Irwin Lipkin, Former Controller of Bernard L. Madoff Investment Securities LLC, Pleads Guilty
|U.S. Attorney’s Office November 08, 2012|
Preet Bharara, the United States Attorney for the Southern District of New York; Mary Galligan, the Acting Assistant Director in Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”); Robert L. Panella, Special Agent in Charge for the New York Regional Office of the U.S. Department of Labor’s Office of the Inspector General; Office of Labor Racketeering and Fraud Investigations (“DOL-OIG”); and Jonathan Kay, the Regional Director for the New York Regional Office of the United States Department of Labor, Employee Benefits Security Administration (“DOL-EBSA”), announced today that IRWIN LIPKIN, the former controller of Bernard L. Madoff Investment Securities LLC (“BLMIS”), pled guilty in Manhattan federal court to a two-count superseding information charging him with conspiracy to commit securities fraud, to falsify records, to make false filings with the SEC, and to falsify statements in relation to documents required by ERISA, as well as a substantive count of falsifying statements in relation to documents required by ERISA. LIPKIN pled guilty before United States District Judge Laura Taylor Swain.
Manhattan U.S. Attorney Preet Bharara said: “As only the third employee of BLMIS, Irwin Lipkin had a long history with Bernie Madoff, and he proved himself to be a loyal foot soldier—consistently and repeatedly breaking the law at his boss’ behest, and leaving as his legacy a successor he personally taught to continue cooking the books. And the benefits went both ways—Lipkin was able to enrich himself and his family through fake trades, and no-show jobs during his tenure and thereafter. Today’s guilty plea marks another step forward in our efforts to prosecute and punish anyone and everyone who we can prove participated in this breathtaking fraud.”
FBI Acting Assistant Director in Charge Mary Galligan said: “By his own admission, Irwin Lipkin aided and abetted Bernard Madoff in his colossal Ponzi scheme for more than two decades. He regularly and routinely cooked the books, a recipe for concealing the largest investment fraud in history. The government continues its effort to hold accountable everyone responsible for this epic shell game.”
DOL-OIG Special Agent in Charge Robert L. Panella said: “The investigation that led to today’s guilty plea by Irwin Lipkin serves as a stern warning to those who would knowingly undermine the financial well-being of workers. By making false statements and falsifying documents required by the Employee Retirement Income Security Act, Lipkin failed to protect the integrity of employee benefit plan assets. More egregiously, Lipkin personally benefited from proceeds gained as a result of this scheme which harmed the savings of thousands of investors. The OIG will continue to work with the U.S. Attorney and our law enforcement partners to investigate these types of crimes.”
DOL-EBSA New York Regional Director Jonathan Kay said: “Today’s plea marks an important step in a well-coordinated, wide-ranging multi-agency investigation. EBSA remains committed to protecting worker benefits and pursuing those who would defraud plans.”
According to the superseding information and other court documents:
LIPKIN was employed by BLMIS from 1964 through 1998, and was the first person who was not a family member to be hired by Bernard L. Madoff. In his role as controller, LIPKIN participated in maintaining the firm’s financial books and records since at least the mid-1970s. At the direction of Bernard L. Madoff, LIPKIN, along with Daniel Bonventre, Enrica Cotellessa-Pitz, and others, made false and misleading entries concerning BLMIS’ profit and loss numbers (“P&L) in the general ledger and stock record, and in supporting books and records.
As an SEC-registered broker-dealer, BLMIS was required to file FOCUS reports on a monthly, quarterly, and annual basis, as well as annual financial statements concerning BLMIS’s assets, liabilities, revenues, and expenses. The information contained in the FOCUS reports and the annual financial statements was derived principally from information recorded in the BLMIS general ledger and the stock record. Because those numbers were false and misleading, the corresponding numbers contained in the FOCUS reports and annual financial statements were false and misleading as well. The annual financial statements provided to various BLMIS investment advisory customers also failed to accurately reflect the P&L of BLMIS.
When LIPKIN retired from BLMIS in or about 1998, he instructed his successor, Enrica Cotellessa-Pitz, how to manipulate the revenues at BLMIS in order to reach a particular P&L result, thereby allowing the fraud at BLMIS to continue.
In addition, since at least 1975, LIPKIN and his wife maintained their own personal investment advisory accounts at BLMIS. On multiple occasions, LIPKIN asked Annette Bongiorno, a BLMIS employee who worked in the investment advisory business, to execute fake, back-dated trades in both his account and the accounts of his family members. And, in an effort to reduce his capital gains income, LIPKIN also asked Bongiorno to either cancel the sales of shares in his account well after those sales had purportedly occurred, or to document nonexistent purchases of shares near the monthly high price, and nonexistent sales near the monthly low price, weeks later. No such trades actually occurred.
LIPKIN also arranged “no-show” jobs at BLMIS for both himself and his wife. As a result, they received income from salaries, health care insurance, 401(k) plans, and other benefits to which they were not entitled.
LIPKIN, 74, of Paramus, New Jersey, faces a statutory maximum sentence of 10 years in prison. He 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. Pursuant to the plea agreement, LIPKIN has agreed to forfeiture of $170 billion, including all of his real and personal property. The net proceeds from the sale of the forfeited property will be used to compensate victims of the fraud, consistent with applicable Department of Justice regulations.
Judge Swain set a sentencing date for LIPKIN of March 22, 2013, at 2:00 p.m.
Cotellessa-Pitz pled guilty in December 2011, and is awaiting sentencing. Charges against Bonventre and Bongiorno remain pending and are merely accusations. They are presumed innocent unless and until proven guilty.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the U.S. Securities and Exchange Commission and the U.S. Department of Labor for their assistance.
These cases were brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a co-chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Lisa A. Baroni, Julian J. Moore, Matthew L. Schwartz, Arlo Devlin-Brown and Barbara A. Ward are in charge of the prosecution.