By LARRY NEUMEISTER and TOM HAYS
Associated Press
NEW YORK (AP) - The younger
brother of disgraced financier Bernard Madoff - the loyal No. 2 at an
investment firm that fronted a multibillion-dollar Ponzi scheme -
pleaded guilty Friday to charges he doctored documents that helped
conceal a fraud that wiped out thousands of investors.
Peter Madoff, 66, entered
the plea Friday as part of a deal expected to result in a 10-year prison
term. He had been taken into custody at his lawyer's midtown Manhattan
office earlier in the morning.
The plea came in the same
Manhattan courthouse where Bernard Madoff was led away in handcuffs in
2009 to serve a 150-year sentence.
Peter Madoff told the judge
he was "deeply ashamed and terribly sorry" but that he didn't know
about the scam until his brother revealed it in December 2008.
When he learned of the fraud, "I was in shock and my world was destroyed. I lost everything I worked for," he said.
The government has used the
cooperation of six former employees and associates at Bernard L. Madoff
Investment Securities LLC to learn what went on inside the secretive
business. Close to $20 billion vanished in the scam, the largest Ponzi
scheme ever prosecuted in the U.S. The scheme left behind only a few
hundred million dollars, not the $65 billion claimed in bogus financial
statements.
Peter Madoff revealed in
court that he agreed to assist his brother in sending out the only money
left to favored people, including friends and family.
"I was shocked and
devastated but nevertheless I did as my brother had said, as I had
consistently done for decades," he said. "I knew that the conduct was
wrong and I am deeply ashamed." The checks never went out.
In his guilty plea, Bernard
Madoff admitted his investment advisory business was a sham, but
insisted that his brother and two sons who also worked for him were in
the dark about his misdeeds. The FBI nevertheless had been suspicious
from the start about the role of Peter Madoff, who had worked side by
side with his scheming brother for more than 40 years.
FBI Assistant Director
Janice K. Fedarcyk said Peter Madoff played an "essential enabling role"
in the scam by certifying fabricated investment results.
"The Madoff investment
empire, built on a foundation of deceit, was a house of cards that grew
to skyscraper proportions," she said. "As Peter Madoff has admitted
today, he was one of the chief architects."
Friends and business
associates had described the brothers as very close. Their offices in
midtown Manhattan were a few feet apart. Their families vacationed
together.
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. He ran
the daily trading operation while his brother focused on the more
secretive investment advisory arm.
Both brothers made a fortune. Peter Madoff owned a Palm Beach, Fla., vacation house that recently sold for $5.5 million.
When Bernard Madoff was
arrested, Peter Madoff broke the news to Madoff Securities employees.
And he was a co-signer on a $10 million bond that won his brother's
release. Through attorneys, he denied any wrongdoing.
But the denial didn't stop
federal authorities from moving to freeze Peter Madoff's assets. He
agreed not to dispose of his assets and promised to curtail his personal
spending as the investigation moved forward. His living expenses were
capped at $10,000 a month.
A trustee appointed to
recover stolen assets also came after Peter Madoff, accusing him of
financing his high-end lifestyle through the fraud.
A complaint filed in
bankruptcy court alleged that the Madoff investment business had
transferred more than $77 million to Peter Madoff. It said that between
1993 and 2008, he was paid a total of $36 million in salary and bonuses.
And it identified other income for Peter Madoff as memberships to
country clubs, including Glen Oaks Club in New York and one of Donald
Trump's country clubs.
Given Peter Madoff's "level
of financial experience and sophistication," he either knew or should
have known that he reaped gains from "fraud and deception," the trustee
alleged.
The trustee also took aim
at his daughter Shana, who once worked as an in-house lawyer at the firm
and has denied involvement in the scheme.
"Had Peter, as the Chief
Compliance Officer, or Shana, as Compliance Counsel, done their jobs
properly, the fraud might have been revealed years earlier," the
complaint said. "Either they failed completely to carry out their
required supervisory/compliance roles, or they knew about the fraud but
covered it up."
Defense lawyers responded
by branding the complaint "a sensationalistic attempt to lump together
members of the Madoff family and create liability by association." Their
court papers claimed the scandal has "left Peter Madoff mired in
litigation, and has devastated his family emotionally and financially."
Copyright
2012 The Associated Press. All rights reserved. This material may not
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