Peter Madoff Sentenced To 10 Years In Prison For Role In Ponzi Scheme

by Tara Arick on December 28, 2012 · 0 comments

in Banking,Ethics

- From LexisNexis® Mealey’s™ Daily Legal News.

The brother of convicted Ponzi scheme mastermind Bernard L. Madoff was sentenced to 10 years in prison on Dec. 20 for his role in the scheme, according to a press release issued by U.S. Attorney for the Southern District of New York Preet Bharara (USA v. Peter Madoff, No. 10-cr-0228, S.D. N.Y.).

In addition to the prison term, U.S. Judge Laura Taylor Swain of the Southern District of New York sentenced Peter Madoff, 67, to one year of supervised release and ordered him to pay a $ 200 special assessment. Peter Madoff is the former chief compliance officer (CCO) and senior managing director of Bernard L. Madoff Investment Securities LLC (BLMIS).

“Peter Madoff was a gatekeeper, who was supposed to guard against fraud, but instead enabled it – facilitating his brother Bernie’s breathtaking scheme by falsifying compliance records and lying to both regulators and clients of BLMIS,” Bharara said in the press release. “The decade he will spend in prison and the disgorgement of his assets are a just result. Our efforts to hold to account anyone and everyone who played a role in this unprecedented Ponzi scheme continue.”

Guilty Plea

On June 29, Peter Madoff pleaded guilty to counts of conspiracy to commit securities fraud, tax fraud, mail fraud and Employee Retirement Income Security Act fraud and falsifying records of an investment adviser.

As part of his guilty plea, Peter Madoff agreed to forfeit more than $ 143.1 billion, “including all of his real and personal property,” which, according to a press release Bharara issued June 29, “represents all of the investor funds paid into BLMIS from 1996 – the start of MADOFF’s involvement in the conspiracy – through December 2008.”

As part of Peter Madoff’s forfeiture, the government entered into a settlement with his family requiring “the forfeiture of all of his wife Marion’s and daughter Shana’s assets, and assets belonging to other family members,” the June 29 press release stated. “The surrendered assets include, among other things, several homes, a Ferrari and more than $ 10 million in cash and securities. Marion Madoff is being left with approximately $ 771,733 to live on for the rest of her life.”

According to the June 29 press release, Peter Madoff, who was employed at BLMIS from 1965 through at least Dec., 11, 2008, became the CCO and senior managing director of BLMIS in 1969. As CCO, Madoff “created false and misleading BLMIS compliance documents, as well as false reports that were filed with the U.S. Securities and Exchange Commission that materially misstated the nature and scope of BLMIS’s Investment Advisory (IA) business,” the press release stated.

“Specifically, in his capacity as CCO, MADOFF created numerous false compliance documents in which he stated that he had performed compliance reviews of the trading in the BLMIS IA business on a regular basis, when in reality, the reviews were never performed. The false statements were designed to mislead regulators, auditors, and IA clients.”

According to the June 29 press release, Peter Madoff also assisted in the registration process conducted as part of BLMIS’s registration as an investment adviser with the SEC and created false and misleading Forms ADV that “created the false appearance that BLMIS’s IA business had a small number of highly sophisticated clients and far fewer assets under management than was actually the case.”

Bernard Madoff was charged with criminal securities law violations by federal prosecutors in December 2008 for running an illegal Ponzi scheme that bilked investors out of billions of dollars. He pleaded guilty to all 11 counts filed against him, and on June 29, 2009, was sentenced to 150 years in prison.

The Dec. 20 press release can be viewed at www.justice.gov/usao/nys/pressreleases/December12/PeterMadoffSentencing.php

The June 29 press release can be viewed at www.justice.gov/usao/nys/pressreleases/june12/pmadoffplea.html.

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