An irreverent Wall Street Blog
by Bill Singer
Join BrokeAndBroker blog on Facebook  Follow the BrokeAndBroker blog on Twitter  Connect with BrokeAndBroker on LinkedIn  Join Bill Singer on Google+  Subscribe to RSS Feed

Bharara Adds Another Notch As Madoff's Controller Pleads Guilty to Four Counts
Written: December 20, 2011

According to federal prosecutors, Enrica Cotellessa-Pitz was employed at Bernard L. Madoff Investment Securities LLC (“BLMIS”), from 1978 through December 11, 2008. In 1998, Cotellessa-Pitz became the Controller of BLMIS.

Beginning in the late 1990s until the collapse of BLMIS in 2008, Cotellessa-Pitz and other conspirators created false and misleading entries in the books and records of BLMIS and in reports filed with the SEC – purportedly as part of a scheme to disguise transfers of funds from the BLMIS Investment Advisory (“IA”) business to BLMIS’s Market  Making and Proprietary Trading  (“MMPT”) operations. As a result of the transfers, MMPT appeared more profitable than would otherwise have been the case. Further, Cotellessa-Pitz and her co-conspirators created false and fraudulent documents that were

  • given to the SEC in connection with its audit of BLMIS; and
  • provided during tax audits of Bernard L. Madoff.

On December 19, 2011, Cotellessa-Pitz, 53, pled guilty in Manhattan federal court to a four count Superseding Information charging her with:

  • COUNT ONE: Conspiracy to (1) Falsify Books and Records of a Broker-Dealer; (2) Falsify Books and Records of an Investment Adviser; (3) Make False Filings with the SEC; and (4) Obstruct and Impede the Lawful Governmental Function of the IRS.

Maximum Penalties: 5 years in prison; 3 years of supervised release; fine of the greatest of $250,000 or twice the gross gain or loss; mandatory $100 special assessment; restitution; and criminal forfeiture.

  • COUNT TWO: Falsifying Books and Records of a Broker-Dealer

Maximum Penalties: 20 years in prison; 3 years of supervised release; fine of the greatest of $5,000,000 or twice the gross gain or loss; mandatory $100 special assessment; restitution; and criminal forfeiture.

  • COUNT THREE: Falsifying Books and Records of an Investment Adviser

Maximum Penalties: 5 years in prison; 3 years of supervised release; fine of the greatest of $250,000 or twice the gross gain or loss; mandatory $100 special assessment; and restitution.

  • COUNT FOUR: Making False Filings with the SEC

Maximum Penalties: 20 years in prison; 3 years of supervised release; fine of the greatest of $5,000,000 or twice the gross gain or loss; mandatory $100 special assessment; and restitution.

Cotellessa-Pitz was released on a $2.5 million bond on the condition that the bond be co-signed by eight financially responsible individuals and secured by $800,000 in cash and property. In addition, she has surrendered her passport and her travel  is restricted to the Southern and Eastern Districts of New York. As part of her guilty plea, Cotellessa-Pitz agreed to cooperate with the Government in its ongoing investigation of the fraud that occurred at BLMIS.

Cotelessa-Pitz  faces a statutory maximum sentence of 50 years in prison. She is also subject to mandatory restitution and criminal forfeiture and faces criminal fines up to twice the gross gain or loss derived from the offense.  Accordingly, Cotellessa-Pitz has agreed to forfeiture of more than $97 billion.  Her  sentencing is scheduled for  June 2012.

Bill Singer’s Comment

Slowly but surely the layers are being pulled back and the nature and extent of the Madoff scam is — and will be — revealed.  We are already getting a far better sense of the parameters of this historic Ponzi.  For starters, we see that it had its roots in the late ’90s. A disturbing realization because it means that Wall Street’s regulators had at least a decade of red flags, warnings, inconsistencies, and whispered rumors, which went unnoticed or, worse, disregarded.

I note that the prosecutors are asserting that Cotellessa-Pitz and her co-conspirators fabricated books and records that were apparently submitted to the SEC.  At the heart of this conspiracy was the goal of beefing up MMPT through the hidden infusion of funds from the IA.  Oh, so the much-vaunted Madoff market making and prop trading wasn’t all that it was cracked up to be.

The unsettling aspect of this record-keeping legerdemain is that none of Wall Street’s cops seemed to have had an inkling that the cards were marked or extra aces stuffed in a sleeve.  Ya gotta wonder, though — isn’t the underpinning of forensic accounting that  you don’t merely accept the representations on books and records?  Aren’t you supposed to seek supporting documentation and source statements?  What the hell happened at the SEC and FINRA and other regulators overseeing Madoff for a decade — was this simply a case of rubber stamping without verification?

Shining more light on this line of inquiry, note that two of the four counts assert that the conspiracy specifically involved falsification of the broker-dealer’s books and records (and a conspiracy to achieve the same).  There’s no longer any way for the securities industry regulators to dodge that bullet or pretend that the Madoff fraud wasn’t about the broker-dealer but only about the investment adviser.

