Ex-Madoff Finance Chief Could Point U.S. to Other Accomplices

Ex-Madoff Finance Chief Could Point U.S. to Other Accomplices


Aug. 10 (Bloomberg) -- Frank DiPascali, the finance chief at Bernard Madoff’s investment advisory business who agreed to plead guilty, could help prosecutors build criminal cases against other players in his boss’s $65 billion Ponzi scheme.

DiPascali, 52, is scheduled to enter his plea tomorrow in federal court in Manhattan, U.S. Attorney Lev Dassin told a judge in an Aug. 8 letter that didn’t specify the charges. DiPascali would waive indictment and plead guilty, which signals to lawyers that he is cooperating to lessen his prison term.

“I believe he’s cooperating,” said John J. Fahy, a former federal prosecutor 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.”

Madoff, 71, is serving a 150-year prison term after pleading guilty to running the largest fraud to pay early clients with money from new investors. Madoff’s failure to identify accomplices or substantially help the receiver locating assets of his firm, Bernard L. Madoff Investment Securities LLC, makes DiPascali valuable, said attorney Andrew Hruska.

“From what I understand, he was perfectly placed to understand all aspects of the fraud,” said Hruska, a former federal prosecutor not involved in the case.

DiPascali spent 33 years at the firm, playing a key role in operations on the 17th floor of the midtown Manhattan building where Madoff’s fraudulent investment advisory business was based, according to investors. Investor Tim Murray said in January that DiPascali was a “street-smart New Yorker” who fielded phone calls about his money at the firm.

‘He is the Guy’

“To a Madoff customer with a discretionary account, he is the guy,” Murray said. “There is nobody else.”

Only Madoff and the firm’s outside accountant, David Friehling, have been charged so far with crimes. Friehling has pleaded not guilty to charges of fraud and making false statements to the U.S. Securities and Exchange Commission.

DiPascali was “closest to the actual operations of the Ponzi scheme,” said Columbia University Professor John Coffee, a securities law expert.

“If there was anything known by anyone else but Bernie Madoff, it was known by Frank DiPascali,” Coffee said. “The question is who had direct conversations with Frank DiPascali and what was said.”

At his sentencing on June 29, Madoff apologized for lying to thousands of investors. He also apologized for deceiving his wife, Ruth, his brother Peter, and his sons, Andrew and Mark. Peter Madoff was the firm’s chief compliance officer, while Andrew Madoff was director of proprietary trading and Mark Madoff was a director.

Peter Madoff ‘Vulnerable’

Peter Madoff is “much more vulnerable than the children,” Coffee said. “As chief compliance officer, he was regularly making statements to the SEC about Madoff Securities which ultimately proved to be egregiously false. The issue is whether Peter Madoff knew they were false. You would expect Frank DiPascali would have had to have been in a number of conversations with Peter Madoff.”

DiPascali attorney Marc Mukasey declined comment about his client, who joined Madoff’s firm a year after graduating in 1974 from Archbishop Molloy High School in Queens, New York.

In January, Mukasey said: “Mr. DiPascali is a blue-collar guy, not a Wall Street master of the universe. He is devastated by the losses to investors.”

Peter Madoff attorney John “Rusty” Wing didn’t return a call or e-mail after business hours seeking comment. Ruth Madoff attorney Peter Chavkin declined to comment. They have previously denied that their clients had knowledge of the fraud.

Madoff Confessed to Sons

A spokesman for Andrew and Mark Madoff, George Sard, declined comment and referred to a previous statement by Martin Flumenbaum, an attorney for the sons. Flumenbaum had said the brothers had no knowledge of the fraud until their father confessed to them on Dec. 10, one day before his arrest.

Investors have filed lawsuits against funds that invested with Madoff and were wiped out, including Fairfield Greenwich Group and Gabriel Capital LP. The Securities Investor Protection Corp. also filed “clawback” lawsuits against the feeder funds. Fairfield Greenwich is being sued for the $3.5 billion it withdrew before the fraud unraveled.

The trustee liquidating Madoff’s business, Irving Picard, has filed civil fraud claims against Jeffry Picower, a health care investor and philanthropist. Picower and related defendants are accused of withdrawing at least $5 billion in fictitious profit from Madoff.

Feeder Funds

DiPascali could help investigators determine whether any feeder funds, Picower or other large investors had knowledge of the fraud, Coffee said.

Picower attorney William Zabel didn’t immediately return a call and e-mail seeking comment after business hours. On July 31, Zabel filed court papers denying Picard’s claim. Zabel said in a statement: “The Picowers are honorable people who were deceived by the same fraud that for many years eluded thousands of other investors, financial professionals and regulators.”

DiPascali was introduced to Madoff Securities in the 1970s by Annette Bongiorno, his next door neighbor in Howard Beach, New York, where the two grew up. Bongiorno worked as Madoff’s personal assistant in the 1980s. A voice mail left at her home was not immediately returned.

DiPascali and his wife live in suburban Bridgewater, New Jersey, and have raised four children. They live in a five- bedroom, five-bathroom house with a pool and cabana on seven wooded acres. They own a 61-foot boat built by Viking Yacht Co.

The Madoff case is U.S. v. Madoff, 09-cr-213, U.S. District Court, Southern District of New York (Manhattan).

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