LA Times

Full post as published by Law Blog - WSJ.com on June 26, 2009 (boomark / email).