Stock Room

[fourkids_9pets]

let's see how far into the *polluted* cesspool
events go ~

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Feds Subpoena Madoff Accomplices

By Henry Blodget
January 29, 2009: 05:58 AM ET
http://money.cnn.com/news/newsfeeds/siliconalley/search/2009_1_feds_subpoena_madoff_accomplices.html

(alleyinsider.com) -- Bernie Madoff didn't print up all those account statements and soothe all those nervous clients alone. Inside the 17th Floor fortress, he had a battery of loyal accomplices--most of whom, we suspect, had no idea they were helping perpetrate a massive fraud.

The Wall Street Journal interviews several Madoff clients and gets a picture of who these folks were and how they operated. It also identifies the maker of that now-infamous dot-matrix printer and computer that spat out the decades-worth of bogus statements:

Just inside the 17th-floor offices was a suite housing Frank DiPascali Jr., who investigators say oversaw the day-to-day dealings with investment clients and is a focus of their probe...

Across the hall was another room, where an old International Business Machines computer generated client statements, former employees say. Nearby was a small cluster of employees responsible for "stuffing envelopes" with client statements, according to a former employee. The IBM server operated independently from Madoff's other computer systems but was supported by tech staffers who also did work for the stock-trading group, according to former employees.

Mr. DiPascali's office, strewn with client statements, overlooked a room with a cluster of desks set up like a trading operation, according to Nader Ibrahim, a former Madoff technology worker.

Mr. DiPascali and some of his employees had two screens each with market information, according to Mr. Ibrahim. Mr. Madoff had told investors, securities regulators and employees outside the advisory group that the trading for advisory clients was done through European brokers, away from his main trading operation.

At the same time, Mr. Madoff told some investors that Mr. DiPascali executed trades for their accounts, and Mr. DiPascali said he headed stock-options trading. Options trades were a crucial part of the strategy that Mr. Madoff told clients he was using. But reviews of client statements suggest the firm couldn't have made the options trades it claimed.

The group headed by Mr. DiPascali had access to account information for Madoff clients, such as trade confirmations that listed scores of stocks and options trades that appear to have been largely fictitious, according to investigators and investors. They also helped generate thousands of monthly or quarterly client statements that listed those trades.

Some members of the client-service group:

- Robert Cardile, a 24-year Madoff veteran who briefly had worked in Madoff's main stock-trading operation with Mr. Madoff's sons Mark and Andrew. Married to Mr. DiPascali's sister; in 2001, he bought Mr. DiPascali's house in Bridgewater, N.J.

- Eric Lipkin, 35 years old, was a second-generation Madoff employee; his father had worked for decades at the company in the stock-trading operation

- JoAnn "Jodi" Crupi, who processed client requests in the investment-advisory business, according to clients and a person familiar with the matter. They say she kept track of money being wired in and out of Madoff's accounts. She handled accounts for individual investors as well as institutional clients, such as so-called feeder funds that would channel in huge sums of money from investors around the world.

- Erin Reardon, who in recent years handled the $12 million family account of 87-year-old Minnesota investor Boyer Palmer, among other clients. Mr. Palmer called about once a week and talked with Ms. Reardon about how the account was invested, he recalled.

- Annette Bongiorno, a 40-year Madoff veteran who handled a number of Mr. Madoff's oldest investment-advisory clients, according to people familiar with the firm. (Read whole article )

It's obviously possible that all these folks have known for years about the fraud, but kept silent out of their loyalty to Madoff and fear about their own well-being (reminiscent of Grisham's "The Firm"). Based on the information that has come to light so far, however, we doubt it. We suspect that the screens they looked at and the envelopes they stuffed contained the same bogus information that fooled thousands of Madoff clients over the years, some of whom were highly sophisticated. As long as the numbers added up and the money came in and went out smoothly, there would be little reason to be suspicious.

Which begs the question:

Were the fake trades entered into Madoff's standalone computer or did the computer's software itself concoct them? The answer will determine where the investigation leads next. If the software had anything to do with it, Mark Cuban is right: future subpoenas will be go out to the company or people who designed it. More likely, someone, perhaps "options trader" Frank DiPascali, manually developed and then entered the trades.

http://money.cnn.com/news/newsfeeds/siliconalley/search/2009_1_feds_subpoena_madoff_accomplices.html