Bad Timing? Madoff's Wife Withdrew $10Mil a Day Before His Arrest, State Says
Prosecutors, attorneys talk possible plea bargain for alleged Ponzi schemer.
February 11, 2009— -- On Dec. 10 - one day before she agreed to secure her husband's $10 million bail - Ruth Madoff allegedly withdrew $10 million from a feeder fund under investigation by Massachusetts authorities for allegedly steering victims to alleged $50 billion fraudster Bernard Madoff, according to a state complaint filed today in Boston.
News of that curiously timed withdrawal came even as federal prosecutors in New York acknowledged in court papers today that they are engaged in ongoing talks with Madoff's lawyers that could lead to a plea bargain agreement.
Ruth Madoff allegedly withdrew the $10 million from Cohmad Securities Corporation, a "feeder fund" that shared Manhattan office space with Madoff's firm at 885 Third Avenue and which received 84 percent of its income in fees from Bernard L. Madoff Investment Securities LLC (Madoff Investments), income in excess of $67 million over eight years, according to the complaint against Cohmad filed by Massachusetts authorities today.
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The alleged Dec. 10 withdrawal by Ruth Madoff raised questions about whether the alleged Ponzi scheme mastermind's wife made false representations as to the assets with which she secured the bail, multiple sources involved in various aspects of the Madoff case said.
The withdrawal came during the same 24-hour period when her husband was allegedly confessing to his two sons that his investment management business was "all one big lie," according to the federal government complaint filed Dec. 11 at the time of Madoff's arrest.
The $10 million withdrawal came on top of a $5.5 million withdrawal on Nov. 25.
The U.S. Attorney in Manhattan was unable to make any specific comment concerning Ruth Madoff's withdrawals, and whether those funds were part of a financial package she assured the government was her property and not subject to recovery by investors.
Investigators involved in attempting to unravel Madoff's 40-year trail of alleged illegal activity and the commingling of his family's money with that of investors say that news of Ruth Madoff's withdrawal and the extensive overlap of Cohmad Securities and Madoff Investments are yet another set of newly discovered and unexplored trails.
Ira Lee Sorkin, lead attorney for Bernie Madoff simply said in an e-mail, "no comment," in response to an e-mailed question concerning Ruth Madoff's withdrawal.
An 'Intertwined' Relationship
Madoff's firm was ao deeply "intertwined" with Cohmad, the Massachusetts complaint said, that Madoff and his brother, Peter Madoff, controlled as much as 35 percent of the firm and actually treated it as their landlord, paying it for rent incurred and utilities used by Madoff Investments in addition to the millions in fees that Madoff Investments paid Cohmad, according to the 39-page complaint filed by Secretary of the Commonwealth of Massachusetts William Galvin.
Those fees for "account supervision," "professional services" and "brokerage services" would have been shared by the Madoffs and Cohmad's registered representatives as well as others who steered money into the fund.
One of those steerers was Sonja Kohn, an Austria-based banker who was paid $526,000 for money she funneled from her grandly named 16-employee Bank Medici into Cohmad. Kohn recently was the subject of published reports that said she was in hiding from Russian organized crime as a result of their losses through investments with Madoff. She denied the reports.
The plea bargain discussions were disclosed by prosecutors in their second request for an extension of the time needed before they were required to file an indictment.
In that filing, the government said that it needed the time to continue those plea bargain talks and that consideration outweighed any interest the defendant or the public may have in a speedy trial.
While the language of the extension, including mention of ongoing settlement talks, is fairly standard, it is somewhat unusual, defense attorneys who practice at the federal bar in New York say, for the government to ask for an extension in a case where the defendant has confessed, and most especially in a high profile case such as this one.
In the Massachusetts complaint, the Secretary of State's Securities Division stated that it sought to revoke the Securities registration of Madoff feeder fund Cohmad Securities Corporation "for failing to provide information about its relationship with the Bernard L. Madoff firm. 'Specifically, the Division sought to determine whether the businesses and finances of Cohmad and Madoff Investments were so intertwined that they could be viewed as a common enterprise, and not as separate entities, for purposes of imputing liability and obtaining investor relief,'" the administrative complaint explains.
According to Galvin, the principals of Cohmad failed to respond to subpoenas or, if they did, failed to provide complete responses. "We cannot tolerate licensed securities dealers who refuse to assist in the detection and prosecution of fraud," Galvin said in a statement.