Madoff accountant outlines fraud during guilty plea; judge denies bail
Posted by AccountingWEB on 2517
For at least 20 years, Frank DiPascali helped Bernard Madoff pull off what many consider the biggest Ponzi scheme in Wall Street history. And in a federal courtroom in Manhattan Tuesday, DiPascali laid out the details of how it was done in his guilty plea to 10 felony charges.
“I knew it was criminal, and I did it anyway,” said DiPascali, the 52-year-old finance chief at Bernard L. Madoff Investment Securities LLC, the New York Times reported. He told Judge Richard J. Sullivan that he used historical stock information that he gathered online to make false trade blotters. He sent fake account statements. He created the false impression that the firm was earning commissions from stock trades by arranging wire transfers between Madoff offices in London and New York.
Prosecutors were hoping DiPascali could remain free to help them build criminal cases against other players in the $65 billion scheme, but Sullivan refused to release him on $2.5 million bail, saying he has “ample incentive to flee.”
DiPascali faces 125 years plus billions of dollars in forfeitures and restitution; Madoff is in jail serving a 150-year sentence.
Some legal experts were concerned about the chilling effect the bail denial could have on others willing cooperate with prosecutors, according to the Washington Post. Charles Ross, an attorney representing a former Madoff employee, said, "Your freedom while providing cooperation is a very, very important consideration to witnesses coming forward. A highly publicized decision like this will cause clients to be that much more concerned and worried about what's going to happen when they enter their guilty plea,” he told the Post.
Steve Peikin, a former federal prosecutor, talked about Sullivan’s decision to the Financial Times: “This is a case that doesn’t have a lot of precedent in terms of scope and magnitude of harm. You can understand how in a case like this he might be particularly cautious.”
The Securities and Exchange Commission is also pursuing DiPascali in a civil lawsuit, where other details of the Ponzi scheme were revealed. The suit contends that DiPascali helped Madoff construct fake trades, generating fake returns for certain accounts that were set up by feeder funds, which directed money from other investors to Madoff.
DiPascali said in court Tuesday that he wanted to apologize to every victim: “I am very, very, very sorry.” He started working for Madoff in 1975, a year after high school, and remained loyal. “I ended up being loyal to a terrible, terrible fault,” he said.
He was taken from the court in handcuffs.