Fraud, Perjury Suit Against Peter Madoff

July 02, 2012 /

The notorious investment scandal that has long hounded the Madoffs never seems to stop as the brother of Bernie Madoff, Peter, is facing fraud charges for allegedly making false statements to regulators, and falsifying books and records in order to create the false appearance of a functioning compliance program over Madoff’s fraudulent investment advisory operations.

In a probe conducted by Aaron P. Arnzen and Kristine M. Zaleskas of the New York Regional Office, the SEC alleges that Peter Madoff, who served as Chief Compliance Officer and Senior Managing Director at Bernard L. Madoff Investment Securities LLC (BMIS) from 1969 to December 2008, created stacks of compliance documents setting out supposedly robust policies and procedures over BMIS’s investment advisory operations. However, Peter Madoff created these compliance manuals, written supervisory procedures, reports of annual compliance reviews, and compliance certifications to merely paper the file. No policies and procedures were ever implemented, and none of the reviews were actually performed even though Peter Madoff represented that he personally completed the reviews.

The U.S. Attorney’s Office for the Southern District of New York today announced parallel criminal charges against Peter Madoff.

“Peter Madoff helped Bernie Madoff create the image of a functioning compliance program purportedly overseen by sophisticated financial professionals,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Tragically, the image was merely an illusion supported by Peter’s sham paperwork and false filings for which he was rewarded with tens of millions of dollars in stolen investor funds.”

According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Bernie Madoff realized in late 2008 that his decades-long scheme was on the verge of collapse. He told Peter Madoff that he could not pay billions of dollars of investor redemption requests and wanted to distribute remaining investor money to family, friends, and favored employees before the scheme collapsed. Peter Madoff then helped choose which family, friends and employees to pay, and rushed to withdraw $200,000 from BMIS’s bank account for himself before the fraud’s final downfall.

The SEC alleges that in addition to creating false compliance materials, Peter Madoff created false broker-dealer and investment advisor registration applications filed by BMIS. He also failed to implement and review required policies and procedures, and falsified the firm’s books and records. Peter Madoff was richly rewarded for his misconduct, pocketing tens of millions of dollars through salary and bonuses, fake trades, sham loans, and direct, undocumented transfers of investor funds to himself from the bank account that BMIS used to perpetrate the Ponzi scheme.

Among other things, the SEC’s complaint seeks financial penalties and a court order requiring Peter Madoff to disgorge his ill-gotten gains.

The SEC’s investigation is continuing.

 

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