Slowly the truth comes to the open in the Madoff case
A new spin to the story and brings the sons right back into the limelight as they also had AC with their fathers fake enterprise and as I suspected earlier some of his clients are also on the bench as they withdrew much more money than they ever paid in – I still think some of them did that in knowledge of the the scam and were collaborating along the scam just taking out their profit share of the scam. Part of the scam was that there was a critical mass of money and the track record added up to the 2 components to lure in big investors around the world. We will hear soon a bit more but probably not the whole truth unfortunately the big beneficiaries will be lawyers writing bills in tens or hundreds of millions and the ones cheated into that system will even have less of the money left and some who withdrew the money will be able to hide and never repay their undeserved perks.
‘All Fake’: Key Madoff Executive Admits Guilt
By CHAD BRAY and TOM LAURICELLA
A key lieutenant of convicted Ponzi-scheme operator Bernard Madoff pleaded guilty to multiple counts of fraud, becoming only the second person after Mr. Madoff to admit to complicity in the multibillion-dollar fraud.
Frank DiPascali Jr., 52 years old, pleaded guilty to 10 criminal charges at a hearing in federal court in lower Manhattan in New York and was immediately sent to jail.
A Securities and Exchange Commission civil complaint also filed against Mr. DiPascali on Tuesday offers the most vivid description yet of the inner workings of the fraud, the extent Mr. Madoff, Mr. DiPascali and others allegedly went to avoid detection and how it ultimately collapsed. It details how Messrs. DiPascali and Madoff, with others, contrived to convince regulators, investors and even visitors to their office that trading was happening, when it wasn’t.
“It was all fake; it was all fictitious,” said Mr. DiPascali in court. “It was wrong and I knew it at the time.”
The plea could prove bad news for others under investigation in the case, which have included Madoff family members, employees and some large investors. Mr. DiPascali is cooperating with prosecutors from the U.S. attorney’s office in Manhattan, and he may be able to lend support to document-based evidence that suggests some of Mr. Madoff’s highest-profile investors knew about a fraud, people familiar with the matter say. In their criminal complaint Tuesday, prosecutors said the scheme included unnamed “co-conspirators” besides Mr. Madoff.
While Mr. DiPascali faces a maximum of 125 years, he will likely receive less based in part on his level of cooperation. “I know my apology means almost nothing. I hope my actions going forward with the government will mean something,” he said. “I hope my help will bring some measure of comfort to those who have been harmed.”
Sentencing for Mr. DiPascali, of Bridgewater, N.J., is on hold pending the outcome of his cooperation, with lawyers and prosecutors expected to update the court on his status in May 2010. A long stretch before a sentencing isn’t unusual for those who cooperate, who often are sentenced after a case in which they are a witness is resolved.
Mr. DiPascali, a college dropout, joined Mr. Madoff’s firm in 1975 at age 18 and was later a key executive overseeing the bulk of the day-to-day operations of Madoff’s investment-advisory business on the 17th floor at the firm’s offices, where the fraud occurred, the SEC complaint said. Mr. DiPascali was the person many of Madoff’s investors dealt with regarding their accounts.
He said in court he believed he worked for a prestigious, successful Wall Street firm, with Mr. Madoff as his mentor. But he came to learn in the late 1980s or early 1990s that no trading was occurring in Mr. Madoff’s investment-advisory client accounts.
He admitted to helping perpetuate the illusion of a trading operation by lying to clients and creating fake client documents to reflect the “specific rate of return” Mr. Madoff directed the client receive.
He said he also lied under oath to the SEC in 2006 at Mr. Madoff’s direction. A lawyer for Mr. Madoff declined to comment.
The SEC complaint alleges that Mr. DiPascali, along with Mr. Madoff, had considerable help from others at the Madoff firm for producing everything from fake client statements to computer programming.
One strategy was to produce fake records from the Depository Trust Corp., the company that acts as the central depository for securities in the U.S. Mr. DiPascali “and others spent substantial time and effort ensuring that these reports mimicked the layout, print font and paper-type of actual DTC reports.”
In another ruse, the SEC alleged, Mr. DiPascali and others created and used a “random number generator program” to give trading orders the appearance of happening at variable intervals and in different increments.
Mr. Madoff ordered that old stationery and letterhead be maintained in case he had to fabricate records going back in time, the complaint says.
The executives even prepared for the possibility that an investor or other outsider might ask to observe actual trading. On Mr. Madoff’s instructions, Mr. DiPascali and others tested a system where one employee would enter trades in front of a visitor and another would go into an office nearby and pretend to be a trader in Europe responding to the orders, the SEC alleged.
Mr. DiPascali profited handsomely, the complaint alleges. Starting around 2002, he set up an account for himself at the firm named after his fishing yacht, Dorothy Jo. Although he never deposited any of his own money, over the years he withdrew more than $5 million for his own benefit, the complaint says. It says he received over $2 million in salary and bonus annually.
Fortunes quickly turned for the firm in the financial crisis of 2008. In the summer of that year, Mr. Madoff had on hand some $5.5 billion in an account at J.P. Morgan Chase. But as the stock and bond markets collapsed that autumn, redemptions surged to more than $6 billion. By the final days of the fraud, only a few hundred million dollars was left for redemptions, the SEC complaint says.
Mr. DiPascali and Mr. Madoff discussed using that money to cash out family, friends and employees. With Mr. Madoff’s approval, he had checks totaling more than $150 million prepared. Mr. Madoff was arrested before they were distributed. Mr. DiPascali’s lawyer said in court that his client expects to give up his ill-gotten assets, and that the government has already seized some property and is monitoring his expenditures.
Mr. DiPascali has agreed to a proposed partial judgment in the SEC case that would prevent him from committing further violations of securities laws, the SEC said. A financial penalty will be decided at a later date, the regulator said.
Prosecutors were willing to agree that Mr. DiPascali could remain out of jail on $2.5 million in bail pending sentencing. But on Tuesday, U.S. District Court Judge Richard Sullivan denied the agreement, instead sending him to jail in Manhattan. He didn’t rule out granting a different bail package in the future.
Mr. Madoff, 71 years old, is serving a 150-year sentence in a federal prison in North Carolina after admitting in March to running a decades-long Ponzi scheme that bilked thousands of investors out of billions of dollars.
Last month, David Friehling, Madoff’s outside auditor, waived indictment and pleaded not guilty to securities fraud and other criminal charges.
Prosecutors are seeking more than $170 billion in forfeiture from Mr. DiPascali, the same amount they sought from Madoff. That figure represents funds deposited by investors into Madoff’s fraudulent investment operation and later disbursed to other investors.