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Mark Madoff

Ruth Madoff In Crosshairs

Toomre Capital Markets LLC ("TCM") has long suspected that Ruth Madoff was an active co-conspirator with her husband Bernie Madoff in his massive Ponzi scheme. (A reader, for instance, might want to review the TCM post Ruth Madoff: Rube or Accomplice to Bernie? ) Now Federal investigators seem to agree as they are "working around the clock" to freeze the assets of Ruth Alpern Madoff.

On Sunday March 15th 2009, The New York Post published the article Ruth In Crosshair$. This article suggests that federal authorities are working feverishly to prepare a filing asking a Federal judge to formally freeze all of Ruth Madoff's more than $93 million in assets as soon as possible. "The US attorneys will be in court in the next week or so to tell a judge that they believe Mrs. Madoff's assets are derived from ill-gotten gains and that they should be frozen for a certain period of time while the investigation is ongoing," an SEC source said.

The judge will then decide whether there is sufficient reason to believe her assets were legitimately earned or whether they were the proceeds of her husband's $65 billion Ponzi scheme. "You do not need the case to be nailed down, you just need to be able to convince the judge that there is a strong probability that the funds in question came from crime," the source said.

The article continues with additional information about a possible forthcoming criminal indictment. "Law-enforcement sources also told The Post that the asset freeze would be just the first step in a one-two punch against her as prosecutors work furiously to build a criminal case." In the past week, Mrs. Madoff has had needed to part legal counsel with Ira Sorkin who now principally is representing the legal interests of her husband. Ruth Madoff's new criminal defense lawyer, Peter Chavkin, apparently declined to comment on these developments.

Madoff Aide Allegedly Orders Creation of Fake Trading Tickets

About three weeks ago, Toomre Capital Markets LLC ("TCM") wrote about Annette Bongiorno, Bernie Madoff's former long-time secretary, in the post Annette Bongiorno, Madoff Aide Falls Under Suspicion. On Monday March 9th 2009, Ms. Bongiorno is back in the news on the front page of the Markets section of The Wall Street Journal.

In the article entitled Madoff Aide Allegedly Got Fake 'Tickets' of Trading, WSJ reporter Amil Efrati reveals that Ms. Bongiorno allegedly directed two assistants to create the bogus trading "tickets." These tickets documented the purported trades, which in turn resulted in gains that were in line with Mr. Madoff's steady annual returns.

"The two assistants to Ms. Bongiorno, Semone Anderson and Winnie Jackson, did clerical work and helped generate stock-trade confirmations for client accounts, which purported to show gains that were later applied to client accounts. The confirmations are now believed to have been fictitious, according to a court-appointed trustee who is liquidating the Madoff firm. Ms. Bongiorno, 60 years old, was once Mr. Madoff's personal secretary and later oversaw some of the firm's oldest accounts. The two assistants were interviewed by the U.S. attorney's office for the Southern District of New York through what are called proffer agreements, in which prosecutors agree not to use their statements against them as long as they tell the truth, according to people familiar with the matter."

Given that Ms. Bongiorno apparently also actively raised funds for the Madoff fraud from her neighbors in Queens New York, this new information highly suggests to Toomre Capital Markets LLC that Ms. Bongiorno will likely be facing some criminal penalties of her own. Surely, if she was ordering the creation of bogus trade tickets, she must have known for some period that Bernie Madoff's investment operation was a scam. If she further profited from fees received from managing so-called "RuAnn" feeder accounts for friends from her old neighborhood, federal prosecutors are likely to come down on her hard. Of course, though, she might have some juicy information about the possible participation of say Ruth Madoff, Peter Madoff and/or either of the sons, Andy or Mark Madoff that just might mitigate her criminal penalties.

This WSJ article also reveals that Federal prosecutors have recently turned their attention to a separate group that handled many of the institutional investment accounts mired in the Madoff fraud. "That group was headed by Frank DiPascali Jr., 52, who hasn't yet been asked to speak with prosecutors, according to a person familiar with the matter. Mr. DiPascali's lawyer declined to comment on his client's behalf. Mr. DiPascali referred to himself as the "director of options trading" at the firm and Mr. Madoff told investors he executed trades, despite the fact that a court-appointed trustee found that no trading occurred for at least the past 13 years. Prosecutors have asked at least three employees who worked under Mr. DiPascali about his role in the firm, according to a person familiar with the matter. The employees, Eric Lipkin, JoAnn Crupi and Robert Cardile, who is Mr. DiPascali's brother-in-law, also had proffer agreements with prosecutors."

Ruth Madoff: Rube or Accomplice to Bernie?

Bernie Ruth MadoffLike many others, Toomre Capital Markets LLC ("TCM") has been keenly focused on the Bernie Madoff scandal these past few weeks. We have found it simply incredulous that Bernie claims to have pulled off his enormous fraud alone against so many people for such a long period. As a firm practicing in the field of Enterprise Risk Management, TCM has been particularly interested in what lessons can be learned from this scandal and, more importantly, what should be done to prevent a repeat of such personal loss to so many investors in the future.

