The Madoff scandal continues to draw prison terms for Madoff Securities’ executives
Preet Bharara, the United States Attorney for the Southern District of New York, announced that IRWIN LIPKIN, the former Controller at Bernard L. Madoff Investment Securities LLC (“BLMIS”), was sentenced today to six months in prison for fraud and other offenses set forth in a two-count Superseding Information to which LIPKIN pled guilty.
Specifically, LIPKIN pled guilty in November 2012 to one count of conspiracy to commit securities fraud, to falsify records, to make false filings with the Securities and Exchange Commission (“SEC”), and to falsify statements in relation to documents required by the Employee Retirement Income Security Act (“ERISA”), and to one substantive count of falsifying statements in relation to documents required by ERISA.
The overt acts in the conspiracy included, among other things, falsifying financial information BLMIS filed with the SEC, causing fake trades to be created in investment accounts LIPKIN and his family members maintained at BLMIS, and arranging to keep himself and his wife on the BLMIS payroll after his retirement in 1998 – even though neither was working for the firm – so they could collect benefits to which they were not entitled. LIPKIN was sentenced in Manhattan federal court by U.S. District Judge Laura Taylor Swain.
Manhattan U.S. Attorney Preet Bharara said: “Bernard Madoff did not commit his massive fraud alone. Irwin Lipkin, hired in the 1960s as BLMIS’s third employee, right after Madoff and Madoff’s wife, was among Madoff’s most loyal accomplices. Year after year, Lipkin helped keep Madoff’s house of cards from collapsing, falsifying the very financial records that Lipkin, as the Controller, was supposed to monitor. In exchange, Lipkin reaped the rewards of fake trades and no-show jobs for himself and his family. Lipkin’s sentencing – the last among the 15 defendants convicted for their participation in Madoff’s fraud – marks the close of another chapter in this tragic tale of unchecked greed.”
According to the Superseding Information to which LIPKIN pled guilty and other court filings:
LIPKIN was employed by BLMIS from 1964 through 1998, and was the first person who was not a family member to be hired by Bernard L. Madoff. In his role as Controller, LIPKIN participated in maintaining the firm’s financial books and records since at least the mid-1970s. At the direction of Bernard L. Madoff, LIPKIN, along with Daniel Bonventre, Enrica Cotellessa-Pitz, and others, made false and misleading entries concerning BLMIS’s profit and loss numbers (“P&L”) in the General Ledger and Stock Record, and in supporting books and records.
As an SEC-registered broker-dealer, BLMIS was required to file Financial and Operational Combined Uniform Single (“FOCUS”) Reports on a monthly, quarterly, and annual basis, as well as annual financial statements concerning BLMIS’s assets, liabilities, revenues, and expenses. The information contained in the FOCUS Reports and the annual financial statements was derived principally from information recorded in the BLMIS General Ledger and the Stock Record. Because those numbers were false and misleading, the corresponding numbers contained in the FOCUS Reports and annual financial statements were false and misleading as well. The annual financial statements provided to various BLMIS Investment Advisory customers also failed to accurately reflect the P&L of BLMIS. “These filings,” LIPKIN admitted when pleading guilty in November 2012, “helped Mr. Madoff run the Ponzi scheme that harmed thousands of people.”
When LIPKIN retired from BLMIS in 1998, he taught his successor as Controller how to manipulate the revenues at BLMIS in order to reach a particular P&L result, thereby allowing the fraud at BLMIS to continue.
In addition, since at least 1975, LIPKIN and his wife maintained their own personal Investment Advisory accounts at BLMIS. On multiple occasions, LIPKIN asked Annette Bongiorno, a BLMIS employee who worked in the Investment Advisory business, to execute fake, back-dated trades in both his account and the accounts of his family members. In an effort to reduce his capital gains income, LIPKIN also asked Bongiorno either to cancel the sales of shares in his account well after those sales had purportedly occurred, or to document nonexistent purchases of shares near the monthly high price, and nonexistent sales near the monthly low price, weeks later. No such trades actually occurred.
LIPKIN also arranged “no-show” jobs at BLMIS for both himself and his wife. As a result, they received income from salaries, health care insurance, 401(k) plans, and other benefits to which they were not entitled.
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In addition to the prison term, Judge Swain sentenced LIPKIN, 77, of Paramus, New Jersey, to three years’ supervised release, including eighteen months of home confinement. LIPKIN was also ordered to forfeit $170 billion dollars and various pieces of property, including a house in Florida, stocks from brokerage and retirement accounts, and artwork. This amount represents all of the investor funds paid into BLMIS from the mid-1970s – when LIPKIN became involved with the conspiracy – through December 2008.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the U.S. Securities and Exchange Commission and the U.S. Department of Labor for their assistance on this case.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Christopher Frey, Andrea Griswold, and David Abramowicz are in charge of the prosecution. Assistant U.S. Attorneys Jonathan Cohen, Paul Monteleoni, and Niketh Velamoor are responsible for the forfeiture aspects of the case.
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