Peter Madoff Pleads Guilty, Faces 10 Years In Jail

Harriet Davies

2 July 2012

Peter Madoff, brother of Bernard Madoff and former chief compliance officer at Bernard L Madoff Investment Securities, faces 10 years in prison after pleading guilty to conspiracy to commit securities fraud, among other charges.

The list of charges included conspiracy to commit tax fraud, mail fraud, ERISA fraud and falsifying records of an investment advisor. Peter Madoff pleaded guilty in a Manhattan federal court on Friday, following reports last week that he would plead guilty.

Separately, the Securities and Exchange Commission on Friday charged Peter Madoff with committing fraud, making false statements to regulators, and falsifying books and records.

He was employed by BLMIS from 1965 till after 11 December, 2008, becoming CCO and a senior managing director in 1969. In his capacity as CIO, the Department of Justice says, he created “numerous false compliance documents” stating that he had performed regular reviews of trading at the firm’s Investment Advisory business, and which were deliberately designed to mislead regulators, auditors and clients.

The statements created the appearance of a business with a small group of highly sophisticated clients, and far fewer assets under management than was really the case. For example, the Forms ADV said the advisory business had only 23 accounts under management, when in reality it had over 4,000 at the time of collapse in 2008. The same forms stated AuM of $17.1 billion, when “on paper” the firm had over $65 billion AuM at that time, the DoJ said.

“In addition, from 1998 through 2008, Madoff engaged in a tax fraud scheme involving the transfer of wealth within the Madoff family in ways that allowed him to avoid paying millions of dollars in required taxes to the IRS. Most, if not all of the ‘wealth,’ came directly or indirectly from IA client funds held at BLMIS,” the statement said.

He also gave his wife a “no show” job at BLMIS, paying her a salary of between $100,000 and $160,000, as well as a 401 and other benefits.

Agreement

In 2008, when insiders realised the Madoff empire was almost certain to collapse, Peter Madoff agreed with others to send the $300 million remaining in IA accounts to favoured employees, family members and friends, but the Ponzi scheme collapsed before the distributions could take place. However, on 10 December, 2008, one day before the firm’s meltdown, he withdrew $200,000 from it for personal use.

He now faces 10 years in prison. As part of his plea agreement, he has agreed not to seek a sentence other than 10 years. He has also agreed to forfeit over $143.1 billion, including all of his real and personal property. The government has also entered into a settlement with Peter Madoff’s family, requiring his wife and daughter to surrender assets including several homes, a Ferrari and more than $10 million in cash and securities. His wife, Marion Madoff, is being left with approximately $771,733.

“Peter Madoff enabled the largest fraud in human history. He will now be jailed well into old age, and he will forfeit virtually every penny he has. We are not yet finished calling to account everyone responsible for the epic fraud of Bernard Madoff and the epic pain of his many victims,” said Manhattan US Attorney Preet Bharara.

The forfeited assets will be used to compensate victims of the fraud, “consistent with applicable Department of Justice regulations,” the government said.

Sentencing has been set for 4 October this year.