Former Madoff finance chief could cut deal and reveal his accomplices

Frank DiPascali expected to plead guilty when he faces US court today

Victims of Bernard Madoff's record-breaking fraud are hopeful of a major breakthrough in the case, with the disgraced Wall Street grandee's closest lieutenant expected to plead guilty today to playing role in the $65bn (£39bn) scam.

Court papers suggest that Frank DiPascali has been helping prosecutors in an attempt to lessen his own sentence. Observers believe he could be the key to unravelling exactly how many other people were in on Madoff's fraud. Even though Madoff, pictured, is behind bars serving a 150-year prison sentence, his refusal to co-operate with the investigation means mystery still surrounds how he spun a web of deceit that took in thousands of victims across several continents.

Specifically, angry investors have been demanding to know if other members of Madoff's family were in on the fraud. Mr DiPascali's co-operation could also help the US Department of Justice build cases against a constellation of so-called "feeder funds", run by supposedly sophisticated investment managers who were actually only outsourcing clients' money to Madoff.

Mr DiPascali, 52, was a "point man" for clients calling in to the mysterious 17th-floor office in New York where Madoff Investment Securities was based. He ran a small team of employees fielding client orders, and called himself "director of options trading", but prosecutors believe no trading was ever carried out. In contrast to Madoff, he was known for his laidback style of dress, often turning up to work in jeans, but not for a laidback personality. He was introduced to Madoff a year after graduating from a Catholic high school in Queens, New York, and immediately became one of his closest colleagues. He lives more modestly than his boss – only a five-bed, five-bath house with a pool on seven acres in the New Jersey suburbs, compared to Madoff's many homes and yachts. Earlier this year, Mr DiPascali's lawyer called him "a blue-collar guy, not a Wall Street master of the universe".

So far, only Madoff himself and the small-time accountant who was meant to be auditing his books have charged over the world's biggest Ponzi scheme. Until it collapsed in December, Madoff was pretending to invest money from thousands of clients and generating steady returns of about 12 per cent a year. In fact, he was simply using cash from new investors to pay clients who cashed out. The $65bn they thought they had in their accounts simply did not exist, and many now face ruin.

John Coffee, a law professor at Columbia University, said: "If others – such as Madoff's brother Peter – were aware of either the full scale of the Ponzi scheme or substantial irregularities and they had conversations with DiPascali, they are now in big trouble. Even without knowing of the Ponzi scheme, some of the feeder funds may have had candid discussions with Mr DiPascali about their desired rates of return, which could show securities fraud on their part."

It is not yet known what charges Mr DiPascali faces, or if he has agreed or even proferred a plea bargain, but he has been questioned repeatedly by investigators. Leaked notes of his earliest interviews describe his answers as "evasive" and "incomprehensible". In a court filing on Friday, the Justice Department said Mr DiPascali would waive indictment and plead guilty at a hearing this morning, signalling to lawyers that he is co-operating.

He could be key to determining if other Madoffs broke the law. Peter Madoff, Bernard's brother, was chief compliance officer. Mark and Andrew Madoff, Bernard's sons, worked on the older, stock trading side of the business. Ruth Madoff, Bernard's wife of five decades, occasionally had offices at the firm. Bernard Madoff said when he pleaded guilty to 11 charges that he acted alone. His family deny knowledge of the fraud and any wrongdoing.

peoplePaper attempts to defend itself
voicesWe desperately need men to be feminists too
Life and Style
food + drink
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits