Madoff Trader Pleads Guilty to 40 Years of Fraud

PHOTO: Bernard Madoff leaves Manhattan Federal court March 10, 2009 in New York City.PlayChris Hondros/Getty Images
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A former trader for Bernie Madoffhas pleaded guilty to fraud and conspiracy charges that date to the 1970s, well before Madoff said he began his Ponzi scheme, and agreed to forfeit millions in profits.

In court, David Kugel told Judge Laura Taylor Swain, "Your Honor, I stand before you ready to plead guilty to the six counts in the information filed against me, and to accept responsibility for what I have done. I am deeply sorry for my actions and the harm suffered by the victims. I want the court and everyone to know that I will do all I can to cooperate with the government."

David Kugel had been accused of playing a "critical role" in the crime. Prosecutors said he conspired to commit securities fraud and bank fraud and falsified records for almost 40 years. Madoff has said his scam began in the 1990s.

Kugel, 66, is the fifth former employee, including Madoff, to plead guilty and cooperate with the government. He faces a maximum sentence of 85 years in prison and fines of nearly $12 million, and agreed to forfeit $3.5 million. Sentencing is set for May 4.

Kugel also agreed to settle civil charges filed by the Securities and Exchange Commission.

"Kugel helped Madoff maintain the elaborate and enduring facade that his clients were engaged in actual trading when in fact no such trading occurred," said George S. Canellos, director of the SEC's New York Regional Office. "Kugel withdrew millions of dollars of phony profits that he knew weren't from actual trading activity."

Irving Picard, the court-appointed trustee overseeing the liquidation of Bernard L. Madoff Investment Securities, has said Kugel "very likely was the architect" of Madoff's fraudulent strategy in which clients were told their money was properly invested when in fact it was not.

"Over the years," Picard's lawsuit against Kugel says, "Kugel structured the fraudulent trades which were allocated between the accounts held by BLMIS investors."

Court records say Madoff paid Kugel as much as $8 million a year in salary, bonuses and other forms of compensation. Members of Kugel's family received millions more. In the two years prior to the fraud being exposed they withdrew millions from their accounts in what Picard calls "attempts by the Kugels to save some of their ill-gotten gains before the fraud was discovered."

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"As he stated in court today, Mr. Kugel has accepted responsibility for his actions and will continue to fully cooperate with the government," said Kugel's lawyer, Daniel L. Zelenko.

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