The Serious Fraud Office (SFO) announced an investigation into the collapse of the Bernard Madoff (Madoff) investment scheme on 8 January 2009. This was in response to widespread public concern in the UK about Madoff's UK operations.
The SFO investigation is looking at all aspects of the affair as they touch on the UK, but does not contemplate a prosecution of Madoff in the UK. There are sound legal and public policy grounds for this, which I set out below.
For a prosecution to be brought in this country, it would have to be shown that an offence had been committed over which the UK courts had jurisdiction. It may be that by causing intermediaries to solicit investment in the investment scheme, Madoff has committed fraud in the UK. It is likely that by moving money invested with him via the accounts of Madoff Securities International Ltd (MSIL) in London, he has committed the offence of money-laundering. It would, however, be a bar to prosecution if Madoff could show that he had already been convicted of offences covering the same alleged conduct (this is the legal doctrine of “autrefois convict”).
Madoff pleaded guilty to an indictment containing 11 counts in New York on 12 March 2009. The indictment to which he pleaded included charges of money-laundering, fraud and perjury. It is almost certain that any conduct that might give rise to criminal liability in the UK is covered by the offences to which Madoff has pleaded guilty in the US. Accordingly, there could be no prosecution in the UK.
There are good public interest reasons not to conduct separate proceedings in this country. As a result of his guilty pleas, Madoff's bail was revoked and it is widely anticipated that he will receive a sentence that will mean he spends the rest of his life in prison. In those circumstances it is difficult to see what purpose a UK prosecution would serve.
Of course, one of the principal concerns for investors will be the payment of restitution. The US Criminal Court will administer property forfeited by Madoff for the benefit of all investors. This process will work in tandem with the compensation scheme administered by the Securities Investments Protection Corporation, which reimburses losses up to $500,000 to those with named accounts with Madoff.
The SFO investigation is focusing on the activities of MSIL, and is playing a significant role in helping investors to understand how the fraud operated.
The SFO is anxious that the interests of investors in the UK are taken into account, and is taking active steps to trace and preserve assets falling under the jurisdiction of the UK courts so that they can be returned to investors.