Peter
Madoff, brother of Bernard Madoff and former chief compliance officer
at Bernard L Madoff Investment Securities, faces 10 years in prison
after pleading guilty to conspiracy to commit securities fraud, among
other charges.

The list of charges included conspiracy to commit tax fraud, mail
fraud, ERISA fraud and falsifying records of an investment advisor.
Peter Madoff pleaded guilty in a Manhattan federal court on Friday, following
reports last week that he would plead guilty.

Separately, the Securities and Exchange Commission on Friday charged
Peter Madoff with committing fraud, making false statements to
regulators, and falsifying books and records.

He was employed by BLMIS from 1965 till after 11 December, 2008,
becoming CCO and a senior managing director in 1969. In his capacity as
CIO, the Department of Justice says, he created “numerous false
compliance documents” stating that he had performed regular reviews of
trading at the firm’s Investment Advisory (IA) business, and which were
deliberately designed to mislead regulators, auditors and clients.

The statements created the appearance of a business with a small
group of highly sophisticated clients, and far fewer assets under
management than was really the case. For example, the Forms ADV said the
advisory business had only 23 accounts under management, when in
reality it had over 4,000 at the time of collapse in 2008. The same
forms stated AuM of $17.1 billion, when “on paper” the firm had over $65
billion AuM at that time, the DoJ said.

“In addition, from 1998 through 2008, [Peter] Madoff engaged in a tax
fraud scheme involving the transfer of wealth within the Madoff family
in ways that allowed him to avoid paying millions of dollars in required
taxes to the IRS. Most, if not all of the ‘wealth,’ came directly or
indirectly from IA client funds held at BLMIS,” the statement said.

He also gave his wife a “no show” job at BLMIS, paying her a salary
of between $100,000 and $160,000, as well as a 401(k) and other
benefits.

Agreement

In 2008, when insiders realised the Madoff empire was almost certain
to collapse, Peter Madoff agreed with others to send the $300 million
remaining in IA accounts to favoured employees, family members and
friends, but the Ponzi scheme collapsed before the distributions could
take place. However, on 10 December, 2008, one day before the firm’s
meltdown, he withdrew $200,000 from it for personal use.

He now faces 10 years in prison. As part of his plea agreement, he
has agreed not to seek a sentence other than 10 years. He has also
agreed to forfeit over $143.1 billion, including all of his real and
personal property. The government has also entered into a settlement
with Peter Madoff’s family, requiring his wife and daughter to surrender
assets including several homes, a Ferrari and more than $10 million in
cash and securities. His wife, Marion Madoff, is being left with
approximately $771,733.

“Peter Madoff enabled the largest fraud in human history. He will now
be jailed well into old age, and he will forfeit virtually every penny
he has. We are not yet finished calling to account everyone responsible
for the epic fraud of Bernard Madoff and the epic pain of his many
victims,” said Manhattan US Attorney Preet Bharara.

The forfeited assets will be used to compensate victims of the fraud,
“consistent with applicable Department of Justice regulations,” the
government said.

Sentencing has been set for 4 October this year.