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From Securities Regulation Daily, September 27, 2013

SEC and DOJ charge accountant for his role in Madoff Ponzi scheme

By John Filar Atwood

The SEC has filed a complaint against Paul Konigsberg, the longtime accountant for several investment advisory clients of Bernard L. Madoff Investment Securities LLC (BMIS), for assisting in the creation of false books and records in connection with Bernard Madoff’s multi-billion dollar Ponzi scheme. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York brought criminal charges against Konigsberg.

SEC’s allegations. The SEC alleges that Konigsberg assisted with the formation of inaccurate trade confirmations each month. He also helped to develop phony data and records documenting the fabricated trades that were, in turn, falsely reflected in the ledgers and related books and records at BMIS.

Konigsberg aided and abetted the falsification of books and records at BMIS from at least the mid-1990s to late 2008, according to the complaint. The SEC claims that he provided tax or accounting services for more than 200 BMIS client accounts, including five of Madoff’s wealthiest and oldest clients who invested more than a billion dollars combined in BMIS. Konigsberg received fees directly from BMIS clients, additionally BMIS and Madoff paid him a monthly fee of $15,000 or $20,000 as a retainer for providing accounting services to a wealthy and longtime Madoff client and to his adult children.

The SEC further alleges that Konigsberg worked with BMIS employees to decide upon desired investment or tax gains and losses to be manufactured and reflected on BMIS account statements and in BMIS computer systems to ensure his clients enjoyed favorable tax treatment for their purported investment activity. The SEC claims that he also discussed backdated trades and fictitious account activity entered into the computer systems to create the desired trading results. Finally, the SEC alleges that Konigsberg returned or destroyed his clients’ true BMIS account statements and designed fictitious account activity to be entered into the firm’s books and records and to be reflected on new phony account statements.

Disgorgement and penalties. In a press release, Director of the SEC’s New York Regional Office, Andrew Calamari, noted that Konigsberg played a role in Madoff’s deception of his wealthiest clients and that his collaboration was essential to the Madoff fraud. The SEC is seeking disgorgement of ill-gotten gains, financial penalties and permanent injunctions against Konigsberg.

Criminal case. Konigsberg was arrested in New York and is charged with two counts of conspiracy, one count of falsifying the books and records of a broker-dealer, one count of falsifying the books and records of an investment adviser and one count of making false statements in a document required to be kept by ERISA. He faces a maximum sentence of 40 years in prison. He is also subject to mandatory restitution and criminal forfeiture, and faces criminal fines up to twice the gross gain or loss derived from the offense.

The charges stem from Konigsberg’s alleged role in falsifying books and records at BMSI and his role in creating a fictitious, no-show job through which a co-conspirator received hundreds of thousands of dollars in compensation from Madoff.

According to the indictment, Konigsberg requested that another co-conspirator who worked at BMSI create back-dated trades in a second client’s account, retroactive to a year earlier, in order to generate losses for tax purposes. The indictment states that a BMSI worksheet reflecting the specific composition of the back-dated trades bears the notation “Paul OK’d this.”

No show job. The Department of Justice also alleges that beginning in approximately 1992, Madoff offered Konigsberg an additional cash payment of $20,000 per year, which he instructed Madoff to pay to a relative of Konigsberg’s who had previously worked at BMSI. From 1992 until December 2008, the relative received more than $320,000 in cash compensation for the “no show” job at BMSI, plus health and retirement benefits to which the individual was not entitled.

Manhattan U.S. Attorney Preet Bharara said that with the indictment, Konigsberg “will be made to answer for his alleged conduct as yet another player on Madoff’s team.”

The case is No. 13-cv-6859.

Attorneys: Sanjay Wadhwa and Andrew M. Calamari for the Securities and Exchange Commission. Preet Bharara for the U.S Department of Justice.

Companies: Bernard L. Madoff Investment Securities LLC; Konigsberg Wolf & Co., P.C.

MainStory: TopStory FraudManipulation AccountingAuditing NewYorkNews

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