Tuesday, August 11, 2009

Madoff's CFO Pleads

Bernie Madoff's Chief Financial Officer entered a plea today to 10 counts that included fraud, money laundering, and other charges.  See Jack Healy, NYTimes, It Was All Fake,’ Madoff Aide Tells Court; David Vorceacos & Thom Weidlich, Bloomberg,  Ex-Madoff Finance Chief Frank DiPascali Pleads Guilty    He also reached a partial settlement with the SEC: 

Without admitting or denying the allegations of the SEC's complaint, DiPascali has consented to a proposed partial judgment, which if entered by the court would impose a permanent injunction against DiPascali and leave the issues of disgorgement and a financial penalty to be decided at a later time.

The SEC Press Release further states that:

According to the SEC's complaint, DiPascali helped Madoff cover his tracks in numerous nefarious ways. For instance, when Madoff grew concerned that showing positive returns every month would be suspicious, he occasionally instructed DiPascali to enter phony trades designed to lose money in order to make their investment strategy and returns more credible. In order to avoid scrutiny by sophisticated financial institutions, they made a practice of closing down accounts of investors who worked at such institutions. Madoff and DiPascali even went so far as to develop a phantom computer trading platform that would appear to reflect real trading. In the event of a surprise visit from outsiders requesting to observe real-time trading activity, one BMIS employee was to enter trades on a computer screen and another employee was to go into an office nearby and play the role of a counterparty trader in Europe.

It is hard to imagine that this could have gone on for as long as it did without someone realizing that it was just a man behind the Wizard's curtain.

(esp)

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