Since Bernie Madoff confessed to defrauding investors out of close to $50 billion in funds, many have been asking what role, if any, other members of the extended Madoff family played in the fraud. There also have been considerable focus directed at what role the approximately dozen "feeder funds" might have played. Attention particularly has focused on Bernie's brother, Peter Madoff, and his two sons, Mark and Andrew, as well as his wife of more than forty years, Ruth Alpern Madoff. Many would like answers on the key issues of what did the principals know, when did they know that information and what then did they do about it.

On Tuesday January 27th 2009, Lucinda Franks contributed an exclusive story to The Daily Beast website entitled Exclusive: Ruth Madoff's Role Revealed. The summary of the story reads: "In a Daily Beast exclusive, Lucinda Franks says key investigators now believe Ruth Madoff played a larger role than previously assumed in her husband’s Ponzi scheme, and that the fraud began far earlier than other reports have indicated. Plus, she reports, 20 million Madoff documents have been unearthed in a Queens warehouse."

This former New York Times and Pulitzer Prize-winning journalists reveals several interesting new pieces of information about the Bernie Madoff fraud scandal. The first is that funds from the investment advisory business were in fact comingled with Madoff's personal funds and with a market-making fund in which Madoff as a broker-dealer executed orders for customers. Apparently Ruth Madoff, following in the footsteps of her accountant father Saul Alpern, oversaw the accounting records of all three of these accounts. The comingling of money from customer funds is a violation of regulatory rules that require all customer funds to be segregated from those of the broker-dealer. Apparently it was this comingling of funds that enabled the Bernie Madoff scandal to continue for so long.

Says one highly placed person involved in the inquiries: “If Ruth Madoff had an office there for 37 years and kept the books of this account, wouldn’t she have had some inkling that something was wrong? She’s there all the time and her husband just blows it by her? They are a really tight couple, did he really keep this secret from her every day of their marriage?” Ira Lee Sorkin, the lawyer for both Madoffs, apparently had no comment.

The second key piece of new information is the revelation from a person close to the case that Madoff has admitted to law enforcement officials that the Ponzi scheme began more than forty years ago — much earlier than most have speculated. Needless to say, there are many irate investors from this enormous and extremely long-running fraud. "Madoff himself has told authorities that he acted alone, and while no hard evidence has emerged to refute that, many members of his extended family are targets of irate victims whose savings has evaporated. Some of those family members have gone to authorities and are talking to them about letters they have received that threaten their lives."

Bob Jaffe Ordered To Testify

Bob Jaffe, Ruth Shapiro, Ellen Jaffe, and Carl ShapiroThe State of Massachusetts took an early lead in aggressively pursuing another of the "feeder funds" that deposited investment monies with Bernie Madoff's fraudulent scheme. This feeder fund apparently was run through an entity known as Cohmad Securities, a FINRA-licensed broker-dealer, which was jointly owned by Maurice "Sonny" Cohn and Bernie Madoff. Cohmad Securities apparently operated out of the same office space as Bernie Madoff's primary firm and paid rent to Madoff's broker-dealer operation.

Mark and Andrew Madoff claim not to have known anything about their father's alleged fraud. "Mark and Andrew Madoff are economically and emotionally devastated by what their father has done, which among others things has destroyed the valuable market-making and proprietary trading businesses they spent 20 years building," their attorney, Martin Flumenbaum of Paul, Weiss, Rifkind, Wharton & Garrison, said in a statement. However, on their 19th trading floor, they had to be aware that some employees of Cohmad Securities were working just a few feet away.

According to one news report, the pair of Madoff sons knew Cohmad only as a retail brokerage operation through which they would occasionally place trades to the floor of the New York Stock Exchange because the firm was not a NYSE member. While Mark and Andrew knew Cohmad was one of their father's ventures, "if they had a role with asset management it was not anything they knew about," the spokesman said.

Given how Bernard Madoff Investment Securities was very much a family-run business, many have been very skeptical about this explanation. Hence, both aggrieved investors and regulators have wanted to get a better explanation of just what business Cohmad Securities conducted, how it reimbursed individuals who referred business for investment in Bernie Madoff's asset management operation and what exactly its principals knew about Madoff's investment operation.

Robert M. Jaffe is/was both a broker with Cohmad Securities and the son-in-law of Carl Shapiro, the Boston philanthropist who allegedly lost $545 million that was invested with Bernie Madoff. As Toomre Capital Markets LLC ("TCM") wrote about in the post Bob Jaffe, Bernie Madoff's Man To See, Ducks Subpoena, Mr. Jaffe thus far has missed two schedule appearances to appear before Massachusetts state security regulators. The original subpoena for his appearance and that of the Cohmad Securities' chief compliance officer, Marcia Beth Cohn, were issued shortly after Mr. Madoff's arrest. Neither has yet given any testimony that might assist prosecutors, regulators and investigators further understand who else might have been involved in Bernie Madoff's fraudulent activity.