Bernard Madoff’s brother pleads guilty
NEW YORK — Peter Madoff admitted that he helped his older brother Bernard conceal history’s largest Ponzi scheme, misleading investors and regulators with phony records.
But the younger Madoff, who pleaded guilty in federal court in Manhattan on Friday, denied knowing that his brother’s money management business was really a $65-billion fraud that fleeced investors large and small. He agreed to serve the maximum sentence of 10 years in prison.
Peter Madoff said he was incredulous when Bernard Madoff told him in December 2008 that the respected Wall Street firm they built over four decades was a fraud.
“I was in total shock, unable to absorb the full import of the words I was hearing,” Peter Madoff told a packed federal courtroom 26 stories above lower Manhattan.
This marks the first relative of Bernard Madoff to face prosecution since the Ponzi scheme mastermind confessed to the FBI 3 1⁄2 years ago. Peter Madoff is the 13th defendant to be charged, and the eighth to
plead guilty.
Peter Madoff, 66, began working for his brother in 1965. He said he wound up believing his brother to be a brilliant Wall Street trader who ran a well-respected market-making firm and later became chairman of the Nasdaq Stock Market.
He also had a hand in maintaining Bernard Madoff’s public image by keeping regulators off his back. This included filing false records with the U.S. Securities and Exchange Commission, which helped hide the size and scope of the Madoff’s investment advisor business, prosecutors said.
In regulatory filings, Peter Madoff claimed the money management business had only 23 highly sophisticated investors, not the actual 4,000 — many of them ordinary investors, as well as charities and university endowments — that would have drawn closer scrutiny, Assistant U.S. Atty. Lisa Baroni said.
As chief compliance officer for Bernard L. Madoff Investment Securities, Peter Madoff also falsified the firm’s compliance records. For example, Baroni said, he once completed weeks’ worth of reports in one sitting, using different pens with different colored inks.
“I know that the conduct was wrong and I am deeply ashamed,” Peter Madoff told the court, his voice breaking. He apologized, adding: “I am here today to take responsibility.”
In a deal with prosecutors, Peter Madoff pleaded guilty to two charges, conspiracy and falsifying the records of an investment advisor.
The conspiracy count involved, in part, tax fraud and falsified employment records involving what prosecutors called a “no show” job for his wife.
Peter Madoff’s 10-year sentence is now pending approval by U.S. District Judge Laura Taylor Swain at his Oct. 4 sentencing. Swain approved $5-million bail.
He would also lose everything he owns as the government seeks $143 billion in forfeiture, which could eventually go to repay investors. The sum reflects how much money investors paid into Madoff’s firm from 1996 to 2008.
A forfeiture agreement includes all assets of his wife, Marion, and daughter Shana, as well as those of other family members. Surrendered assets include homes, a Ferrari and more than $10 million in cash and securities.
Marion Madoff will be left with approximately $771,733 to live on for the rest of her life, according to prosecutors. Ruth Madoff, Bernard’s wife, got $2.5 million.
Adecade would put Peter Madoff behind bars for far less time than his brother, who was banished to 150 years in prison at the same courthouse in 2009.
“Peter Madoff enabled the largest fraud in human history,” U.S. Atty. Preet Bharara said in a statement. “He will now be jailed well into old age, and he will forfeit virtually every penny he has. We are not yet finished calling to account everyone responsible for the epic fraud of Bernard Madoff and the epic pain of his many victims.”
Of eight defendants to plead guilty, only Bernard Madoff has been sentenced; the remaining five are awaiting trial.
Sentencing has been put off for defendants who have been cooperating with the government’s investigation, suggesting that the inquiry isn’t finished.
“They’re squeezing them for as much information as they can about as many people as they can, and they want to continue to have the leverage of jail time,” said Michael Weinstein, a former federal prosecutor who is now a white-collar defense attorney in New Jersey.
In addition to the criminal case, the SEC sued Peter Madoff on Friday, accusing him of fraud, making false statements and falsifying records.
“Peter Madoff helped Bernie Madoff create the image of a functioning compliance program purportedly overseen by sophisticated financial professionals,” Robert Khuzami, the agency’s enforcement chief said in a statement. “Tragically, the image was merely an illusion supported by Peter’s sham paperwork and false filings for which he was rewarded with tens of millions of dollars in stolen investor funds.”