Former Madoff employee, Irwin Lipkin, jailed over £11bn Ponzi scheme fraud

Irwin Lipkin, one of Bernard Madoff’s longest-serving lieutenants, has been sentenced to six months in prison for falsifying records that helped the Wall Street fraudster run his $17bn (£11bn) Ponzi scheme. The sentencing of a Bernard L Madoff Securities employee, more than six years after the fraud first came to light, brings to a end the criminal cases stemming from the scheme, fittingly enough with the very first person hired by the company in 1964.

Lipkin, 77, received the six-month sentence after pleading for mercy because of his failing health. The judge said the Bureau of Prisons may let Lipkin serve the term via confinement at home. Earlier this week, prosecutors detailed a plea deal with Lipkin over charges including conspiracy and falsifying employment records.

Lipkin served as Madoff Securities’ financial controller and stayed with the company his entire working life. Throughout the trial, Irwin’s defence claimed (as in every Madoff-related criminal trial) that the “Ponzi” scheme operated by Madoff was his work alone. The fact that every other case has resulted in a guilty plea or a conviction made that line of defence less plausible the more it was rejected. In submitting a guilty plea, Lipkin’s lawyers admitted that the accountant, who retired from Madoff Securities in 1998, knowingly helped to cook the books to show better performance of its investment portfolio and falsely inflated the firm’s profit and loss account.

As part of the deal, Lipkin was forced to surrender numerous personal possessions, including a second home in Florida, an investment portfolio and a Rolex watch. Unusually, the prosecution agreed to allow Lipkin to keep one of two valuable paintings by cult artist Red Skelton. Irwin had written to prosecutors asking for a probation sentence due to his ill-health and alleged lack of knowledge about Madoff’s scheme.

Lipkin’s son, Eric, who began working for Madoff under the tutelage of his father after high school, has already been convicted for knowingly creating phony records following a guilty plea in May. However, he managed to avoid jail time thanks to his co-operation with the Federal prosecutors.

Madoff claimed that the entire scheme, which ran almost unnoticed for 40 years and resulted in $17bn in client losses, was his own doing and that no employee was aware of the fraud.

Its sheer complexity was magnified by its duration – the scheme started before the widespread use of computers so prosecutors had to go through thousands of paper transactions.

Last month, another non-Madoff employee escaped jail as a result of the scheme’s collapse. Accounting executive Paul Konigsburg, 79, pleaded guilty to falsifying books last month but prosecutors accepted that he was not aware of the scheme he unwittingly aided.

Madoff, who is also 77, is currently serving a 150-year prison sentence following a guilty plea in 2009, just months after his fraudulent trading was revealed, in which new investment money was used to pay profits to other investors.