Madoff Aid Might Be In Plea Talks, Could Name Names

In the ongoing Bernard Madoff Ponzi scheme debacle, some new arrangements might be in the works. It seems that Madoff’s top deputy is looking to negotiate a plea deal with federal prosecutors. Frank DiPascali, a Madoff employee for over three decades, said he would give government prosecutors details of Madoff’s historic Ponzi scheme in exchange for a reduced sentence, reported the Post Chronicle, citing Fortune magazine.

According to the news outlets, DiPascali is allegedly agreeing to testify he “manipulated” bogus returns for some key Madoff investors. The Post Chronicle pointed out that if the allegations are determined valid, then that means the investors involved would have known their returns were falsified. According to Fortune, DiPascali is said to be open to naming names.

Madoff pleaded guilty to 11 fraud counts on March 12. The former chairman of the NASDAQ stock exchange ran an investment advisory business for decades that was, in reality, a Ponzi scheme. Last November, Madoff told his investors that his fund held more than $64 billion, but in reality, he only had a fraction of that amount.

In other recent news, financial giant JPMorgan Chase is facing a lawsuit over its dealings with Madoff. According to a prior article, the lawsuit alleges that JPMorgan Chase learned that Madoff was running a scam last fall, but kept quiet to protect its own interests. In January 2006, JPMorgan Chase began offering investors a way to leverage their bets on the future performance of two Fairfield Greenwich Group hedge funds that invested with Madoff. To protect itself from the resulting risk, the bank put $250 million of its own money into those funds. Last fall, JPMorgan Chase began taking its own money out the hedge funds, but never let its investors know.

According to the prior piece, Madoff also maintained a checking out with JPMorgan Chase and, as a matter-of-fact, just one month ago the bank agreed to transfer $2.4 million in a Madoff account to the trustee liquidating his assets. According to The New York Times, Madoff has admitted moving millions of dollars through his checking accounts to give the illusion of active investing, when, in fact, he purchased no securities at all for his thousands of clients.

Meanwhile, the court trustee in the ongoing case is seeking the return of funds from some of Madoff’s investors as part of a continuing clawback procedure, reported USA Today last week. Irving Picard, the trustee appointed to recover Madoff’s assets, issued in excess of 200 letters on behalf of defrauded investors.

The letters request some of Madoff’s former clients to return money they withdrew prior to the collapse of Madoff’s Ponzi scam. The move does not come as a surprise, but has angered Madoff’s many victims, said USA Today.

In New York state, the clawback procedure enables court trustees to seek recovery of funds from withdrawals made as far back as six years, said USA Today, which explained that the thinking behind the law is that those withdrawals are part of the scam and should be sought for proportional distribution back to all of the victims.

This entry was posted in Stock Fraud. Bookmark the permalink.

© 2005-2016 Parker Waichman LLP ®. All Rights Reserved.