* Paul Konigsberg, 77, pleads not guilty
* Accountant charged with conspiracy, falsifying records
* Statute of limitations on Madoff fraud ends in December
By Jonathan Stempel and Bernard Vaughan
NEW YORK, Sept 26 A former accountant for
Bernard Madoff has been indicted on charges he helped the
convicted swindler defraud thousands of customers in the Ponzi
scheme masterminded by Madoff, nearly five years after the fraud
Paul Konigsberg, the former accountant and a former senior
tax partner at Konigsberg Wolf & Co in New York, was arrested on
Thursday and charged with two counts of conspiracy and three
counts of falsifying records and statements. The U.S. Securities
and Exchange Commission filed related civil charges.
Konigsberg, 77, with matted gray hair and wearing a blue
button-down shirt and gray slacks, pleaded not guilty in a brief
afternoon appearance before U.S. Magistrate Judge Debra Freeman
He was freed on $2 million bond with restricted travel.
Konigsberg, a Greenwich, Connecticut, resident, hugged his
brother after leaving the courtroom. The defendant faces up to
40 years in prison, plus fines and other financial penalties.
Konigsberg is the 15th individual to be criminally charged
over the fraud centered at Bernard L. Madoff Investment
Securities LLC. The trustee liquidating the firm has estimated
that investors lost about $17.3 billion of principal.
"Paul Konigsberg threw aside his ethical duties as an
accountant in favor of his role as a false bookkeeper, which
included allegedly participating in a scheme of backdating
client account statements to show fictitious trades and
conjuring profits and losses of millions of dollars," U.S.
Attorney Preet Bharara in Manhattan said in a statement."
Reed Brodsky, a lawyer for Konigsberg, said his client was
also a victim of Madoff's fraud, with Konigsberg's family having
lost $10 million.
"For a number of months, we've tried to demonstrate to the
federal authorities that Mr. Konigsberg has committed no crime,"
Brodsky said outside the courthouse after the hearing. "He is a
victim of a sociopath - Bernie Madoff."
Federal prosecutors announced the charges less than three
months before a five-year statute of limitations runs out for
them to bring securities charges tied to Madoff's scheme.
The latest charges were revealed 11 days before the start of
a trial of five former Madoff employees also accused of aiding
the fraud by their former boss.
Madoff, 75, was arrested on Dec. 12, 2008. He pleaded guilty
three months later and is serving a 150-year prison term.
"AMENDED" ACCOUNT STATEMENTS
According to the indictment, Madoff directed more than 300
accounts to Konigsberg, who along with top Madoff lieutenant
Frank DiPascali manipulated trades, including through
back-dating, to make customers appear to be getting the steady
investment returns they had been promised.
Konigsberg was also accused of concealing the fraud by
helping Madoff arrange for customers to receive "amended"
account statements that contained false trading activity.
In one such instance, Madoff in 2008 supposedly backdated
losing trades to recoup $1.6 million from a customer, and
arranged to have Konigsberg, who had received duplicate account
statements, return them so they could be amended.
One Madoff employee supposedly noted: "Corrected statements.
Keep in hanging folder. Do not mail out! We never received his
original statement back (from the client). He told Bernie he
sends everything to Paul & Paul told Bernie he shreds whatever
he doesn't need!"
Konigsberg was also accused of arranging a job with Madoff
for a relative who collected more than $320,000 between 1992 and
2008 without having to show up for work.
DiPascali is among the nine people to plead guilty to
criminal charges related to Madoff. He has won repeated praise
from prosecutors for his cooperation with the investigation.
Brodsky, a partner at Gibson, Dunn & Crutcher, at the
hearing called the prosecution's case "weak" and considerably
dependent on DiPascali, who he said has had "a long pattern of
deception for decades."
Before entering private practice, Brodsky was the lead
federal prosecutor who in 2011 won the conviction of Galleon
Group hedge fund founder Raj Rajaratnam for insider trading.
NINE GUILTY PLEAS
According to court papers, Konigsberg had been close to
Madoff since at least the 1980s, and owned non-voting shares in
a London-based operation, Madoff Securities International Ltd.
In March 2009, U.S. prosecutors accused Madoff of using the
London operation to launder money. Thursday's indictment does
not reference those allegations.
Among the others to plead guilty in connection with Madoff's
fraud are Bernard Madoff himself; his brother Peter Madoff, who
was sentenced to 10 years in prison; and former accountant David
Friehling, who is also cooperating with prosecutors.
The five former Madoff employees who pleaded not guilty are
Annette Bongiorno, Daniel Bonventre, Joann Crupi, Jerome O'Hara
and George Perez. Their trial is scheduled to begin on Oct. 7.
The case is U.S. v. Konigsberg, U.S. District Court,
Southern District of New York, No. 10-cr-00228.