As the first of Madoff's employees to confess to crime, Frank DiPascali Jr. said, to a judge in U.S. District Court, "I was loyal to him. I ended up being loyal to a terrible, terrible fault."
DiPascali admitted that he abetted Madoff in fabricating trade statements and other records in order to report fictitious annual returns of 10 to 17 percent.
"From the early 1990s until December 2008, I helped Bernie Madoff and others carry out a fraud," DiPascali told the court.
Victory for prosecutors
DiPascali was the chief financial officer of Madoff's firm. As a key Madoff "lieutenant” he answered all queries from investors and explained them the firm’s investment strategies.
His admission is likely to ease further investigation into the scam as investigators might track all those who were involved in Ponzi scheme that led thousands of investors lose their money.
DiPascali had indulged in “phantom” computer trading. When the investor or the auditor came to see the firms trading operation, one employee was told to enter fictitious trades on a computer and another hiding in a close by office was suppose to interact through a connected computer as a counterparty.
“This guy knows where the bodies are buried," says Robert Lamb, a professor at New York University's Stern School of Business.
DiPascali imprisoned
DiPascali pleaded guilty for 10 criminal charges which include conspiracy; international money laundering; and investment adviser, mail,securities, and wire scam.
The attorneys had urged the court to free the former chief financial officer on bail to help in investigation but the U.S. District Judge Richard Sullivan ordered DiPascali jailed.
Sullivan said that he was duty-bound to imprison 52-year-old DiPascali as he lied to the Securities and Exchange Commission and "to people who entrusted him with their life savings".
It has been agreed that sentence will not be announced before May 2010.
"There will be more information and the court will sentence on the basis of additional information," Sullivan said.
DiPascali's co-operation with investigation might earn him some leniency against the criminal charges that could lead to a maximum imprisonment of 125 years.
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