So far in the Madoff scandal only one person other than Madoff has been charged. His accountant, David Friehling, was accused of securities fraud and investment-adviser fraud and four counts of making false filings with the Securities and Exchange Commission on July 17. Friehling pleaded not guilty.
Now cases against Madoff employees appear to be moving forward. Frank DiPascali, who was chief financial officer for Bernard L. Madoff Investment Securities, will likely be charged in the next few days. Government prosecutors filed a notice of intent, but did not specify the charges. The notice, which was signed two days ago indicated that DiPascali will waive his right to an indictment. That likely means that DiPascali agrees to admit guilt and cooperate with authorities in exchange for leniency. This is the same type of document prosecutors filed before Madoff pleaded guilty.
This filing is probably just the beginning of what will likely be a stream of indictments against other Madoff employees and possibly family members. Frequently, once one person agrees to cooperate others come forward as well. The big question is who else will he named. Also, how much information has DiPascali given already and, now that he appears to have made an agreement with the prosecutors, will he continue to provide in order to get leniency.
DiPascali was introduced to Madoff by Annette Bongiorno, who was his next door neighbor when he was growing up. Annette Bongiorno has been one of the key players under investigation. She worked for Madoff for 40 years and it has been reported that she instructed assistants to generate trading tickets that appear to be bogus.
According to investigators, she would ask assistants to research daily share prices for blue chip stocks from the previous month or several months earlier. Using these researched numbers, Bongiorno would instruct assistants to generate the "trading" tickets, so they could show gains that were in line with Madoff's steady annual returns. Investigators obtained this information from talking with Bongiorno's assistants.
Others that could be drawn into the case if DiPascali testifies are members of the Madoff family. The most likely family member who may be at risk is Peter Madoff, Madoff's younger brother. He had the title of compliance officer, which made him responsible for assuring the firm followed securities laws and regulations. Peter Madoff and Bernard Madoff were listed as officers of the firm on SEC flings.
Madoff stayed silent most likely to protect others in his company as well as family members. He is serving 150 years in prison, and all but $2.5 million of the assets held by he and his wife have been seized by the U.S. Marshals. Ruth Madoff has been put on a spending leash to be sure she isn't hiding other money.
Lita Epstein has written more than 25 books including Reading Financial for Dummies and Trading for Dummies.
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