STOCK MARKET WATCH -- Thursday, 28 June 2012

[Demeter]

3. Madoff’s Brother Sets Plea Deal in Ponzi Case

http://dealbook.nytimes.com/2012/06/27/peter-madoff-expected-to-plead-guilty/

For nearly four decades, as the second-in-command at Bernard L. Madoff Investment Securities, Peter B. Madoff ran the family business alongside his older brother. On Friday, Peter Madoff - more than three years after his brother, Bernard, confessed to running a vast Ponzi scheme that swindled investors out of billions of dollars - is expected to appear in Federal District Court in Manhattan and plead guilty to criminal charges, according to prosecutors. He would be the first relative of Mr. Madoff's to admit to wrongdoing in connection with the fraud.

Peter Madoff has agreed to a prison term of 10 years, prosecutors said in a letter filed with the court on Wednesday. As part of his plea deal, he has agreed to forfeit $143 billion, a staggering penalty that he is not likely to be able to pay. But it is a government calculation based on the amount of money that passed through the firm and a clear indication that prosecutors will seize all of his assets. The guilty plea does not amount to an admission that Peter Madoff knew about or participated in his brother's Ponzi scheme. Rather, it confirms the government's allegations that Peter Madoff served as a sham compliance officer who exercised little if any legal oversight over the firm's operations, effectively enabling his brother's crimes. A securities lawyer by training, Peter Madoff, 66, served various roles at the firm, including chief compliance officer and general counsel. He is expected to plead guilty to charges including falsifying documents, lying to regulators and filing false tax returns...Peter Madoff's life has been upended since the fraud was revealed in late 2008, living under the cloud of a criminal investigation and fending off the numerous civil lawsuits filed against him by Madoff victims.

Irving H. Picard, the Madoff bankruptcy trustee trying to recover money for victims of the fraud, sued Peter and other Madoff family members in July 2010 in an effort to claw back money from them. The lawsuit accused Peter, his daughter and Bernard Madoff's two sons of treating the firm as a "family piggy bank," spending about $200 million of victims' money. Mr. Picard said that Peter Madoff paid himself and his family about $60 million. That lawsuit does not accuse Peter Madoff of serving as Bernard's accomplice in the fraud, but instead asserts that he was "completely derelict" in his professional duties.

"Simply put, if the family members had been doing their jobs, honestly and faithfully," said the trustee's suit, "the Madoff Ponzi scheme might never have succeeded, or continued for so long."

...So far, prosecutors have charged 13 defendants - now including Peter - for some degree of involvement. Of those 13, Peter Madoff will be the eighth person to plead guilty. The remaining five maintain their innocence and await trial before Judge Laura Taylor Swain in Federal District Court in Manhattan...Despite Peter's important role within the firm, Bernard remained its sole owner. For Peter's 40 years at the firm, he remained a salaried employee working for a brother who never made him partner. Eve though he had no ownership stake in the firm, he lived well, raising his family in the fancy Long Island suburb of Old Westbury, N.Y., where he belonged to the exclusive Glen Oaks Country Club. He owned a chateau-style home in Palm Beach, Fla., and an apartment on Park Avenue. Peter's luxurious lifestyle came, in part, from liberally borrowing money from the Madoff firm. In 2007, for instance, the firm made a $9 million unsecured loan to Peter, at a very favorable interest rate, to finance a real estate investment...

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