Long-time Madoff employee charged with fraud

SEC charges another Madoff executive for his role in the multi-billion dollar Ponzi scheme

The US Securities and Exchange Commission (SEC) has charged Madoff employee David Kugel, who worked at Bernard L. Madoff Investment Securities (BMIS) for nearly 40 years, with fraud for his role in the $65 billion Ponzi scheme.

In the November 21 complaint, the SEC alleges that "from the early 1970s to 2008, Kugel knowingly participated in the creation of false account statements supplied to BMIS's clients", "helped create fictional trades" and "aided and abetted the fraud that Madoff perpetrated on clients for decades".

The total sum missing from client accounts was $65 billion, while actual client losses were estimated at $18 billion.

Kugel opened his own account at BMIS and withdrew almost $10 million from it between 2001 and 2008, therefore withdrawing the purported profits, "even though he knew that they were not proceeds of actual trading activity".

"Kugel helped Madoff maintain the elaborate and enduring facade that his clients were engaged in actual trading when in fact no such trading occurred," said George Canellos, director of the SEC's New York office.

The US Attorney's Office for the Southern District of New York has already filed parallel criminal charges against Kugel, to which he has pleaded guilty. He has also agreed to settle the SEC's civil charges, which will result in a permanent injunction and the forfeit of ill-gotten monetary gains.

Kugel is not the first Madoff associate to be prosecuted.

Another long-time Madoff employee, Eric Lipkin, was also charged with fraud by the SEC in July after allegedly having produced false account statements.

Two other former employees, Annette Bongiorno and JoAnn Crupi, were charged in November 2010 with creating false documents and trades, and misleading investors, respectively.

BMIS's chief financial officer Frank DiPascali, who joined the firm at the age of 18, pleaded guilty to 10 charges, including money laundering, securities fraud and conspiracy, at a Manhattan court in August 2009. He faces up to 125 years in prison.

Bernard Madoff himself, the mastermind behind what is considered to be the biggest financial fraud in US history, pleaded guilty to 11 federal felonies in March 2009 and is currently serving a prison term of 150 years.