Bernie Maddoff Sentenced to 150 Years Behind Bars

Bernard Maddoff was sentenced to an amazing 150 years behind bars this morning. As for the 1,341 accounts holders who suffered estimated losses of $13.2 billion, a payback sentencing will not come for another few months, according to the New York Times. (I wonder how he's going to pay that back from behind bars. Talk about debt settlement!)

“I’m responsible for a great deal of suffering and pain, I understand that,” Bernard Maddoff told the court at his sentencing. “I live in a tormented state now, knowing all of the pain and suffering that I’ve created. I’ve left a legacy of shame, as some of my victims have pointed out, to my family and my grandchildren.”

In Maddoff’s prolonged Ponzi scheme, he successfully conned hundreds of victims out of billions of dollars by promising very large return on investments and fruitful futures. Obviously, he could not pay out on these promises. Bernard Maddoff’s 20 year scheme is one of the longest and most detrimental in recent history, turning him into the face of Wall Street's rough times.

Sharon Lissauer, a Maddoff victim, said she invested all of her savings with Mr. Madoff, told the court: “He should spend his whole life in jail. He’s ruined so many people’s lives. He killed my spirit and shattered my dreams.”

Before Bernard Maddoff’s sentencing today, his lawyer was aggressively arguing for the shortest sentence of 12 years to be handed down, claiming that Maddoff probably only has 13 years left to live. The judge, however, did not buy the act and handed down the one of the largest penalties ever for a white collar offender in NYC.

As the judge handed out Bernard Maddoff’s sentence, he made it clear that not one single person had come to Maddoff’s aid. There were no letters to the judge on Maddoff’s behalf, no family or friends who had claimed Bernard Maddoff was in fact a good man. While on the other side of the bench there were many letters and complaints from the victims, their family and friends who went from living the high life to losing everything almost overnight.

Bernard Maddoff’s sentencing is only the first step in this process that will still take many months to reach an end. It will take several months and hard work to figure out just how much money each victim lost and is owed, according to the New York Times.

Ponzi schemes have always been a part of Wall Street and NYC, but never to this caliber. What is a Ponzi scheme? Well, it’s simple. Maddoff took his “clients” money with promises to invest it in the stock market, and here and there, and make millions off of it. He promised his “clients” they would become rich through his investments of their money. Basically, he promised huge returns. But, instead of investing the money, Bernard Maddoff kept it. He’s pay out a little here and there to keep the scheme running for 20 years, and to keep his “clients” thinking positively, but in the end he spent all the money on himself.

Moral of the story; be smart with your money, especially during these rough economic times. If you’re thinking of investing, research all of your options. Poniz schemes and stories like Maddoff’s can be avoided with research and timely investments. Don’t be fooled by a large return on investment. It’s your money, your hard work, and your investment. Be smart about who you choose to give it to.

College Costs Are About To Get Some Help

In this recession, when we can’t even make our house payments, college tuition is on the rise. The costs at my college, Arizona State University, were literally outrageous, sending me into debt for probably the next 10 to 20 years. Actually, probably even longer then that.

So, while we’re struggling to work our way through school in a part-time job that frustrates us and pays minimum wage only to head home at nights and hit the books to keep our grades at acceptable levels, our school presidents are discussing how they can add new buildings and labs, which will in turn knock out some of the parking areas, which will drive prices up for parking as well as for tuition to pay for the new buildings that will only serve research professors who teach one class a week. (Taking a breath now).

And then we’ll graduate with a degree in something that we probably shouldn’t have pursued, only to be promoted to a full-time manager at our minimum wage job and stuck paying monthly bills for student loans for a degree that is getting us nowhere. But, I’m not bitter about the overpriced tuition, the books that cost $200 when you buy them but cost the school $50, and will get a buy-back value of $5 if you’re lucky. (Taking another breath).

Here’s the deal, though:

As part of the College Cost Reduction and Access Act signed into law last September, a new repayment plan will be available to grads on July 1 that will make it easier for them to afford their federal loans by basing monthly payments on their income as opposed to their outstanding federal loan balance. Also starting next month, those who decide to consolidate their variable-rate Stafford and Plus loans will be able to do so at a rate of as low as 2% -- a historic low. – SmartMoney.com

This plan was signed into law by President Bush in order to help students, and parents, pay back student loans based on their income. It’s a great idea, and one that will take effect very soon and help out millions of families. It is ironic that it’s just happening to take effect during a recession when so many people are in need of so much help. College costs are continuing to rise through the roof, and it’s an ironic twist of fate that this bill would take effect during the midst of our troubles.

