1 Boring Old Man

Some of Madoff’s employees pursued by prosecutors
DailyFinance
By Lita Epstein
March 11, 2009

Now that Bernard Madoff pleaded guilty to 11 charges, prosecutors’ efforts turn to identifying those who helped him perpetuate the fraud. Investigators say Madoff told 4,800 investors in November that their accounts were worth $64.8 billion, even though he knew their holdings were a "small fraction" of that amount, according to the charges filed in Manhattan federal court Tuesday. What prosecutors still don’t know is whether the employees of the firm knew these numbers were fraudulent, though investigators believe that at least some employees were involved in the fraud…

… What has come out so far is that Madoff told his employees to create false account documents and trade confirmations that reflected phony returns so they could transfer funds and give the appearance of legitimate trades. They used this information to generate false financial statements for regulators, according to the U.S. prosecutor…

…Prosecutors alleged Tuesday that Madoff hired numerous employees with "little or no prior pertinent training or experience in the securities industry" and caused them to "communicate with clients and generate false and fraudulent documents."

So who are some prime targets for investigators to pursue? Here’s what is known about some key employees, but I want to make it clear that none have been accused of any wrongdoing:

• Frank DiPascali, director of options trading, is the one who Madoff says executed trades. But at this point the court-appointed trustee found no trading occurred for the past 13 years. Investigators have talked with at least three employees under DiPascali. Employees were given proffer agreements, which means the prosecutors agree not to use their statements against them as long as they tell the truth.
• Annette Bongiorno, who worked for Madoff for 40 years, instructed assistants to generate trading tickets that appear to be bogus. According to investigators, she would ask assistants to research daily share prices for blue chip stocks from the previous month or several months earlier. Using these researched numbers, Bongiorno would instruct assistants to generate the "trading" tickets, so they could show gains that were in line with Madoff’s steady annual returns. Investigators obtained this information from talking with Bongiorno’s assistants.
• Horowitz and Friehling, auditors for Madoff, so far have given no indication of knowledge of any fraud. Jerome Horowitz, who was Madoff’s auditor from the early 1960s until he retired in 1995, told investigators in a recent interview that he saw no indication of fraud. His son-in-law, David Friehling, has handled audits since Horowitz retired. Investigators indicate he has said nothing to implicate his son-in-law…
• Ruth Madoff, Madoff’s wife, reconciled the Madoff firm’s bank accounts. She recently announced that she will hire her own attorney separately from her husband. Two lawsuits have been filed against Ruth Madoff in New York State court.
• Peter Madoff, Madoff’s younger brother, had the title of compliance officer, which made him responsible for assuring the firm followed securities laws and regulations. Peter Madoff and Bernard Madoff are listed as officers of the firm on SEC filings.

… The issues related to forfeiture, restitution and sentencing in this matter are highly complex and will require extensive time to resolve." Obviously, since Ruth Madoff wants to keep $70 million dollars of her assets, the amount to be paid in restitution becomes a key sticking point in negotiations.

So, which of the above were involved? Frank DiPascali and Annette Bongiorno for sure. They were the ones who prepared the bogus statements- scoured the Stocks to make them fit Bernie’s fictitious returns [717,600 statements]. Horowitz and Friehling were auditing an Investment business that made no investments, that was purportedly managing billions that no longer existed [52 Quarterly Financial Reports]. Ruth Madoff was reconciling the bank accounts for a firm trafficking in billions that wasn’t moving any money at all and had relatively small Capital compared to the reported assets. Peter Madoff was the compliance officer making sure they followed security laws and rules in an investment firm that never bought a stock once in thirteen years [actually buying and selling the stocks seems like it should be one of the security rules].