Bernard Madoff’s right-hand man, Frank DiPascali, admitted Tuesday that he played a key role in orchestrating the largest investment fraud in history.
DiPascali, 52, now faces 125 years in prison after pleading guilty to the following 10 counts: conspiracy, securities fraud, investment adviser fraud, falsifying books and records of a broker dealer, falsifying books and records of an investment adviser, mail fraud, wire fraud, international money laundering to promote specified unlawful activity, perjury, and federal income tax evasion.
Prosecucutors said they would ask that DiPascali be held on $2.5 million bail.
During a hearing in federal court in lower Manhattan, DiPascali apologized to victims of the fraud and admitted to essentially running the day-to-day operations of Madoff’s investment firm. “It was all fake. It was all fictitious,” he said.
DiPascali is just the third person to face criminal charges as a result of Madoff’s massive Ponzi scheme.
Meanwhile, the Securities and Exchange Commission said Tuesday that civil charges have been filed against DiPascali charging him with fraud.
“DiPascali and Madoff ran an extraordinary and massive counterfeiting operation that concealed their fraud from investors and regulators alike,” said Robert Khuzami, Director of the SEC’s Division of Enforcement, in a statement.
The criminal case against DiPascali was widely anticipated, as DiPascali was listed as the chief financial officer of Bernard L. Madoff Investment Securities. In testimony Tuesday, DiPascali confirmed what investigators had determined months ago. Namely, that Madoff’s investment firm did not conduct a single trade for investors for many years prior to Madoff's arrest and that all of the financial statement created by employees were fraudulent.
If, as believed, DiPascali is talking with authorities, his cooperation could be damaging for others who did business with Madoff, especially the managers of so-called feeder funds who acted as de facto agents for Madoff’s business.
The government has requested a sentencing date for May 2010, presumably to give investigators time to work with DiPascali.
DiPascali was almost certainly in a position to know which money managers with whom Madoff did business knew that Madoff was running a scam.
Madoff was arrested in December after confessing to FBI agents that he had bilked investors of billions of dollars. He subsequently pleaded guilty to 11 felony counts and was sentenced in June to 150 years in jail.
Madoff’s accountant, David Friehling, was charged in March in a criminal complaint with fraud for allegedly rubber stamping audits of Madoff’s financial statements.
DiPascali’s attorneys issued a statement Friday saying they would have no comment on the criminal case.
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