Alas, Madoff for a decade, MF Global for a few years — SEC, FINRA, CFTC, NFA . . . you can slice and dice the acronymed regulators as you see fit.  The system didn’t work.  The question going forward is can it get the job done as presently structured.

As if there should be any doubt for regular readers of Street Sweeper, I don’t think Wall Street’s regulatory system is up to the job and needs a drastic and dramatic overhaul.

We have three levels of securities regulators in the United States: federal (such as the SEC and CFTC); state securities divisions, and self-regulatory organizations (such as FINRA and NFA).  At best, a federal prosecutor should be a back-stop, not the first line of defense.  As things presently stand, only US Attorney Preet Bharara is getting the job done when it comes to regulating Wall Street.  That’s not acceptable. But for Bharara’s recent investigations and prosecutions of Wall Street fraud, there just isn’t much indication that the three-levels of federal, state, and self regulators are getting between the public and the bad guys.

SEC Enforcement Chief Khuzami may complain, as he has, about the unfairness of Judge Rakoff’s rejection of the SEC’s dubious settlement with Citigroup Global Markets, Inc. (See, SEC Files Historic Appeal of Judge Rakoff’s Citigroup Settlement Rejection (“Street Sweeper”, December 16, 2011).  How odd that in times that call for bark and bite, the SEC opts to divert its precious resources towards filing a federal appeal against a judge who demanded a fairer and more meaningful settlement with one of Wall Street’s Big Boys.  Such petulance and wound-licking does nothing to protect the public.  Moreover, it must delight the likes of Goldman Sachs, Bank of America, UBS, and other financial services firms who have recently come under fire. A sitting federal judge and the head of the SEC’s Enforcement are having a very public pissing contest. Wonderful.

Ultimately, Bharara has repeatedly demonstrated a willingness to bang heads, to go to trial, and to eschew the soft settlement.  Sadly, we have two conflicting messages.  The US Attorney for the Southern District of New York fired an opening salvo against Wall Street and kept up his barrage.  The SEC seems content to bluster and whine.


Previous Entries
July 1, 2015
If you're going to promise a Wall Street regulator that you will fix a problem, you better make certain -- in fact, you better make damn cer... Read On
June 30, 2015
In "SEC Commissioner Gallagher Rages Against The Dying Light In Two Dissents" (, June 18, 2015), I noted that:After four years ... Read On
June 30, 2015
Stockbroker, Compliance, Legal, and Regulatory JobsEmployment Page Jobs#wallstreetjobs @brokeandbrokerNOTICE TO EMPLOYERS: Brok... Read On
June 29, 2015
On June 26, 2015, the Financial Industry Regulatory Authority ("FINRA") published this somewhat unusual and intriguing press release:FINRA Supports NA... Read On
June 27, 2015
BREAKING NEWS: Supreme Court Rules On Gay MarriageIn Obergefell et al. v. Hodges, Director, Ohio Department Of Health, et. al (Slip Opinion,... Read On
June 26, 2015
In Obergefell et al. v. Hodges, Director, Ohio Department Of Health, et. al (Slip Opinion, Supreme Court, No. 14–556; 576 U. S. ____ / June ... Read On
June 26, 2015
During my three decades on Wall Street (which has included stints as an industry regulator, industry defense lawyer, and public customers' lawyer), I'... Read On
June 25, 2015
You ever heard of PPAC Act -- a Congressional Act passed in March 2010?  That law is formally known as the "Patient Protection and Affo... Read On
June 25, 2015
If there is a hallmark of the Financial Industry Regulatory Authority's ("FINRA's") approach to Wall Street regulation, it is likely found in the se... Read On
June 24, 2015
It has been said that lawyers' fees are like a gas, which expands to fill any size container. Sometimes you get what you pay for and your lawyer think... Read On
June 24, 2015
You can't do something about something that you don't know anything about. Yeah, I know, not exactly profound words but they are at the heart of today... Read On Job Search

