Former Madoff Controller Pleads Guilty To Fraud Charges

The first non-Madoff employed at Bernard Madoff's brokerage firm pled guilty to aiding and abetting Madoff's $65 billion Ponzi scheme for more than two decades.  Irwin lipkin, the former controller of Bernard L. Madoff Investment Services ("BLMIS") and the third employee after Madoff and his wife, entered a guilty plea to several fraud charges including conspiracy to commit securities fraud, to falsify records, and to make false filings with the SEC.  Pursuant to his plea agreement with authorities, Lipkin, 74, faces up to ten years in federal prison.

Lipkin was hired in 1964 as the first non-Madoff at BLMIS, and participated in maintaining the firm's financials in his job as Controller, as well as assisting Madoff in performing internal audits of the securities positions held by BLMIS.  Along with several other Madoff employees, Lipkin maintained the BLMIS General Ledger and Stock Record.  Beginning in the 1970's, Lipkin falsified entries in the General Ledger designed to manipulate the purported profits and losses realized by BLMIS, and were done at Madoff's behest.  Additionally, in connection with audits by the Internal Revenue Service ("IRS"), Lipkin and others backdated the General Ledger and other supporting documents to appear consistent with representations made to the IRS.  After his retirement, Lipkin also instructed other Madoff employees how to continue his duties to perpetuate the fraud.  

According to authorities, Lipkin also arranged for his wife to receive a regular paycheck from BLMIS despite the fact that she did not work at BLMIS or provide any services on its behalf.  Even though Lipkin retired in 1998, he continued to receive a salary and benefits until the scheme was uncovered in December 2008.  

As part of his restitution agreement, Lipkin has agreed to forfeit $170 billion, which includes all real and personal property owned.  He is scheduled to be sentenced on March 13, 2013.  

A copy of the criminal charging document against Lipkin is here.

Men Behind $1.6 Million Hawaii Ponzi Scheme Sentenced to Prison

Three members of a Honolulu investment group were sentenced to federal prison for their role in a Ponzi scheme that bilked investors out of nearly $2 milion.  Syed Qadri, 39, Ruben Carrillo Gonzalez, 50, Jeffrey Greenhut, 40, received prison sentences of fifty-one months, forty-one months, and twenty-four months, respectively.  United States District Judge Leslie Kobayashi also handed down a one-month sentence to Qadri's wife, Patricia Rodzkowski, for her role in the scheme.  The three men had pled guilty in June.  

According to authorities, the men operated Amasse Capital LLC ("Amasse") and Solomon & Co LLC ("Solomon").  From january 2006 to September 2006, the companies purported to invest in high-yield bonds that were advertised as nearly risk-free, with investors promised monthly returns ranging from 100% to 400%.  However, in reality, the operation was a classic Ponzi scheme, with investor funds being used to make Ponzi-style payments to existing investors.  

In addition to the prison sentences, Judge Kobayashi also ordered the three men to pay restitution to their victims.

Former Stanford Chief Investment Officer Receives Three-Year Prison Sentence

The former chief investment officer of Allen Stanford's financial empire was sentenced to serve three years in prison after she pled guilty to obstructing an investigation by the Securities and Exchange Commission ("SEC") into Stanford's operations.  Laura Pendergest-Holt, 39, had agreed to plead guilty only days after Allen Stanford was sentenced to 110 years in prison after being convicted of operating a $7 billion Ponzi scheme rivaled only by Bernard Madoff.  The sentence is consistent with her plea agreement, in which prosecutors agreed to recommend a sentence of thirty-six months in prison followed by a term of supervised release.  It was unclear from immediate news reports whether United States District Judge David Hittner ordered Pendergest-Holt to pay restitution.  

The charges derived from the SEC's initial investigation into Stanford's operations, which resulted in the issuance of subpoenas to Stanford and another employee to provide testimony on the operations of Stanford International Bank, Ltd. ("SIB").  After the subpoenas were issued, a Stanford attorney convinced the SEC to allow the substitution of Pendergest-Holt to give testimony, intimating that she was more familiar with operations than Stanford.  Pendergest-Holt then participated in several weeks of meetings with Stanford executives where she was coached on the testimony she was expected to give.  Her testimony omitted crucial details of SIB's finances and omitted or misrepresented other relevant information.  According to prosecutors,

"Holt acknowledged that her eventual appearance and sworn testimony before the SEC was a stall tactic designed to frustrate the SEC's efforts to obtain important information about SIB's investment portfolio.  Holt admitted she took this action intentionally and corruptly, knowing that her testimony would impede the SEC's investigation and help SIB continue operating."

Holt is the third-highest ranking official to receive prison time after Stanford and Stanford's CFO, James Davis.  Incidentally, Pendergest-Holt carried on an affair with Davis, who served as the prosecution's chief witness against Stanford.  Two other Stanford officials are scheduled to stand trial beginning later this month.  

A copy of the indictment is here.

Man Who Operated Charity As Ponzi Scheme Sentenced to Eight Years in Prison

A federal judge handed down an eight-year prison term to a man who duped investors out of millions of dollars in a Ponzi scheme that masqueraded as a charitable organization.  Joseph Angelo Sivigliano, 80, received the sentence from United States District Judge David Russell after a federal jury convicted Sivigliano earlier this year of forty-six criminal charges that included conspiracy, wire fraud, and money laundering.  While investors were told that investment proceeds would be used to benefit philanthropic ventures, in reality, Sivigliano operated an elaborate Ponzi scheme that ultimately took in nearly $4 million from investors.  Sivigliano was also ordered to pay more than $2.21 million to victims as restitution.

According to authorities, Sivigliano operated Helping Hearts and Hands ("HHH"), based in Bethany, Oklahoma.  Potential investors were assured that HHH was a 501(c)(3) charitable organization, and that profits earned from investments in real estate ventures would be used for humanitarian ventures such as the support of a Christian childcare facility known as "Teaching Little Hearts and Hands."  Aided by co-conspirators Dwight Pimson and Venus Marie Pimson, nearly 70 investors eventually entrusted $3.8 million to the operation.

However, rather than use investor funds to operate his "charity", prosecutors accused Sivigliano of operating a classic Ponzi scheme in which new money was used to pay returns to existing investors.  Additionally, investor funds were siphoned off for a variety of unauthorized purposes, including propping up several Sivigliano-owned businesses including Celebrity Limo and Valet and MC Productions, Inc.  Unbeknownst to investors, Sivigliano also failed to register himself and HHH  with Oklahoma securities regulators.  Victims were estimated to sustain total losses of approximately $1.7 million in the scheme.

Both Dwight and Venue Pimson agreed to plead guilty and cooperated with prosecutors in the case against Sivigliano.  Dwight Pimson later received a five-year prison term, while Venus Pimson was sentenced to a thirty-month term.  Each was also ordered to pay more than $2 million in restitution to victims.