MADOFF AIDE REVEALS

It Was All Fake’

08-13-2009 | AP

Panama Star NEW YORK. After months of secretly working with the FBI, Bernard Madoff's right-hand man emerged in federal court on Tuesday and pleaded guilty to conspiracy and other charges, contradicting claims by the disgraced financier that he acted alone.

"I was loyal to him. I ended up being loyal to a terrible, terrible fault," Frank DiPascali told a judge during a hearing at which his long-rumored cooperation deal with the government was confirmed. Both prosecutors and defense attorneys portrayed DiPascali as the man who could unlock his former boss' epic Ponzi scheme and potentially make cases against other defendants. Since Madoff revealed the fraud to his sons in early December and was arrested by FBI agents, investigators have looked into the actions of his wife, Ruth, his brother and two sons, who ran a trading operation under the same roof, and other insiders. No other Madoff family members have been charged.

Attorneys argued the former chief financial officer should be free on bail to help investigators sift through a mountain of evidence. But U.S. District Judge Richard Sullivan surprised both sides by ordering DiPascali jailed immediately -- a rarity for a cooperator in a white-collar case who had pleaded guilty.

Sullivan said he felt compelled to keep 52-year-old DiPascali locked up after hearing the defendant admit that, at Madoff's direction, he lied to the Securities and Exchange Commission in 2006 when he thought they might discover the fraud. The judge said he was troubled too that DiPascali also lied repeatedly "to people who entrusted him with their life savings."

Defense attorney Marc Mukasey told Sullivan his client was "completely unprepared for this" and tried several times to persuade the judge to change his mind. He described DiPascali as a genuinely repentant cooperator who won the trust of FBI agents by speaking to them nearly every day since late last year.

But in the end, a dejected-looking DiPascali was handcuffed and led out of the courtroom.

The cooperation deal may still earn him leniency against charges which carry a potential penalty of up to 125 years in prison for securities fraud, money laundering and other crimes. It was agreed that sentencing won't occur before May 2010. Madoff is serving 150 years in prison for a Ponzi scheme that destroyed thousands of people's life savings.