Madoff accountant indicted for aiding Ponzi scheme

Reuters

By Jonathan Stempel

NEW YORK (Reuters) - A former accountant for Bernard Madoff has been indicted on charges he helped the convicted swindler defraud thousands of customers in the Ponzi scheme masterminded by Madoff, nearly five years after the fraud was uncovered.

Paul Konigsberg, the former accountant and a former senior tax partner at Konigsberg Wolf & Co in New York, was arrested on Thursday and charged with two conspiracy charges and three charges of falsifying records and statements.

Konigsberg is the 15th individual to be charged over the fraud centred at the now-defunct Bernard L. Madoff Investment Securities LLC in New York.

The charges were announced 11 days before the start of a trial of five former Madoff employees also accused of aiding the fraud.

Konigsberg's arrest comes less than three months before a five-year statute of limitations runs out for prosecutors to bring securities fraud charges tied to Madoff's scheme.

Madoff, 75, was arrested on December 12, 2008. He pleaded guilty three months later and is serving a 150-year prison term.

The trustee liquidating his firm has said customers lost about $17.3 billion of principal.

Reed Brodsky, a lawyer for Konigsberg, did not immediately respond to requests for comment on the charges. He previously told The New York Times that his 77-year-old client was an "innocent victim" of Madoff's fraud who looked forward to clearing his name at trial.

According to the indictment, Madoff directed more than 300 accounts to Konigsberg, who along with top Madoff lieutenant Frank DiPascali manipulated trades to make customers appear to be getting the steady investment returns they had been promised.

Konigsberg was also accused of concealing the fraud by helping Madoff arrange for customers to receive "amended" account statements that contained false trading activity.

In one such instance, Madoff in 2008 supposedly backdated losing trades to recoup $1.6 million from a customer, and arranged to have Konigsberg, who had received duplicate account statements, return them so they could be amended.

One Madoff employee supposedly noted: "Corrected statements. Keep in hanging folder. Do not mail out! We never received his original statement back (from the client). He told Bernie he sends everything to Paul & Paul told Bernie he shreds whatever he doesn't need!"

Konigsberg was also accused of arranging a job with Madoff for a relative who collected more than $320,000 between 1992 and 2008 without having to show up for work.

A spokeswoman for U.S. Attorney Preet Bharara in New York declined to comment on the indictment.

According to court papers, Konigsberg had a close relationship with Madoff dating at least to the 1980s, and owned non-voting shares in a London-based operation, Madoff Securities International Ltd. In March 2009, U.S. prosecutors accused Madoff of using the London operation to launder money.

Of the people charged for crimes related to Madoff's Ponzi scheme, nine have pleaded guilty so far. They include Madoff, his brother Peter Madoff, DiPascali, and another former accountant, David Friehling. DiPascali has won repeated praise from prosecutors for his cooperation with the investigation.

The five former employees who pleaded not guilty are Annette Bongiorno, Daniel Bonventre, Joann Crupi, Jerome O'Hara and George Perez. Their trial is scheduled to begin on October 7.

The case is U.S. v. Konigsberg, U.S. District Court, Southern District of New York, No. 10-cr-00228.

(Reporting by Jonathan Stempel in New York; Additional reporting by Emily Flitter and Nate Raymond; Editing by Gerald E. McCormick, Bernadette Baum and Leslie Adler)

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