Loan payments will be limited to 15 percent of a borrower’s discretionary income or 15 percent of the amount that a borrower’s (and spouse’s if applicable) adjusted gross income exceeds 150 percent of the poverty line, divided by 12. Unpaid interest and principal are capitalized and any outstanding loan balance is forgiven after 25 years of repayment.

PLUS Loans made on behalf of a dependent student and Direct Consolidation Loans that contain PLUS loans are not eligible for the income-based repayment program. –LALate.com

While we still will struggle with the cost of college, and our wonderful college presidents (not naming any names) continue to raise tuition on us, the College Cost Reduction and Access Act is some much needed relief.

Marriage and Money

This might not be the two terms that you’d consider when tackling the topic of debt, but money and marriage truly go hand-in-hand. If you’re married, you definitely know this, and if you don’t then you’re probably in big trouble.

I recently read an article regarding marriage and money in U.S News & World Report. It was extremely interesting mainly because they interviewed an ordained minster who was also a money and debt consultant.

Is money different for married couples versus single people?
[Once you're married], you have to understand now that you're responsible to another person. You can't just think of it as 'my money,' even if you have separate accounts. Both of you are responsible for the overall household. If one of you think it's just your money, the household will fall apart.

Do you think married couples should maintain separate accounts?
We have separate accounts for pampering each other, but not for household money. Before, if he tried to pamper me, I would say, 'Where did that money come from?' since I was in charge of managing the money. So I recommend a separate account for that factor. Also, if you are bringing debt in the marriage, that should stay separate until you figure it out.

That way, you don't have to feel like, 'Honey, can you give me an allowance?

You'll go crazy like that. I have gone and made arrangements for our anniversary and made hotel reservations and he didn't know. For Father's Day, I made arrangements for him to go to a photography seminar next month. And he'll bring me flowers with that separate money. We allow that freedom because we talk; there are no secrets.

What if only one person earns money in the family, does that same system work?
When we were in that situation, I made sure I left a signed check in the house, so if anything came up, they could handle it. It's still the household money, not one person's money.

What are common mistakes married people make with their money?
If somebody gets their feelings hurt, they go and shop out of emotion, so they're creating new bills without addressing what was done to hurt their feelings. The problem is still here. Another thing that's common is the one who makes the most money thinks they can dictate the household, because they think it's my money and not ours.

Do you think getting married can improve people's finances?
It can. It did for us. My husband and I both come into our marriage in debt. When you're a giver, like I am, you have to learn to set boundaries. He was a shopper, so I was the best person to manage our money. We formulated a plan and said, 'We'll be out of debt in 5 years.' We did it in 2.5 years. We had $30,000 in debt and were making $20,000, and we paid everybody off.

What should engaged couples talk about before they get married?
What existing debt do you have? What student loans? What car payments that parents will stop paying? Are you about to lose your car? If you have a child, do you have child support? You can't hold anything against the person prior to your getting married -- you were not there. We all make mistakes. Forgive yourself for financial mistakes that you made; you were not taught how to mange money.


Maybe it’s because I’m in the middle of planning my wedding and my thoughts are crowded with flowers, family, cake, music, tastings, payments and more payments, but marriage and money is something that probably should be talked about more.

I mean, you cannot go into a marriage with debt and not discuss it. You cannot go into a marriage without deciding what to do about your finances, your checking and savings accounts, your bills, and your play money. It’s nearly impossible to have a cohesive marriage and not discuss money and debt.

The funny thing about marriage, money and debt is that credit counseling and marriage counseling are not that different. In one situation you learn to communicate and balance your differences. In the other you learn to balance your checkbook.

Money and debt will leave you jaded, broken, poor, and unable to have a successful future when you’re stuck with bad credit for many years. Ironically, a failed marriage can leave you jaded, broken, extremely poor, and unable to have a successful future for many years until the sting is gone.

Free-Speech Case for a Debt-Ridden Age(NY Times)

WASHINGTON —The great Supreme Court free-speech cases of the 20th century arose from the suppression of political dissent in wartime and the struggle for civil rights in the South. These days, the court’s First Amendment docket is thinner and odder.

