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.

PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

SQL Developer with T-SQL, Watford, Hertfordshire - £350 - £360

£350 - £360 per day: Ashdown Group: SQL Developer with T-SQL, Watford, Hertfor...

Chief Financial Officer

120-150k: Accountancy Action: We are looking for an experienced CFO from a min...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...

Day In a Page

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker
Renée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity

'Renée Zellweger's real crime was to age'

The actress's altered appearance raised eyebrows at Elle's Women in Hollywood awards on Monday
From Cinderella to The Jungle Book, Disney plans live-action remakes of animated classics

Disney plans live-action remakes of animated classics

From Cinderella to The Jungle Book, Patrick Grafton-Green wonders if they can ever recapture the old magic
Thousands of teenagers to visit battlefields of the First World War in new Government scheme

Pupils to visit First World War battlefields

A new Government scheme aims to bring the the horrors of the conflict to life over the next five years
The 10 best smartphone accessories

Make the most of your mobile: 10 best smartphone accessories

Try these add-ons for everything from secret charging to making sure you never lose your keys again
Mario Balotelli substituted at half-time against Real Madrid: Was this shirt swapping the real reason?

Liverpool v Real Madrid

Mario Balotelli substituted at half-time. Was shirt swapping the real reason?
West Indies tour of India: Hurricane set to sweep Windies into the shadows

Hurricane set to sweep Windies into the shadows

Decision to pull out of India tour leaves the WICB fighting for its existence with an off-field storm building
Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?