Madoff Employee to Plead Guilty, May Assist Prosecution

Frank DiPascali, 52, the finance head at Bernard Madoff’s investment advisory firm—Bernard L. Madoff Investment Securities LLC—agreed to plead guilty and could also assist the prosecution in creating criminal cases against others involved in the historic Madoff Ponzi scheme, Bloomberg.com is reporting. DiPascali is schedule to enter his plea in Manhattan’s federal court this week.

DiPascali is scheduled to waive indictment in addition to his guilty plea, a sign, said Bloomberg.com that indicates he is cooperating in order to receive a lesser sentence. “I believe he’s cooperating,” according to John J. Fahy, quoted Bloomberg.com, which noted that Fahy, a former federal prosecutor, is not involved in the case. “He would be very valuable to the government because he has been close to Madoff for so many years and had to have seen some of the fraudulent transactions that went on. From what we know of Madoff, he trusted very few people,” Fahy added.

Madoff, 71, was recently sentenced to 150 years in prison for running a Ponzi scheme that is estimated to have cost investors as much as $65 billion. The SEC has come under fire for apparently missing warnings that something was amiss with Madoff’s investment advisory business. Apparently, DiPascali worked at Madoff’s firm for over three decades.

To date, only Madoff and his firm’s external accountant, David Friehling have been charged with any crimes, reported Bloomberg.com.

The charges against Friehling included aiding and abetting investment adviser fraud and four counts of filing false audit reports with the Securities and Exchange Commission (SEC) the New York’s southern district acting U.S. attorney, Lev Dassin said, according to USA Today previously. Citing the criminal information, USA Today reported that Friehling allegedly “falsely certified” he prepared and audited Madoff’s investment company’s—Bernard L. Madoff Investment Securities LLC—financial statements. Such information would include, said USA Today, cash flows, income statements, and balance sheets, to name a few.

The disgraced financier apologized at his sentencing in June for lying to thousands of investors; deceiving his wife, Ruth; his brother, Peter; and his sons, Andrew and Mark, said Bloomberg.com. Now, Peter, the firm’s chief compliance office is considered quite vulnerable as far as ongoing investigations are concerned.

Although Bernard was initially stripped of $171 billion and all of his personal property, as well as $80 million in assets Ruth claims were hers, the wife of the mastermind of what is believed to be the largest such scam in history still walked away with $2.5 million, likely more than many of Madoff’s duped investors.

Of note, said Bloomberg.com, DiPascali and his wife live in Bridgewater, New Jersey, have four children. The family lives in a five-bedroom, five-bathroom house that has a pool and cabana and is situated on seven “wooded” acres, said Bloomberg.com, noting that DiPascali also owns a Viking Yacht Company 61-foot boat.

Meanwhile, the SEC has come under fire for apparently missing warnings that something was amiss with Madoff’s investment advisory business and has been shamed for its inability to detect Madoff’s fraud and its role in the well-publicized investment bank collapse, which has been blamed—in part—for the current financial downturn, said the Washington Post previously.