Madoff No. 2 charged with 10 crimes for fraud role

Discussion in 'Wall St. News' started by crgarcia, Aug 11, 2009.

  1. Madoff No. 2 charged with 10 crimes for fraud role

    By Grant McCool Grant Mccool – 1 hr 50 mins ago

    NEW YORK (Reuters) – Bernard Madoff's long-time deputy, Frank DiPascali, was charged with 10 crimes and is expected to plead guilty later on Tuesday in a cooperation deal with investigators for his role in Wall Street's biggest investment fraud.

    The charging document, filed in Manhattan federal court just hours before the scheduled plea proceeding, accuses DiPascali, 52, of conspiracy and securities fraud among other crimes. He faces a maximum possible sentence of 20 years on some of the charges.

    DiPascali worked for 33 years in the investment advisory arm of Bernard L. Madoff Investment Securities LLC in New York, many of them as chief financial executive, before the 2008 economic decline exposed a fraud of as much as $65 billion.

    "The government expects that DiPascali will plead guilty pursuant to a cooperation agreement with the government," said the U.S. Department of Justice website

    Court documents said U.S. prosecutors and his lawyer had proposed a $2.5 million personal recognizance bond and a sentencing date in May 2010.

    Only Madoff and the firm's outside accountant, David Friehling, had previously been criminally charged, but law enforcement sources said in June the FBI was investigating 10 or more people associated with the firm who could also be charged.

    Madoff, 71, pleaded guilty in March and is in a medium- security prison in Butner, North Carolina, after a judge sentenced him on June 29 to an effective life term of 150 years. The accountant Friehling pleaded not guilty.

    Madoff, who swindled large and small investors worldwide over at least 20 years, admitted in a guilty plea in March to having operated a classic Ponzi scheme, a fraud in which early investors are paid with the money of new clients.

    Court documents released last Friday said U.S. prosecutors expect DiPascali to plead guilty to "a criminal information," which is an alternative charging document to a grand jury indictment.

    Public records show DiPascali has a home in Bridgewater, New Jersey, 42 miles southwest of New York.

    At the Madoff firm, he worked with separate staff and Bernard Madoff on the 17th floor of the firm's office at the Manhattan building known as the Lipstick Tower.

    The firm's stock traders and other staff worked on the 18th and 19th floors, where they were supervised by Madoff's brother, Peter.

    DiPascali faces a maximum possible sentence of 20 years imprisonment on each of the charges of securities fraud, falsifying books and records of a broker dealer, mail fraud, wire fraud and international money laundering.

    He faces a maximum possible sentence of five years in prison on each of the charges of conspiracy, investment adviser fraud, falsifying books and records of an investment adviser, perjury and federal income tax evasion.

    DiPascali's lawyers said last week they would not comment on the matter.

    (Reporting by Grant McCool; editing by John Wallace, Andre Grenon and Steve Orlofsky)
  2. Pleads guilty:

    Ex-Madoff CFO pleads guilty in court in NYC
    Former Madoff CFO DiPascali pleads guilty to conspiracy, other charges in NYC

    * By Tom Hays, Associated Press Writer
    * On Tuesday August 11, 2009, 6:06 pm EDT

    NEW YORK (AP) -- The former chief financial officer for Bernard Madoff pleaded guilty Tuesday to conspiracy, admitting he helped Madoff carry out a massive fraud that cost thousands of people billions of dollars by lying to investors and testifying falsely when it seemed the fraud might be discovered.

    "I was loyal to him. I ended up being loyal to a terrible, terrible fault," Frank DiPascali said as he pleaded guilty in U.S. District Court in Manhattan to charges including securities fraud, falsifying records and international money laundering.

    Afterward, U.S. District Judge Richard Sullivan surprised the defendant, prosecutors and a defense lawyer by ordering DiPascali jailed, a rarity for someone in a white-collar case who had pleaded guilty with a cooperation deal.

    Sullivan said he may later reconsider his decision to jail the 52-year-old DePascali but felt compelled to keep him locked up after he had admitted that he lied to the Securities and Exchange Commission in 2006 when he thought they might discover the fraud and that he lied repeatedly "to people who entrusted him with their life savings."

    The judge jailed him despite a request by Assistant U.S. Attorney Marc Litt that he be kept free or under house arrest to assist investigators studying millions of pages of documents and data that he is familiar with. His lawyer, Marc Mukasey, said his client was "completely unprepared for this."

    The cooperation deal may still earn him leniency against charges which carry a potential penalty of up to 125 years in prison at a sentencing that will not occur before May 2010.

    Madoff is serving 150 years in prison for a pyramid scheme that demolished thousands of people's life savings, wrecked charities and shook confidence in the financial system.

    Customers say DiPascali was their main contact with Madoff's firm, a fact he admitted as he confessed to the 10 charges contained in a criminal information charging document.

    His admission provided a wider understanding of how the fraud took place than had emerged during Madoff's statements in court.

    DiPascali said he began working for Madoff in 1975 -- just after he finished high school -- and had joined Madoff in his fraud by the 1980s or early 1990s, when he knew that he and Madoff were promising investors that transactions were being made which were not.

    DiPascali says the transactions were "all fake. It was all fictitious. It was wrong, and I knew it was wrong at the time."

    DiPascali said he thought "for a long time" that Madoff had other assets to cover the claims of any investors who might demand their money back.

    "That's not an excuse. I knew everything I was doing was wrong and criminal," he said.

    He added: "I don't know how I went from an 18-year-old kid who just happened to have a job to someone standing before you today."

    Mariam Siegman, who described herself as a 65-year-old Madoff victim, was the only victim to take up Judge Richard Sullivan's invitation to speak at the hearing.

    She said she opposed acceptance of the plea because it prevents a trial and "the kind of justice that allows truth to be spoken out loud in a courtroom."

    The judge said that he did not believe "the quest for truth ends today" and that he expected to learn much more before the 2010 sentencing.

    "There will be more information and the court will sentence on the basis of additional information," Sullivan said.

    Customers say that for decades DiPascali answered their questions about their accounts with Madoff's firm and helped them if they wanted to add or withdraw money.

    He and Madoff came from the same part of Queens, and DiPascali's first job was as Madoff's assistant. In the 1980s, DiPascali held titles with Madoff's firm including director of research and director of options trading. Since 1996, he had been the firm's chief financial officer.

    During his guilty plea in March, Madoff insisted that he acted alone. Only one other person -- his accountant -- had been charged during the seven-month investigation before the charges were revealed against DiPascali.

    The conspiracy charge against DiPascali and his cooperation deal are likely to increase speculation that investigators might learn who carried out the details of the multi-decade fraud that led thousands of investors to sink at least $13 billion into Madoff's firm to lose all.

    Madoff had told investors late last year that their accounts contained nearly $65 billion, when he actually had only several million dollars left of their money.

    Since Madoff revealed the fraud to his sons in early December and was arrested by FBI agents, investigators have looked into the actions of his wife, Ruth, his brother and two sons, who ran a trading operation under the same roof, and other insiders. No other Madoff family members have been charged.

    The FBI has said it expects more arrests before it concludes the probe.