Another Madoff Defendant Pleads Out. Read Cooperation Agreement and Indictment.

June 7, 2011

No, you haven't heard the last of the Bernard Madoff mess.  While Bernie continues to grant interviews from his jail cell, prosecutors continue to grapple with pending criminal pleas and prosecutions, and civil litigants continue their search for assets and more defendants.  The saga still has life in it.

Conspiracy

According to recent government allegations and pleas, Eric S. Lipkin was employed by the investment advisory firm of Bernard L. Madoff Investment Securities LLC ("BLMIS"), from the mid-1980s until the firm's demise on December 11, 2008. The government alleges that in 1996, Lipkin and a number of co-conspirators began falsifying the books and records at BLMIS.

SIDE BAR: Among those alleged to be Lipkin's co-conspirators are:

  • Frank Dipascali (pled guilty to several charges in connection with the fraud that occurred at BLMIS and is cooperating with the Government in its ongoing investigation),
  • Daniel Bonventre,
  • Annette Bongiorno,
  • Joann Crupi,
  • Jerome O'Hara, and
  • George Perez.

NOTE: The charges and allegations contained in an Complaint, Information, or Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

Federal prosecutors alleged that while working in concert with certain co-conspirators, Lipkin

  • created fraudulent account statements detailing the account values of several investment advisory ("IA") accounts at BLMIS; and
  • prepared letters and statements setting out fake holdings purportedly held in multiple BLMIS IA accounts.

In an alleged effort to mislead auditors, Lipkin and others are charged with creating fake reports purportedly obtained by the Depository Trust Company ("DTC") that showed the securities holdings of BLMIS IA clients. However, those holdings were fabricated and nonexistent.

In addition to allegations concerning fraud pertaining to BLMIS's investment advisory accounts, the government alleges that at the direction of other co-conspirators, including Bonventre, Lipkin knowingly created false BLMIS books and records reflecting individuals who did not actually work at the firm. These non-employees received salaries and benefits, and a number of these fake employees were falsely reported to DOL as among the firm's staff.

Indictment

On June 5, 2011, Lipkin, 37, pled guilty in Manhattan federal court to a six-count Superseding Information , which charged him with:

  1. conspiracy to falsify records of a broker-dealer, to falsify records of an investment advisor, and to falsify statements to facilitate a theft concerning the Employee Retirement Income Security Act ("ERISA").
  2. conspiracy to commit bank fraud,
  3. falsifying records of a broker-dealer,
  4. falsifying records of an investment adviser,
  5. false statements to facilitate a theft concerning ERISA, and
  6. bank theft.

Lipkin also agreed to cooperate with the Government in its ongoing investigation of BLMIS.

Lipkin faces:

  • a statutory maximum sentence of 70 years in prison; 
  • mandatory restitution and criminal forfeiture;
  • criminal fines up to twice the gross gain or loss derived from his crimes.

Cooperation Agreement

Pursuant to the Cooperation Agreement entered into with the Government, Lipkin will forfeit at least $1.4 million as well as his interest in his home and various investment accounts. The net proceeds from the sale of the forfeited property will be used to compensate victims of the fraud.

SEC Settlement

Without admitting or denying the allegations of the SEC's Complaint, on June 6, 2011, Lipkin consented to a proposed partial judgment, which, if entered by the court, will impose a permanent injunction against Lipkin and require him to disgorge ill-gotten gains and pay a fine in an amount to be determined by the court at a later time.

Note From Bill Singer: Although much has been written about the Madoff cases, sometimes the facts and nuances get lost as reporters parse through the voluminous pleadings involved in these matters.  I have linked below the  full-text of Lipkin's Criminal Information and Cooperation Agreement, and the SEC Complaint.  They provide quite a bit of depth and context, and I commend their reading to those of you truly interested in understanding the issues of this case:

The Criminal Information: (June 6, 2011)

Cooperation Agreement (May 31, 2011)

SEC Complaint (June 6, 2011)