Ex-accounting executive avoids prison in Madoff fraud case

NEW YORK (Reuters) - A former associate of Bernard Madoff avoided prison on Thursday for his role in perpetuating the fraudster’s massive Ponzi scheme because of his extensive cooperation with prosecutors.

Paul Konigsberg (L), the former accountant and a former senior tax partner at Konigsberg Wolf & Co in New York, leaves the Manhattan federal courthouse after making bail, with his lawyer Reed Brodsky, in New York, September 26, 2013. REUTERS/Zoran Milich

Paul Konigsberg, 79, a lawyer and accounting firm executive, pleaded guilty in June 2014 to charges of conspiracy and falsifying books and records.

At the time, his cooperation deal was seen as a signal that prosecutors were still pursuing a criminal case against Madoff’s son, Andrew, who died of cancer three months later.

U.S. District Judge Laura Taylor Swain in New York, citing an otherwise admirable life, said Konigsberg had been punished enough by the loss of his reputation.

“You’ve demonstrated sincere remorse,” she said.

Prosecutors said Konigsberg was unaware of the scheme but helped by conspiring with Madoff employees to create some of the fraudulent customer statements at its heart.

“Not a day goes by that I don’t regret that I trusted Mr. Madoff,” a tearful Konigsberg told Swain. “As we’ve all come to know, this man was truly a monster.”

Konigsberg’s plea last year included references to two unnamed co-conspirators who allegedly received sham tax-free loans from Madoff. Sources told Reuters the two people were Madoff’s sons, Mark and Andrew.

Mark Madoff committed suicide in December 2010 on the second anniversary of his father’s arrest. Andrew Madoff died in September.

The Madoff brothers denied any knowledge of or involvement in their father’s fraud. Bernard Madoff is serving a 150-year sentence after pleading guilty to running the Ponzi scheme, estimated to have cost investors $17 billion in principal.

In the 1990s, Madoff began steering some of his biggest clients to Konigsberg’s accounting firm.

In several instances, Konigsberg agreed to return customer account statements to Madoff’s firm, to be replaced by amended statements with fraudulent backdated trades. He then filed clients’ tax returns based on the revised statements.

Konigsberg also allowed Madoff to pay a relative for a no-show job at Madoff’s firm, prosecutors said.

Konigsberg has forfeited more than $4 million of commissions his firm received for Madoff clients.

Prosecutors said Konigsberg aided the investigation into Madoff's longtime bank, JPMorgan Chase & Co JPM.N. The bank agreed in January 2014 to pay $2.6 billion to resolve criminal and civil claims related to Madoff.

Fifteen defendants including Madoff have been convicted in connection with the fraud.

The case is U.S. v. Konigsberg, U.S. District Court for the Southern District of New York, No. 10-cr-228.

Reporting by Joseph Ax