Madoff Could Beat Prison Time Due To Foreign Prosecution

Despite several pending U.S. charges and a possible multi-count criminal conviction in the United States, a new twist emerged in the Madoff fraud case regarding Madoff's defrauding foreign financial institutions and funds that could end up in legal tug of war between the U.S. Justice Department and several foreign governments over whose going to actually prosecute and incarcerate him.

"Because of the complexities of foreign prosecution along with multiple treaties regarding incarceration, and the fact that the fraud took place in several foreign jurisdictions, it could be years before Madoff is convicted  let alone begins serving his sentence," said Larry Jay Levine, a former Federal Inmate and founder of consulting firm American Prison Consultants.  "If I were his lawyer I'd, drag this thing out forever and at his age, the likelihood is that he'd die before he'd ever spent one day in a prison cell."

The funds affected include Access International Advisors LLC’s LuxAlpha Sicav-American Selection, the Herald (Lux) US Absolute Return Fund, the Luxembourg Investment Fund-U.S. Equity Plus, and investments in those vehicles such as six sub funds of the BG Umbrella Fund,  according to the Commission de Surveillance du Secteur Financier 

The number of funds involved and questions over safeguards for investors have bankers concerned it may hurt their ability to attract placements from investors worldwide. Luxembourg with less than half-a-million people, is the world’s second- largest mutual fund market after the U.S.

“Because of this scandal, there’s the risk of reputation problems which would automatically harm us,” said Jean-Jacques Rommes, director of the Luxembourg Bankers’ Association.

The Luxembourg Fund Industry Association yesterday said 16 funds had suspended redemptions. Charles Muller, the association’s deputy director-general, said in an interview today that the regulator used more recent data than his group.