NEW YORK (Aug. 11) - The former chief financial officer for Bernard
Madoff pleaded guilty Tuesday to conspiracy, admitting he helped
Madoff carry out a massive fraud that cost thousands of people
billions of dollars by lying to investors and testifying falsely
when it seemed the fraud might be discovered.
"I was loyal to him. I ended up being loyal to a terrible,
terrible fault," Frank DiPascali said as he pleaded guilty in U.S.
District Court in Manhattan to charges including securities fraud,
falsifying records and international money laundering.
Afterward, U.S. District Judge Richard Sullivan surprised the
defendant, prosecutors and a defense lawyer by ordering DiPascali
jailed, a rarity for someone in a white-collar case who had pleaded
guilty with a cooperation deal.
Sullivan said he may later reconsider his decision to jail the
52-year-old DePascali but felt compelled to keep him locked up
after he had admitted that he lied to the Securities and Exchange
Commission in 2006 when he thought they might discover the fraud
and that he lied repeatedly "to people who entrusted him with
their life savings."
The judge jailed him despite a request by Assistant U.S.
Attorney Marc Litt that he be kept free or under house arrest to
assist investigators studying millions of pages of documents and
data that he is familiar with. His lawyer, Marc Mukasey, said his
client was "completely unprepared for this."
The cooperation deal may still earn him leniency against charges
which carry a potential penalty of up to 125 years in prison at a
sentencing that will not occur before May 2010.
Madoff is serving 150 years in prison for a Ponzi scheme that
demolished thousands of people's life savings, wrecked charities
and shook confidence in the financial system.
Customers say DiPascali was their main contact with Madoff's
firm, a fact he admitted as he confessed to the 10 charges
contained in a criminal information charging document.
His admission provided a wider understanding of how the fraud
took place than had emerged during Madoff's statements in court.
DiPascali said he began working for Madoff in 1975 - just after
he finished high school - and had joined Madoff in his fraud by the
1980s or early 1990s, when he knew that he and Madoff were
promising investors that transactions were being made which were
not.
DiPascali says the transactions were "all fake. It was all
fictitious. It was wrong, and I knew it was wrong at the time."
DiPascali said he thought "for a long time" that Madoff had
other assets to cover the claims of any investors who might demand
their money back.
"That's not an excuse. I knew everything I was doing was wrong
and criminal," he said.
He added: "I don't know how I went from an 18-year-old kid who
just happened to have a job to someone standing before you today."
Mariam Siegman, who described herself as a 65-year-old Madoff
victim, was the only victim to take up Judge Richard Sullivan's
invitation to speak at the hearing.
She said she opposed acceptance of the plea because it prevents
a trial and "the kind of justice that allows truth to be spoken
out loud in a courtroom."
The judge said that he did not believe "the quest for truth
ends today" and that he expected to learn much more before the
2010 sentencing.
"There will be more information and the court will sentence on
the basis of additional information," Sullivan said.
Customers say that for decades DiPascali answered their
questions about their accounts with Madoff's firm and helped them
if they wanted to add or withdraw money.
He and Madoff came from the same part of Queens, and DiPascali's
first job was as Madoff's assistant. In the 1980s, DiPascali held
titles with Madoff's firm including director of research and
director of options trading. Since 1996, he had been the firm's
chief financial officer.
During his guilty plea in March, Madoff insisted that he acted
alone. Only one other person - his accountant - had been charged
during the seven-month investigation before the charges were
revealed against DiPascali.
The conspiracy charge against DiPascali and his cooperation deal
are likely to increase speculation that investigators might learn
who carried out the details of the multi-decade fraud that led
thousands of investors to sink at least $13 billion into Madoff's
firm to lose all.
Madoff had told investors late last year that their accounts
contained nearly $65 billion, when he actually had only several
million dollars left of their money.
Since Madoff revealed the fraud to his sons in early December
and was arrested by FBI agents, investigators have looked into the
actions of his wife, Ruth, his brother and two sons, who ran a
trading operation under the same roof, and other insiders. No other
Madoff family members have been charged.
The FBI has said it expects more arrests before it concludes the
probe.
