Aug. 11 (Bloomberg) -- Frank DiPascali, the finance chief at Bernard Madoff’s investment advisory business, pleaded guilty to helping his boss carry out a $65 billion Ponzi scheme and is helping prosecutors build cases against his accomplices.

DiPascali, 52, pleaded guilty in federal court in Manhattan to 10 counts, including conspiracy, fraud and money laundering. DiPascali has been explaining to prosecutors how Madoff spent two decades committing fraud using money from new clients to pay earlier investors at Bernard L. Madoff Investment Securities LLC.

“I knew I was participating in a fraudulent scheme,” DiPascali told U.S. District Judge Richard Sullivan. “I knew everything I did was wrong, and it was criminal, and I did it knowingly and willfully. I accept complete responsibility for what I did. I apologize to every victim and to my family and the government. I am very, very, very sorry.”

Sullivan denied a $2.5 million bail request and ordered DiPascali to jail immediately. DiPascali was led from the courtroom in handcuffs when the two-hour hearing ended. The judge said he may reconsider DiPascali’s bail request.

Madoff, 71, is serving a 150-year prison term after pleading guilty in March. DiPascali, who faces 125 years, is hoping his cooperation will bring him leniency at sentencing, tentatively set by the judge for May 15, 2010. DiPascali also settled a civil lawsuit today with the U.S. Securities and Exchange Commission.

‘All Fake’

From the late 1980s until December 2008, DiPascali said, he helped Madoff carry out a fraud. During that time, no purchases or sales of securities took place, he said.

“It was all fake. It was all fictitious,” he said.

“I knew no trades were happening,” DiPascali said.

DiPascali agreed to forfeit $170 billion for several counts and $250 million for the money laundering count.

DiPascali has spent hundreds of hours preparing to explain the fraud to the Justice Department and the SEC, according to his attorney, Marc Mukasey.

“I know my apology means almost nothing,” DiPascali said. “But I hope my actions going forward with the government will mean something.”

Duped Investors

DiPascali, who spent 33 years working for Madoff, is the first insider after Madoff to plead guilty in a fraud that duped wealthy investors, charities, celebrities, universities and European royalty.

Prosecutors began eyeing DiPascali after Madoff admitted the fraud to his sons in December and was arrested on Dec. 11. DiPascali worked on the 17th floor of Madoff’s midtown Manhattan-based firm, where his boss ran an investment advisory business that was off-limits to most employees.

DiPascali joined Madoff’s firm in 1975 after growing up in Howard Beach in Queens, New York, and graduating from Archbishop Molloy High School.

DiPascali was a “street-smart New Yorker” who fielded calls from investors and had a brusque manner, Minnesota investor Tim Murray said in an interview in January.

DiPascali and his wife have raised four children. Their home in Bridgewater, New Jersey sits on seven wooded acres has five bedrooms, five bathrooms, a pool and cabana. They own a 61- foot boat built by Viking Yacht Co.

Madoff pleaded guilty to 11 counts and got the maximum sentence for each. He received 20 years for two counts of international money laundering, as well as for single counts of securities fraud, mail fraud, wire fraud, and making a false statement to the U.S. Securities and Exchange Commission. He must serve the sentences consecutively.

Investors Suing

Madoff’s Manhattan apartment and other luxury items were seized by U.S. Marshals and will be sold to repay victims. Madoff’s wife, Ruth, has been sued by the trustee liquidating her husband’s firm.

Investors have sued funds that invested with Madoff and were wiped out, including Fairfield Greenwich Group and Gabriel Capital LP. The Securities Investor Protection Corp. also filed “clawback” lawsuits seeking the return of money from feeder funds. Fairfield Greenwich is being sued for the $3.5 billion it withdrew before the fraud unraveled.

Lost Savings

Many of Madoff’s thousands of investors lost their life savings. Thierry Magon de La Villehuchet, chief executive officer of Access International Advisors, which managed $3 billion, was driven to suicide because of his firm’s Madoff- related losses, his brother, Bertrand Magon de la Villehuchet, said in January.

Aside from Madoff and DiPascali, prosecutors also have charged the firm’s outside accountant, David Friehling, who pleaded not guilty on July 17. He is accused of securities fraud and investment-adviser fraud and four counts of making false filings with the SEC.

The Madoff case is U.S. v. Madoff, 09-cr-213, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: David Voreacos in New York federal court at dvoreacos@bloomberg.net; Thom Weidlich in U.S. District Court in New York at tweidlich@bloomberg.net.

Last Updated: August 11, 2009 17:39 EDT