August 4, 2015 / 5:09 AM / 4 years ago

With final defendant, Madoff criminal case comes to an end

NEW YORK (Reuters) - In 1964, Irwin Lipkin became one of the first employees at a small New York trading firm called Bernard L. Madoff Investment Securities.

Irwin Lipkin, former controller for Bernard L. Madoff Investment Securities, is pictured in New York in this undated FBI handout photo obtained by Reuters August 3, 2015. REUTERS/FBI/Handout via Reuters

Five decades later, Lipkin, 77, is set to be sentenced on Wednesday in Manhattan federal court for falsifying records, marking the end of the criminal case stemming from the collapse of Madoff’s multibillion-dollar Ponzi scheme more than six years ago.

Lipkin is the last of 15 people who either pleaded guilty or were convicted at trial in connection with the fraud, which cost investors approximately $17 billion in principal.

Madoff, 77, who is serving a 150-year sentence after pleading guilty in 2009 to masterminding the fraud, has always insisted he acted alone.

Prosecutors have conceded that Madoff alone knew the full extent of his deception. Even his deputy, Frank DiPascali, who was intimately involved in the fraud, testified he believed Madoff had hidden assets to cover customers’ liabilities almost until the end.

Madoff tearfully confessed to him that he didn’t “have any more goddamn money” in the firm’s final days, DiPascali said in 2013 while testifying against five former colleagues.

But prosecutors have used millions of documents and the cooperation of key co-conspirators to prove that while Madoff was the architect, he had plenty of help.

The task was complicated by the sheer scope of the fraud and involved poring through countless paper records, since the scheme began before computers were widespread.

“It was a fraud that lasted for 40-something years; it involved thousands upon thousands of customers,” said former prosecutor Matthew Schwartz, now a partner at Boies Schiller & Flexner, who helped lead the Madoff investigation. “It was very difficult to know where to start.”

Lipkin, who pleaded guilty to falsifying records as the firm’s controller, has asked for probation, citing his declining health, while prosecutors have requested prison time.

Five employees took their chances with a jury: back-office director Daniel Bonventre, portfolio managers Annette Bongiorno and JoAnn Crupi and computer programmers George Perez and Jerome O’Hara.

They were convicted on securities fraud and other counts in March 2014, following a six-month trial that was one of the longest ever white-collar criminal trials in New York.

Lawyers for the five, who are appealing, say they were duped by one of history’s greatest con men, just as investors, auditors and regulators were.

“Nobody knew what he was doing,” Andrew Frisch, Bonventre’s lawyer, told Reuters. “These are uneducated, or thinly educated, functionaries who basically see him as a god.”

Those assertions may have helped persuade U.S. District Judge Laura Taylor Swain not to impose lengthy prison terms, instead sentencing them to between 2-1/2 and 10 years.

Prosecutors criticized those sentences as too light and have taken the unusual step of appealing.

Besides DiPascali, six defendants cooperated with prosecutors and were rewarded with non-prison sentences. DiPascali died in May before his sentencing.

As part of the criminal investigation, the Justice Department has also recovered $4 billion for victims, including $1.7 billion from Madoff’s longtime bank, JPMorgan Chase & Co (JPM.N), as part of a deferred prosecution agreement.

Over the years, there was speculation as to whether the government would expand its criminal case to others, including major Madoff clients and other firm employees.

Last year, Reuters reported that prosecutors were still considering a case against Madoff’s son, Andrew. He died of cancer a few months later.

Madoff’s other son, Mark, committed suicide on the second anniversary of his father’s arrest.

No Madoff customer was ever criminally charged. In 2010, Irving Picard, the trustee seeking to recover victims’ funds, and prosecutors reached a $7 billion civil settlement with the estate of Madoff client Jeffry Picower, who died in 2009.

Picard has recouped more than $10 billion and is still pressing civil claims against members of the Madoff family and other parties.

For a list of the defendants and their sentences in the Madoff case, click here

Reporting by Joseph Ax; Editing by Noeleen Walder and Meredith Mazzilli

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