Ponzi scheme mastermind Bernard L. Madoff’s brother Peter will plead guilty on June 29 to two federal charges as part of the U.S. investigation of fraud at the investment fund, prosecutors said.
Peter Madoff, 66, who was Bernard L. Madoff Investment Securities LLC’s chief compliance officer and senior managing director, will plead guilty to one count of conspiracy to commit securities fraud and one count of falsifying records, a prosecutor said in a letter yesterday to U.S. District Judge Laura Taylor Swain in New York.
Prosecutors said Madoff also will agree to forfeit $143.1 billion, an amount based on the total funds that passed through the Madoff firm during his tenure. Peter Madoff, a graduate of Fordham University Law school who began working at his brother’s firm in 1965, has also agreed to forfeit his personal assets, prosecutors said.
“Pursuant to a plea agreement with the government, Peter Madoff agrees not to seek a sentence of other than 10 years’ imprisonment,” Assistant U.S. Attorneys Lisa Baroni and Julian Moore said in court papers. “Further, Peter Madoff agrees to the criminal forfeiture of approximately $143.1 billion, including all of his real and personal property.”
Madoff will admit that he made false statements to investors about the firm’s compliance program and the nature and scope of its investment advisory business as part of his role as chief compliance officer, the U.S. said. He will also plead guilty to falsifying business records, prosecutors said. Both charges carry a maximum statutory term of as long as five years in prison and a fine of at least $250,000.
Bernard Madoff, 74, whose New York-based firm collapsed in December 2008, is serving a 150-year prison term after pleading guilty to orchestrating the fraud.
Peter Madoff’s lawyer, John Wing, didn’t immediately return a voice-mail message seeking comment on the agreement.
Bernard Madoff said in June 2008 that he deceived his brother and his two sons about his $65 billion Ponzi scheme. U.S. District Judge Denny Chin, who presided over Bernard Madoff’s criminal case, signed a criminal forfeiture judgment against the convicted con man of $170.8 billion in June 2009.
Since Bernard Madoff’s December 2008 arrest, federal prosecutors and Federal Bureau of Investigation agents in New York have been hunting for his assets, seeking forfeiture of the $170.8 billion they said moved through his firm since the fraud began in the 1980s.
Chin explained in his June 2009 forfeiture order against Bernard Madoff that $170 billion “represented the amount of proceeds traceable to the commission of the offenses,” as well as all property derived from the scheme. The judge also imposed a separate $799 million judgment representing the property involved in money-laundering offenses which Bernard Madoff had pleaded guilty to committing.
In October 2009, Bernard Madoff’s sons, along with Peter Madoff and his daughter, Shana Madoff Swanson, were sued by trustee Irving Picard in U.S. Bankruptcy Court in New York over claims they spent $198.7 million of victims’ money and treated the Madoff firm as a “family piggy bank.”
Peter Madoff paid $60 million to himself, his family members and entities he controlled, and used the money to buy homes on Park Avenue in Manhattan and in Palm Beach, Florida, according to Picard’s complaint. Peter Madoff was also accused of backdating trades to withdraw more money from his accounts than he deposited.
Peter Madoff was “an experienced investment professional,” Picard said, who “did not carry out this responsibility with any degree of diligence or integrity” Picard alleged in an amended lawsuit against Peter Madoff and other family members filed in May.
“Peter Madoff’s duties and responsibilities were well-defined by law,” Picard said, “Yet he failed miserably to meet them, to the financial detriment of thousands of Bernard L. Madoff Investment Services customers victimized by the Ponzi scheme.”
The trustee said he hadn’t located or identified “any evidence of meaningful compliance or supervisory activities,” at the firm. Had Peter Madoff done his job properly, “the fraud might have been revealed years earlier,” Picard said.
Picard later amended his claims to about $226 million, saying in court papers that the judgment he is demanding reflects money the family took from the Ponzi scheme, plus “breaches of fiduciary duties and other tortious conduct that facilitated Madoff’s crimes and enriched the family.”
Bernard Madoff fraud scheme was uncovered after his sons Andrew and Mark turned in their father to U.S. authorities, saying he told them he was operating a Ponzi scheme. They later reported their father for giving away watches and jewelry worth $1 million in alleged violation of a court asset-freeze order.
Martin Flumenbaum, a lawyer representing Andrew Madoff and the estate of Mark Madoff, has previously said the brothers had no knowledge of the fraud until their father confessed to them one day before his arrest. Mark Madoff committed suicide on Dec. 11, 2010.
Flumenbaum didn’t immediately return a voice-mail message yesterday seeking comment on the government’s letter. Ira Lee Sorkin, a lawyer for Bernard Madoff, didn’t return a voice-mail message left at his office after business hours seeking comment.
Mark Warren Smith, a lawyer for Shana Madoff, Peter’s daughter and a compliance officer at the firm, didn’t return a voice-mail message left at his office seeking comment about her father’s guilty plea.
Jerika Richardson, a spokeswoman for Manhattan U.S. Attorney Preet Bharara, whose office is prosecuting the case, declined to comment.
The case is U.S. v. Peter Madoff, 10-cr-00228, U.S. District Court, Southern District of New York (Manhattan).