The former Controller at Bernard L. Madoff Investment Securities LLC was sentenced following the entry of guilty pleas in 2012. He is the last of the Madoff employees to be sentenced to prison. U.S. v. O’Hara, Case No. 10-cr-00288 (S.D.N.Y.).
Irwin Lipkin was one of BMI’s longest serving employees. He began at the firm in 1964 as the first non-family member employee. As the controller of the firm Mr. Lipkin has been responsible for maintain the books and records since at least the mid-1970s. Acting in conjunction with Daniel Bonventre, Enric Cotellessa-Pitz and others, Mr. Lipkin falsified the profit and loss numbers for the firm in the General Ledger and in the supporting records. When he retired in 1998 Mr. Lipkin schooled his successor in the preparation of the false records.
The falsification of the firm’s General Ledger and related records resulted in the filing of false reports with the SEC. As a registered broker-dealer BMI was required to file FOCUS reports with the SEC on a monthly, quarterly and annual basis and annual financial statements. Since those filings were based on the falsified internal books of the firm, the regulatory filings were false.
On multiple occasions Mr. Lipkin had Annette Bongiono, a firm employee in the investment advisory business, execute false trades in his personal accounts at the firm as well as those of his family. He also took steps to minimize his capital gains taxes by either recording in the records that the transactions had been canceled long after they occurred or by documenting nonexistent purchases of shares near the monthly high price and nonexistent sales near the monthly low price. In addition, he arranged “no-show jobs at the broker for himself and his wife which resulted in the payment of various benefits that were not earned.
Mr. Lipkin pleaded guilty to: One count of conspiracy to commit securities fraud; falsifying records; making false filings with the SEC; and to falsifying statements in relation to documents required by ERISA; and to one substantive count of falsifying statements in relation to documents required by ERISA. Unlike some Madoff employees, Mr. Lipkin refused to cooperate with the government.
The Court sentenced him to six months in prison and to three years supervised release, including eighteen months of home confinement. He was also ordered to forfeit $170 billion dollars and various pieces of property, including a house in Florida, stocks from brokerage and retirement accounts and artwork. Mr. Lipkin, like other Madoff employees, maintained he was unaware of the fraud. According to news reports, the Court noted that the sentence would have been longer but for Mr. Lipkin’s health.
Five other BMI employees were found guilty following a jury trial last year. They were back office director Daniel Bonventre, portfolio managers Jerome O’Hara and George Perez. They were sentenced to between 2-1/2 and 10 years in prison. The convictions are on appeal.
