Manhattan accountant Frank DiPascali confessed this week to his role in the Bernard Madoff Ponzi scheme, and he just might be the snitch that federal prosecutors have been waiting for. In particular, two Madoff associates in South Florida, Michael Bienes and Frank Avellino appear to have cause for anxiety.
DiPascali's intimate involvement with Madoff's investments is detailed in this article by the United Kingdom's Telegraph. A crucial moment in the scam's survival, as Bob Norman told us back in January, came when the SEC hit Fort Lauderdale-based Avellino & Bienes with securities violations 17 years ago. And it seems DiPascali played a pivotal role. From the Telegraph:
The SEC's case against Avellino & Bienes in 1992 is well-documented - it was feeding funds into Madoff's money pot by offering promissory notes in unregistered transactions.
As a result, the SEC came after Madoff, and DiPascali was involved in "fabricating after-the-fact records" to "corroborate the purported trading in the accounts" which eventually threw the regulator off Madoff's scent.
However the SEC notes that as a result of the A&B case, "many of the investors in...A&B came right back to" Madoff, with "the size and volume of these accounts placed a great administrative burden on Madoff's small account advisory staff."
Federal prosecutors will be curious to learn exactly how Avellino and Bienes could have participated in that pivot without knowing they were part of a fraudulent enterprise. And it seems DiPascali, of all people, will be able to tell them.
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After the jump, we'll try to find a silver lining for another local Madoff associate who's liable to hear his name in the DiPascali debriefing.
That would be Robert Jaffe, the broker who currently divides his year between Massachusetts and Palm Beach. He's named among the Madoff feeders likely to be on the DiPascali hitlist.
But as Jaffe glumly prepares a blank check for his lawyers, let's cheer him up with an interesting theory, courtesy a South Florida attorney quoted in a new book on the Bernard Madoff catastrophe.
Rick Stone, a Miami attorney who was interviewed for Too Good to Be True: The Rise and Fall of Bernie Madoff, says that in the wake of international publicity around the Madoff case, the wealthiest investors are more inclined to save face than to save money. And for that reason, they may not be as litigious as they might otherwise be. Among those likely to profit from that magnamity, the Boston Herald names Jaffe.