Federal authorities, deepening their criminal investigation of Bernard L. Madoff’s multibillion-dollar Ponzi scheme, have arrested Paul J. Konigsberg, a longtime accountant in Mr. Madoff’s inner circle, according to
people briefed on the case.
At 6 a.m. on Thursday, agents of the Federal Bureau of Investigation met Mr. Konigsberg at his lawyers’ offices in Midtown Manhattan and arrested him. He is expected to make a court appearance later in the day.
A founding partner of Konigsberg Wolf & Company, a midsize New York accounting firm that is now shuttered, Mr. Konigsberg had a close business relationship with Mr. Madoff dating to at least the 1980s.
He was the only nonfamily shareholder in Mr. Madoff’s London operation, which played a crucial role in transferring stolen money around the globe. Mr. Konigsberg prepared tax returns for two family foundations and served as an accountant for dozens of families who invested with the firm. Mr. Madoff often referred his investors to Mr. Konigsberg for their tax services.
“Paul Konigsberg, a 77-year-old accountant, is an innocent victim of Bernie Madoff,†said Reed Brodsky, a lawyer for Mr. Konigsberg at Gibson Dunn & Crutcher. “He looks forward to clearing his good name at trial.â€
The charges against Mr. Konigsberg come as the government faces a December deadline to bring additional charges connected with the Madoff fraud. When Mr. Madoff turned himself in on Dec. 12, 2008, that started the clock ticking on a five-year statute of limitations for securities fraud crimes.
Federal prosecutors asked Mr. Konigsberg’s lawyers to grant them an extension of the legal deadline, but they refused, leading to Thursday’s arrest, according to people briefed on the case.
Mr. Madoff, who is serving a 150-year prison sentence, has insisted that he acted alone. Yet Mr. Konigsberg is the 15th individual charged in the case.
On Oct. 7, five former employees of Bernard L. Madoff Investment Securities are scheduled to stand trial in Federal District Court in Manhattan on charges they aided the fraud.
Each of the five employees - Daniel Bonventre, Annette Bongiorno, Joann Crupi, Jerome O’Hara and George Perez â€" worked at the firm for more than 15 years in a variety of low-level roles, but ones that the government
said were key to perpetrating Mr. Madoff’s long-running scheme. Ms. Bongiorno, for example, was Mr. Madoff’s longtime secretary. Mr. O’Hara and Mr. Perez were computer programmers who produced the firm’s account statements.
The trial is likely to last several months, and the defendants are expected to argue that they were manipulated and deceived by Mr. Madoff and had no idea their boss was a crook.
Federal prosecutors are still weighing additional criminal charges. Among those under continued scrutiny is Shana Madoff Swanson, Mr. Madoff’s niece and a former senior lawyer and compliance official at the firm. Ms.
Swanson’s father, Peter Madoff, was Mr. Madoff’s No. 2 at the firm, and is serving a 10-year sentence after admitting to falsifying documents and lying to securities regulators.
Federal authorities are also examining the role of JPMorgan Chase in Mr. Madoff’s fraud. Mr. Madoff moved billions of dollars of investors’ cash in and out of Chase bank accounts up until his crimes were revealed.
Investigators are focused on whether the bank failed to conduct adequate due diligence and properly alert regulators to suspicions about Mr. Madoff’s business, said people with knowledge of the investigation.
JPMorgan’s part in the fraud was illuminated by a 2010 lawsuit brought against the bank by Irving H. Picard, the bankruptcy trustee working to retrieve money for Mr. Madoff’s victims. A lawyer for the trustee has argued that Mr.
Madoff “would not have been able to commit this massive Ponzi scheme without this bank.â€
In an e-mail sent 18 months before Mr. Madoff’s arrest, a JPMorgan employee said that a bank executive “just told me that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme.â€
A JPMorgan spokesman declined to comment.
Actual cash losses from the Madoff fraud are estimated at about $17.5 billion, but the paper wealth that was wiped out totaled more than $64 billion. Mr. Picard has thus far recovered about $9.4 billion and continues
to trace the victims’ funds. He has filed more than 1,000 lawsuits, and the process of recouping losses is expected to carry on for years.
Mr. Konigsberg served as the accountant for dozens of Mr. Madoff’s investors. Trained as a lawyer, he received a degree from Brooklyn Law School and a master’s in taxation from New York University School of Law. He worked for some of Mr. Madoff’s earliest investors, including Carl Shapiro, a Boston businessman, and Mr. Shapiro’s son-in-law, Bob Jaffe, who recruited many Madoff investors in Palm Beach, Fla.
In 2010, Mr. Shapiro, Mr. Jaffe and their family members, who held much of their money at JPMorgan Chase, agreed to forfeit $625 million in Madoff profits to the trustee and the Justice Department.
A principal in Mr. Konigsberg’s firm, Steven B. Mendelow, had a run-in with regulators related to Mr. Madoff two decades ago. Mr. Mendelow settled a civil case in 1993 with the Securities and Exchange Commission for having set up a firm that improperly funneled nearly $90 million to Mr. Madoff.
Providing accounting services for Mr. Madoff paid handsomely. Mr. Konigsberg and his wife, Judith, live in Greenwich, Conn., and spend winter months in Palm Beach Gardens, Fla. The Konigsbergs socialized with Mr.
Madoff and his wife, Ruth, once taking a ski vacation to the Swiss Alps along with a group of Madoff associates.
Mr. Konigsberg is the second outside accountant criminally charged in the Madoff case. David G. Friehling, the longtime independent accountant for the Madoff firm, pleaded guilty in 2009 and has been cooperating with prosecutors. Mr. Friehling ran Friehling & Horowitz, a three-employee firm based in a Rockland County strip shopping mall that provided auditing services for Mr. Madoff’s company.
