Ex-Madoff Employee Craig Kugel Pleads Guilty to Scheme

Ex-Madoff Employee Craig Kugel Pleads Guilty to Tax Scheme
Craig Kugel, former human resource employee for Bernard L. Madoff Investment Securities LLC, exits federal court in New York on June 5, 2012. Photographer: Peter Foley/Bloomberg

Craig Kugel, who worked in human resources at con man Bernard Madoff’s firm, pleaded guilty to a tax scheme that paid salaries and benefits to people who weren’t employees.

Kugel, 38, pleaded guilty today before U.S. District Judge Laura Taylor Swain in New York to three counts of subscribing to false tax returns, one count of conspiracy to obstruct the U.S. Internal Revenue Service and one count of making false statements. He told the judge that he played no role in defrauding investors in Madoff’s Ponzi scheme.

Kugel said today that while working for a Madoff unit, he learned some people on the payroll weren’t employed at Madoff’s securities firm, yet he authorized and submitted falsified documents to the U.S. Labor Department that allowed them to obtain salary and benefits they hadn’t earned.

“I am sorry for my lapses in judgment and committing these federal crimes,” Kugel told the judge. “I want to make clear that I had nothing to do with the Madoff Ponzi scheme and I was never involved in Madoff trading operations.”

Kugel also admitted today that from 2001 to 2008, he charged personal expenses to his corporate credit card.

Defendant ‘Cooperating’

Swain said that while Kugel faces a combined maximum prison term of 19 years, he is aiding prosecutors in the Madoff investigation. She said she could impose a reduced sentence if she determines he provided “substantial assistance” to the government.

The judge ordered Kugel to forfeit more than $2.3 million that he earned as a result of his illegal activities, noting that his lawyer and the government had stipulated to that amount.

Assistant U.S. Attorney Julian Moore told the judge that prosecutors consented to allow Kugel to remain free on $500,000 bond secured by $100,000 cash and property.

“The defendant has been working with our office and the FBI since last year,” said Moore, adding that Kugel had also been working with the government office helping to identify assets earned as a result of the scheme.

“The government doesn’t believe the defendant is a danger to the community and that a bail package is reasonable and appropriate,” Moore said.

‘Totally Unrelated’

Barry Agulnick, Kugel’s lawyer, said after court that his client’s crimes hadn’t affected Madoff investors.

“The plea that he took today is totally unrelated to the Madoff Ponzi scheme and totally unrelated to any defrauding of Madoff victims who lost money,” Agulnick said.

Kugel is the seventh person to plead guilty in the government’s investigation into Madoff’s former firm.

David Kugel, who is Craig Kugel’s father and a former supervisory trader in Madoff’s proprietary trading operation, pleaded guilty in November to aiding the fraud by creating phony backdated trades beginning in the early 1970s and continuing until the fraud collapsed in December 2008.

David Kugel pleaded guilty to six criminal counts and is cooperating with authorities.

Frank DiPascali, Madoff’s chief financial officer, and former employees Enrica Cotellessa-Pitz and Eric Lipkin, along with Madoff’s former accountant David Friehling, also have pleaded guilty and are awaiting sentencing.

Madoff, 74, pleaded guilty in 2009 to orchestrating what prosecutors called the biggest Ponzi scheme in history. He’s serving a 150-year sentence in federal prison in North Carolina.

The cases are U.S. v. Kugel, 10-cr-00228, Picard v. Kugel, 11-cv-04227, U.S. District Court, Southern District of New York (Manhattan).

Before it's here, it's on the Bloomberg Terminal. LEARN MORE