Toomre Capital Markets LLC

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Jodi Crupi

Recent Madoff Customer Contributions To Be Segregated

Late on Friday January 23rd 2009 Reuters reports that at least two customers, who deposited their funds with Bernie Madoff just days prior to his fraud admission, will have those funds segregated from the other monies recovered for distribution to other investors. These funds will remain segregated until these recent investors' judicial claims to be treated differently are resolved.

For those who do not recall, New York fuel company businessman Martin Rosenman wired $10 million on December 5th to JP Morgan Chase for the account of Madoff's firm. This was six days before Bernie Madoff was arrested by the FBI. Mr. Rosenman claims to have been told directly by Bernie Madoff that he could wire the funds early, but his funds would not be invested until the start of the next month when Madoff's investment fund next would be open for investments. Mr. Rosenman apparently received a fax back from some member of Madoff's investment management unit acknowledging receipt of the wire transfer.

Miami business man Stanley Kriegler through his firm Hadleigh Holdings LLC appears to have had a similar experience. He deposited $1 million of funds in a Madoff firm account on December 8th at the same bank. He too apparently received receipt acknowledging that the transfer had been completed.

Both of these Madoff investors are represented by lawyer Howard Kleinhendler. In lawsuits respectively filed on January 1st and 7th against the trustee, lawyer Irving Picard, hired by SIPC and JP Morgan Bank, Mr. Klienhendler argued that these monies could be "traced because it was deposited soon before Madoff's assets were frozen." The cases are Rosenman Family LLC v Picard et al 09-01000 in U.S. Bankruptcy Court for the Southern District of New York (Manhattan) and Hadleigh Holdings LLC v Picard et al 09-01005.

"To the extent funds are transferred from the Chase Account to the Trustee, the Trustee shall withhold from distribution the amount of $10,000,000 until the merits of the (case) are adjudicated," the order in the Rosenman case entered Jan. 20 in U.S. Bankruptcy Court in New York said. The same order was also applied to Hadleigh's $1 million, according to court documents.

Earlier on Friday January 23rd, Toomre Capital Markets LLC ("TCM") posted the article Investigators Work Backward On Madoff Fraud. This article discussed how investigators have been forced to work backwards to figure out who else could have assisted Bernie Madoff, who rather implausibly claims to have committed this fraud alone. Two of the figures that investigators have been focusing on include JoAnn "Jodi" Crupi and Frank DiPascali.

Care to guess the names of the Madoff firm employees that show up on the documentation filed with the Rosenman and Hadleigh Holdings lawsuits? Reader comments and thoughts are welcome.

Investigators Work Backward On Madoff Fraud

The Friday January 23rd 2009 edition of The Wall Street Journal included an article entitled Probers Work Backward on Madoff written by Kara Scannell and Amir Efrati. This article summarizes the unusual case in the Bernie Madoff scandal where the principal figure was the first to confess to his criminal behavior. Normally, prosecutors and investigators work their way up the chain to the principle figure(s). In the Madoff case, they have been forced to work backwards to figure out who else could have helped Mr. Madoff, who said that he acted alone.

According to the article, the SEC recently issued subpoenas to a Madoff lieutenant, one JoAnn "Jodi" Crupi, and a brokerage firm affiliated with Mr. Madoff. Ms. Crupi is represented by lawyer Eric R. Breslin. Regulators are focused on documents about her compensation and her dealings with certain firm clients, including some charities. They also have asked for access to her personal computer. This last request makes Toomre Capital Markets LLC ("TCM") wonder whether regulators suspect that there were communications with clients from private e-mail accounts (as reportedly happened earlier in the timeline of this scandal).

Also, apparently regulators are preparing to issue a second subpoena to another Madoff associate, Frank DiPascali. He is represented by lawyer Marc Mukasey of the firm Bracewell & Giuliani LLP in New York. Mr. DiPascali has been reported to be Mr. Madoff's senior assistant (or even chief financial officer) and, according to Bloomberg News, investors' "Go-To" guy in the operation of the investment management business. According to investor Tim Murray of Minnesota, Mr. DiPascali was a “street-smart New Yorker” who fielded calls about the millions of dollars he entrusted to the firm. “To a Madoff customer with a discretionary account, he is the guy,” said Mr. Murray, 57, a real-estate developer. “There is nobody else.”

Ms. Crupi and Mr. DiPascali both worked on the now infamous 17th floor where the investment management portion of Bernie Madoff's business was kept separate from the broker/dealer market making operations. Like many who have learned of this fraud, authorities do not believe Mr. Madoff's assertion that he acted alone in pulling off such a large fraudulent scheme that seems to have stretched back at least three decades and involved literally thousands of investors. Those investors received monthly and quarterly account statements that are now believed to be fraudulent. One of the open questions is: Who helped Bernie Madoff prepare such detailed and ultimately fraudulent statements?