Tuesday, March 10, 2009

UPDATE: The Con Man You Know

Our original post The Con Man You Know concerned itself with the nature of Madoff and Ponzi's individual schemes. The following report from Lucinda Franks of the Daily Beast delves into the first leaked specifics and who is likely get sucked down along with Bernie.

Two days before Bernard Madoff enters an 11-count guilty plea in Manhattan federal court, the investigation into his giant Ponzi scheme has broadened to include a number of suspected co-conspirators, according to federal officials involved in the case. Madoff’s lawyer told a judge today that there was no “deal” connected to Madoff’s confessing to money laundering, mail fraud, and other counts that will likely result in a life sentence.

That tallies with the revelation, from another source involved in the probe, that Madoff has not been cooperating in good faith with investigators. “He is not reliable. He’s jerking everyone around,” said the source. “Every day he changes his tune about where the money went and where it is. He’s trying to protect his family.”

A source close to the Madoff defense team agreed that Madoff’s main concern was to preserve as much assets as possible for his wife and children and to keep them from legal entanglements. “The US attorney’s office is still trying to resolve what is tainted or clean money, what real property in the US is appropriate for the Madofffs to keep,” the source said. That may prove difficult. Sources say new information has surfaced that suggests several members of Madoff’s inner circle transferred assets to their wives, transactions thought to be laundered through an English bank. Ruth Madoff, who was considered “innocent at first,” according to this source, is believed to have received at least $70 million from her husband and is now therefore an object of the investigation. That is one reason why she recently decided to retain her own lawyer, leaving Ira Sorkin, who has represented both of the Madoffs since December, when the Ponzi scheme was revealed.

Investigators are focusing their attention on three groups of possible co-conspirators. “There should be at least 20 indictments, between the three groups, if the feds are doing their jobs,” said one highly placed lawyer involved in the case. “Some will be conspiracy, the ones who were deep into it with Madoff, and others will be civil cases sent to the SEC for prosecution.”

In the first group are employees of Madoff’s firm who concocted false trades and sent out phony statements to thousands of unsuspecting clients.The second group is comprised of principals in feeder funds such as Cohmad Securities Corp. and Fairfield Greenwich Group, which funneled investor dollars to Madoff and received large fees for steering this business. If they were aware of Madoff’s fraud, they could face criminal charges; if they were not, they could be hit with civil charges for a lack of due diligence. “It’s a question of state of mind,” said a lawyer for a Madoff employee. “If the feeder fund principals like Walter Noel of Fairfield Greenwich or Robert Jaffee of Cohmad didn’t ask Madoff any questions, if they simply turned the money over to a Madoff account without doing the work they were supposed to do to make sure their clients were well-protected, they would be guilty of fiduciary violations, which is a civil matter. But if they knew about the Ponzi scheme, if they had the intention to deceive, that is a felony.”

One attorney close to the defense team of Walter Noel, who is reported to have offshore bank accounts, says the belief is that Noel could be indicted in England on money laundering charges. The third group is the target of an investigation that's still in its early stages into money laundering through British banks, in which US and British authorities are cooperating. This group consists of solicitors, accountants, and others in London who may have assisted Madoff in transferring funds from client accounts to a Madoff entity that lists Ruth Madoff, brother Peter Madoff, and sons Mark and Andrew Madoff among its board members.

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the running mule

the running mule