MANILA, Philippines – The brains behind the biggest Ponzi scam in the world, Bernard Madoff, has been sentenced by a US court to 150 years in prison.

He pleaded guilty to securities, mail and wire fraud, money laundering, investment-adviser fraud, perjury, theft and making false statements.

As there were no circumstances that could mitigate the gravity of his offenses, the judge imposed on him the maximum sentences allowable under US law.

The erstwhile high flying money manager will serve the prison terms consecutively. Barring a presidential pardon, Madoff, 71, will spend the rest of his life behind bars.

His sentencing, however, does not put an end to the tragic saga. The authorities do not believe he acted alone in his three decades-long global swindle.

His wife, brothers and two sons, whom he earlier absolved from culpability for his crimes, are not yet off the hook. They, together with some of his business associates, are still under investigation.

The search is on for proof that will justify filing charges against those people or the seizure of their properties suspected to have been acquired from Madoff’s ill-gotten wealth.

Operations

The skepticism is well-grounded. Financial scams, regardless of where they operate, are never one-person affairs.

Although a swindling scheme starts initially as the idea of a single person or a group of similarly evil-minded people, it needs sales and marketing personnel to promote its “products.” Their efforts, in turn, have to be coordinated by lawyers, accountants and other professionals whose principal duty is to keep the cash registers merrily ringing without inviting attention or scrutiny from the authorities.

It is essential that the business entity used as vehicle to attract potential victims and to channel the proceeds of the loot to the operators appear legitimate. Every effort must be taken to project to the public the image of a law-abiding and responsible corporate citizen.

In the hands of a skillful lawyer, half-truths and incomplete data can be made to appear as accurate or in conformity with the requirements for the issuance of permits or licenses to operate the business of the corporation.

If there are ambiguities or loopholes in the law that can be used to protect scam artists from prosecution, there is no dearth of lawyers who will enthusiastically prepare that legal cover for the right price.

Creativity

No lawyer would openly admit it, but there is quiet rejoicing in law offices whenever weaknesses in the law are successfully exploited for the benefit of clients.

After all, the reasoning goes, that’s what lawyers are paid for. Sounds mercenary, but that’s how the cookie crumbles in the legal profession.

The most recent example of such maneuver is the reported practice of rural banks identified with the Legacy Group to break down their deposits in P250,000 multiples to take advantage of the government’s insurance cover.

Another indispensable element in the operation of scams is “creative accounting” or, loosely defined, the art of manipulating accounting rules and principles to meet the objectives of its intended beneficiary.

With deft movements of entries in the financial statements, values can, for instance, be attributed to assets that do not exist or, if they do, the prices are exaggerated. To the untrained eye, the resulting figures give the impression that the company is in good financial health. The truth comes out only when the scam is exposed and the investors are left holding the proverbial empty bag.

Liability

It’s every man for himself if the scam unravels and the authorities run after its operatives.

Unless the operators do a Madoff, that is, own up to the crime, expect them to deny any culpability and invoke all kinds of defenses to avoid prosecution. If push comes to shove, the scam artist can claim he did the acts complained of after consultations with or upon the advice of his legal and financial advisers.

This I-acted-in-good-faith defense is de rigueur in corporate cases. The indicted business executive passes the blame for his violation of the law to the people who allegedly advised him on the matter. If there are documents that could prove this allegation, the advisers could find themselves in serious trouble. But chances of finding “smoking guns” of that nature are rare. Lawyers and accountants are very careful about putting in writing advice to clients that may fall in the wrong hands or smacks of professional misconduct.

The rule of the thumb for giving sensitive or confidential (read: legally questionable) advice is: Do it verbally, nothing in writing. This way, in the unlikely event of a parting of ways, it will be the word of the client against that of the adviser. If for any reason that rule is forgotten, the argument may be raised that the advice given was merely recommendatory or an expression of opinion which the client was free to accept or reject. And if he does, he should be held accountable for his actions.

Anybody who believes scam operators act alone or without the benefit of professional advice should undergo a brain scan.

(For feedback, please write to rpalabrica@inquirer.com.ph)