Related Topics
Tag Cloud
Internet FINRA Bear Stearns Bloomberg SEC NASD NYSE Money Laundering Due Diligence Waiver Forbes China Broy Woody Allen Madoff NAC NPR Marketplace Stanford UBS Ketchum Antitrust NASDAQ RRBDLAW Schapiro Bill Singer BrokerAndBroker USERRA Morgan Keegan Arbitration Counterclaim Khuzami BrokeAndBroker Aleynikov Goldman Sachs brokeandbroker Promissory Note U4 Bill SInger EFL CFTC Huffington Post Flash Crash arbitration RBC Ponzi Affinity Fraud Wachovia Criminal Raymond James Expungement Fraud Securities Fraud Outside Business Activity Registered Rep Magazine FOREX FBI Banc of America Pro Se PCAOB Supreme Court Morgan Stanley Smith Barney E*Trade Margin email Galleon Penson U5 Defamation Protocol Wells Fargo Punitive Damages Citigroup Merrill Lynch ARS Employee Forgivable Loan Street Legal Morgan Stanley AWC Fidelity Bankruptcy Broke And Broker HFT David Sobel Day Trading Ameriprise Commissions Spouse Schwab Commission CRD Kenneth Starr IRS CNBC Complaint ATM Skimming Hacking Phishing Malware Naskovets Poteroba Koval Lincoln Financial Selling Away Outside Business Activities Rakoff 2nd Circuit Second Circuit IRA 401k Forgery Tax Email Netschi Moore Whistleblower Street Sweeper Countrywide Tran Bharara Facebook Online Severance Bonus Eligibility Rule TD Ameritrade Hedge Fund SAC 1099 Smith Barney Lehman Brothers SIPC IC3 Scottrade AIG Lehman JPMorgan Chase Hertz Insider Trading Bank of America Department of Justice Elles Bribe Auction Rate Securities Raiding Spam Edward Jones Medicare Diabetes Dow Schumer Thain Walter Bid Rigging Real Estate Discrimination Wall Street Statutory Disqualification Form U4 Form U5 Indictment Boyland DOJ Corruption bill singer FTC Do Not Call FINRA Arbitration Costa Rica Settlement LIBOR Varney Plea Rule 8210 Eligibility RRBDlaw 8210 Appeal Fowler LPL Johnson Cellphone US Airways JPM BrokeandBroker Reg D MSSB Vault Loan SunTrust Discovery Employment Rosenthal Recruiting Lawyer Trading Platform JP Morgan Employment Tuesday Wrongful Termination Bank Guarantee WaMu Solicitation REIT Martin Credit Cards Rule 3050 Away Account Credit Repair PN Advisor Placement Group Fifth Amendment Forex Mortgage Private Placement Moon CGMI Failure to Supervise Merrill Anderson Exam Lee Borrowing Tax Lien Charity Conversion Oppenheimer Wedbush Felony Misdemeanor Expenses ING Lien OTR Estate Jobs Florida Credit Card Elderly Flash Drive Annuity Expense Reimbursement FNMA BrokeAndBroke TIC DWI Promissory Notes Suitability Will POA Power of Attorney Casino NSF MF Global Counterfeit Preet Bharara Corzine Hacker Deferred Compensation RIA Prison Disclosure NASAA Aguilar FCPA Subway Testimony Identity Theft Gold Dell Bar Injunction Bank Deutsche Bank Hospital Retirement Due Process God HSBC Private Placements Eric Stein Wire Fraud FINOP CCO Compliance Audit Test Examination Cheating Joshua Brown Backstage Wall Street Obstruction of Justice Reuters Retaliation Variable Annuity Arbitraiton Outside Account Options Telephone Wine Series 7 Social Media ADA Pacifico Non-Prosecution Agreement Confirm Tax Fraud OBA Equity Indexed Annuities EIA Disability MetLife Continuing Education OIP Tax Liens Willful CE Unregistered Impersonation Annuities BBVA Business Expenses ETF JOBS Act Mail Fraud Parking Variable Annuities Signatures BitTorrent Impersonator Wire Transfer Wire Crowdfunding Nasdaq Away Accounts WSP Laptop Dodd Frank Checks RMBS AML PST Solicited Unsolicited Congress SRO Password Wife Discretion Non-Solicitation Restaurant Commodities Private Securities Transaction Offer of Settlement Money Market employment jobs Great Recession Chase Investment Services Arrest Barclays Liens Obamacare Failure To Supervise Apple Time And Price T&P Willfully Husband Letter of Authorization LOA Sexism Debit Card Knight Practice Sale Unfair Competition Signature Judgments Data Undisclosed Settlement Trainee Fee Trust Laser Side Bar Mattera Female Sales Assistant Kennedy Charge Sexist NML Argentina Embezzlement Silver Investor Alert Evidence Judgment Bank Fraud Deceased Bill Singer BrokeAndBroker TSSB OHO Leveraged ETF Mary Jo White Trustee FINRA AWC Motion To Dismiss Frumento Conspiracy 6th Circuit Proctor Commissioner Stein 401(k) Rule 3040 Customer Files Class Action Beneficiary NYAG Schneiderman 11th Circuit Insurance Gallagher White Self Regulation Short Sale Compromise Website Rule 2010 Check TRO Supervision Vacatur Remand SDNY Rule 12206 BrokeAndBroker Bill Singer Piwowar Stifel Rule 1122 Article V signature Confidential Inside Information Reg SP VA Leveraged ETFs Regulation SP Fees Cease And Desist Customer Rule 3270 Rule 3240 Annual Compliance Questionnaire OWB 2Cir Red Flags Payroll Stockbrokers ALJ Cybercrime Loans BrokerCheck Altered Records
Email Bill Singer Connect with Bill Singer on Facebook Follow Bill Singer on Twitter Link up with Bill Singer on LinkedIn Join Bill Singer on Google+