Peter Madoff, Bernie's brother, pleads guilty to fraud
Peter Madoff blamed his brother Bernard Madoff while pleading guilty to conspiracy and falsifying records. Peter Madoff agreed to serve 10 years in prison for his part in the largest known Ponzi scheme in history.
In pleading guilty to criminal charges, Peter Madoff portrayed himself as a victim of a domineering older brother who he revered right up until an evening in December 2008 when his sibling revealed that his wildly successful investment business was a sham that lost its customers their nearly $20 billion investment.
"I was in total shock," Madoff said Friday as he described the confession by his older brother, Bernard. "My world was destroyed. I lost everything I worked for."
The 66-year-old Madoff, saying he was "deeply ashamed and terribly sorry," spoke angrily about his 74-year-old brother, who is serving a 150-year prison term in the U.S. after admitting his creation of the largest known Ponzi scheme.
"My family was torn apart as a result of my brother's atrocious conduct," he said. "I was reviled by strangers as well as friends who assumed that I knew about the Ponzi scheme."
He said his brother had made it clear that he would never become a partner in the business where he had worked since 1966, even as he was showered with tens of millions of dollars in salary, bonuses and other financial gifts. He made him the investment business's chief compliance officer.
Peter Madoff said he was so confident about his brother's smarts and success that he persuaded his wife, daughter, granddaughter and sister to invest millions of dollars that they eventually lost in the fraud.
He agreed to serve 10 years in prison and surrender all his assets as he pleaded guilty to conspiracy and falsifying records. He will remain free on $5 million bail until his Oct. 4 sentencing. Federal prosecutors said the investigation was ongoing.
Prosecutors portrayed the younger Madoff as a criminally incompetent chief compliance officer who filed fabricated compliance reports for more than a decade and purposefully deceived the Securities and Exchange Commission.
"He even signed many weeks of compliance reports in one sitting, intentionally changing pens and ink colors to disguise the fact that he had done them at once," Assistant U.S. Attorney Lisa A. Baroni told U.S. District Judge Laura Taylor Swain.
Madoff became choked up near the end of his statement after he described deciding with his brother which favored friends, clients and family members should receive the $300 million that remained in the investment company's accounts. The checks never went out.
Only weeks before, the clients had been told their investment had grown to more than $65 billion.
The plea was consistent with Bernard Madoff's own claims that his brother and two sons were in the dark about his misdeeds.
FBI Assistant Director Janice K. Fedarcyk said Peter Madoff played an "essential enabling role" in the scam by certifying fabricated investment results.
"Peter Madoff enabled the largest fraud in human history. He will now be jailed well into old age, and he will forfeit virtually every penny he has," U.S. Attorney Preet Bharara said. "We are not yet finished calling to account everyone responsible for the epic fraud of Bernard Madoff and the epic pain of his many victims."
Peter Madoff was credited with creating a computer trading system for the firm in the late 1970s and early 1980s that was considered groundbreaking at the time.
"I loved my job," he said.
A complaint filed in bankruptcy court alleged that the Madoff investment business had transferred more than $77 million to Peter Madoff.
Peter Madoff admitted Friday that he tried to hide millions of dollars from the Internal Revenue Service.
Baroni said he had engaged in "an enormous tax fraud conspiracy," enabling tens of millions of dollars to be transferred among members of the Madoff family to dodge millions of dollars in taxes, and he arranged for his wife to take a no-show job at the investment firm.
As part of a forfeiture agreement, Madoff's wife, Marion, and daughter, Shana, must forfeit nearly all of their assets. The government said those assets and assets that will be forfeited by other family members include several homes, a Ferrari and more than $10 million in cash and securities. It said his wife will be left with $771,733.
Though Madoff had been the firm's chief compliance officer for nearly four decades, the government marked his start in the conspiracy as 1996. It said he created false and misleading compliance documents and false reports for the Securities and Exchange Commission.
The lies worsened in severity after August 2006, when the business was registered with the SEC as an investment adviser, requiring annual filings to guide the SEC's examination programs. Prosecutors said Madoffmade "numerous false statements" to create the false appearance that the business represented a small number of highly sophisticated clients.
Baroni said the Madoffs once claimed the investment firm had 23 client accounts when it actually had more than 4,000.
His plea differed from his brother's appearance three years ago, when numerous investors spoke of their pain after losing their life savings.
On two occasions Friday, the judge asked if any investors wished to speak. None stepped forward.
Since the fraud was revealed, a court-appointed trustee has reached agreements to recover approximately $9.1 billion and has distributed more than $1.1 billion to Madoff's victims.