Ex-Madoff CFO pleads guilty in court in NYC

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(Agencies)
Updated: 2009-08-12 11:18

This court drawing shows Frank DiPascali (C), Bernard Madoff's right-hand man, taking the oath before being charged at the New York Federal court. [Agencies]

During his plea, DiPascali described himself as a "kid from Queens" in New York City who began working for Madoff in 1975, just after he finished high school. He said he became aware of the fraud by the 1980s or early 1990s.

DiPascali said account statements showing the firm was making trades for clients were "all fake", something "I knew, Bernie Madoff knew and other people knew." He claimed 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.

The SEC, in a complaint filed Tuesday against DiPascali, said one reason the fraud "was not detected for so long was DiPascali's considerable success in overseeing the creation of large quantities of false books and records that corroborated the fictitious trading."

The agency said new investments were dumped into a bank account that amounted to a slush fund used to pay out redemptions when investors asked for money.

The SEC said Madoff and DePascali used the fund to enrich themselves, with DiPascali in 2002 setting up an account for himself named after his fishing yacht, "Dorothy Jo." It said he withdrew over $5 million from the account between 2002 and 2008 to fund personal expenses, including the purchase of a new boat. He also received $2 million in salary and bonuses.

By the summer of 2008, the value of the account exceeded $5.5 billion. But investor redemptions spiked dramatically following the market collapse in September 2008 -- to more than $6 billion -- in the final three months of the fraud, the SEC said.

When the account dwindled last fall to a few hundred million dollars, DiPascali and Madoff discussed using the remaining funds to liquidate the accounts of family and friends of the firm, including employees, rather than honor redemption requests from institutional investors, the SEC said.

It said DiPascali reviewed investor lists and identified which accounts should be liquidated and then, with Madoff's approval, instructed that checks be prepared. Those checks, totaling more than $150 million, were found by investigators when Madoff was arrested.

Mariam Siegman -- calling herself a 65-year-old, near-homeless Madoff victim -- was the only victim to take up the judge'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."

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