A recent sample: Minor celebrities, swearing. Dog fight videos. A monument to the Seven Aphorisms of the Summum religion. A banner reading “Bong Hits 4 Jesus.”

But the Supreme Court did just agree to hear a free-speech case that captures the tenor of our times. It concerns bankruptcy.

One of the plaintiffs in the case is Robert J. Milavetz, a 73-year-old lawyer from Minnesota. In the 1960s and 1970s, he represented conscientious objectors and people accused of violating obscenity laws. The new free-speech battleground, he says, is whether the government can gag lawyers seeking to help their clients arrange their financial affairs.

In 2005, Congress enacted a law that seems to bar lawyers from advising their clients to take on more debt if they are considering bankruptcy.

“Any lawyer with a First Amendment background would immediately recognize the First Amendment problems in this statute,” Mr. Milavetz said.

The law was meant to combat what it called bankruptcy abuses. It is certainly possible to abuse the bankruptcy system by piling on debt right before filing in the hope that you will not have to repay it. But ethics rules already forbid lawyers from advising their clients to break the law.

At the same time, not all new debt in the face of bankruptcy is abusive. It may be perfectly legal and prudent, for instance, to refinance a home mortgage to pay down credit card debt. It may make sense to buy a car on credit to make sure you can get to work — so you can pay back your creditors. But the law seems to forbid lawyers from suggesting or even discussing such things.
Joseph R. Prochaska, a bankruptcy lawyer in Nashville who represents creditors, said a client might get plausible advice from, say, a brother-in-law or Suze Orman on CNBC about refinancing a loan.

“You go to your lawyer for confirmation,” Mr. Prochaska continued. “As a lawyer, what do you say to that? ‘If I told you to do that, I’d be breaking the law.’?”

Experts in First Amendment law and legal ethics said the law, at least if read broadly, is deeply flawed.

“To say that a lawyer can’t advise a client to take on legal debt is clearly unconstitutional,” said Erwin Chemerinsky, the dean of the new law school at the University of California, Irvine.
Stephen Gillers, who teaches legal ethics at New York University, agreed. “Congress has no legitimate interest in denying people knowledge of their lawful alternatives,” Professor Gillers said.

In its brief urging the Supreme Court to hear the case, the government did not defend the broader and more natural reading of the law, the one that would forbid even lawful advice. Instead, it said the law contained “a term of art” with “a specialized meaning” that should allow for a more limited reading, one that applies only to abusive situations.

The law forbids advising someone “to incur more debt in contemplation of such person filing” for bankruptcy. The term of art, the government says, is the three-word phrase “in contemplation of.” You probably have to be a very good lawyer to make that phrase mean what the government says it means: “actions taken with the intent to abuse the protections of the bankruptcy system.”

In fairness, the government’s interpretation won support from a dissenting appeals court judge in the case the Supreme Court agreed to hear, from the United States Court of Appeals for the Eighth Circuit, in St. Louis, and a unanimous three-judge panel of the Fifth Circuit, in New Orleans.

To avoid holding a law unconstitutional, the Fifth Circuit said, it is sometimes a good idea to give a “restrictive meaning” to “what appear to be plain words.” That approach has a name: the doctrine of constitutional avoidance.

Mr. Milavetz’s law firm challenged the law, asking that it be struck down in all possible applications. Its briefs discuss hypothetical problems. The law prohibits advice about co-signing on a child’s student loan, one brief said, or borrowing to pay for credit counseling.

But the Supreme Court has not welcomed these kinds of sweeping challenges in recent cases, preferring more focused “as applied” cases that take issue with particular applications of laws.

The law also requires bankruptcy lawyers covered by it to publish disclosures when they advertise. The law says they must use this statement or something “substantially similar”: “We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”
Mr. Milavetz said the language was aimed to stifle speech. “I feel the term ‘debt relief agency’ is pejorative,” he said. “It deters lawyers from advertising.”

Other lawyers welcome the requirement.

“Most consumer bankruptcy lawyers like to call themselves a ‘debt relief agency,’ ” Mr. Prochaska said. “They have buttons that say ‘Federal Debt Relief Agent.’ It’s a marketing tool.”
There are traces of history in every era’s First Amendment cases. These days, it seems, the great open question is what may be said in the face of looming financial ruin. (NY Times)