After months of secretly working with the FBI,Bernard Madoff's right-hand man emerged in federal court on Tuesday andpleaded guilty to conspiracy and other charges, contradicting claims bythe disgraced financier that he acted alone.
"Iwas loyal to him. I ended up being loyal to a terrible, terriblefault," Frank DiPascali told a judge during a hearing at which hislong-rumored cooperation deal with the government was confirmed.
Madoff is serving 150 years in prison for a pyramid scheme thatdestroyed thousands of people's life savings, wrecked charities andshook confidence in the financial system. During his guilty plea inMarch, Madoff insisted that he acted alone. Only one other person - hisaccountant - had been charged during the seven-month investigationbefore the charges were revealed against DiPascali.
Both prosecutors and defense attorneys portrayed DiPascali asthe man who could unlock his former boss's epic pyramid scheme andpotentially make cases against other defendants. Since Madoff revealedthe fraud to his sons in early December and was arrested by FBI agents,investigators have looked into the actions of his wife, Ruth, hisbrother and two sons, who ran a trading operation under the same roof,and other insiders. No other Madoff family members have been charged.
Attorneys argued the former chief financial officershould be free on bail to help investigators sift through a mountain ofevidence. But US District Judge Richard Sullivan surprised both sidesby ordering DiPascali jailed immediately - a rarity for a cooperator ina white-collar case who had pleaded guilty.
Sullivan said he felt compelled to keep 52-year-old DiPascalilocked up after hearing the defendant admit that, at Madoff'sdirection, he lied to the Securities and Exchange Commission in 2006when he thought they might discover the fraud. The judge said he wastroubled, too, that DiPascali also lied repeatedly "to people whoentrusted him with their life savings."
Defense attorney Marc Mukasey told Sullivan hisclient was "completely unprepared for this" and tried several times topersuade the judge to change his mind. He described DiPascali as agenuinely repentant cooperator who won the trust of FBI agents byspeaking to them nearly every day since late last year.
But in the end, a dejected-looking DiPascali was handcuffed and led out of the courtroom.
The cooperation deal may still earn him leniency against chargesthat carry a potential penalty of up to 125 years in prison forsecurities fraud, money laundering and other crimes. It was agreed thatsentencing won't occur before May 2010.
During his plea, DiPascali described himself as a "kid fromQueens" in New York City who began working for Madoff in 1975, justafter he finished high school. He said he became aware of the fraud bythe 1980s or early 1990s.
DiPascali said account statements showing the firm was makingtrades for clients were "all fake" - something "I knew, Bernie Madoffknew and other people knew." He claimed he thought "for a long time"that Madoff had other assets to cover the claims of any investors whomight demand their money back.
"That's not an excuse. I knew everything I was doing was wrong and criminal," he said.