Free The Madoff Chronicles: Inside the Secret World of Bernie and Ruth by Brian Ross Page B

the “option counter parties.”
    Of course, the reason for this was that he had no good answers. The entire operation was a fabrication. No stocks were traded. No options were purchased. His profits were not coming from any $.04 stock or $1.00 option commissions.
    According to the investigators, what really happened on the seventeenth floor was relatively simple. Every day, DiPascali kept track of the closing prices of the Standard & Poor’s 100. Then, on a regular basis, DiPascali and Madoff would pick the stocks that had done well and create bogus trading records for their “basket of stocks.”
    They often got sloppy. Sometimes they recorded trades as if they had been made on weekend days or federal holidays, when the stock market was closed. None of the supposedly sophisticated investors or SEC regulators ever noticed.
    Investigators would later find a consistent pattern in which Madoff and DiPascali made their fictional trades at the precise high or low price of a stock each month, an amazing feat that generated “too good to be true” profits.
    Of course, it’s easy to master the timing and make a profit if you already know the winners—it’s like knowing which horse won the race and then placing a bet.
    To help hide the fact that no trades were taking place in New York, Madoff claimed all of the trading for the investment advisory business was being done through the London office, on the European markets. Madoff regularly transferred hundreds of millions of dollars to the London office, but investigators say the London office simply wired the hundreds of millions of dollars right back to New York without buying a single share for investors. Employees in the London office later told investigators they thought their job was to buy and sell stock for Bernie’s personal account. They had no idea they were supposed to be making billions in trades for the firm’s investors.
    Investigators say that, using a computer program, DiPascali and those who worked for him on the seventeenth floor would plug the fictional trades into the 4,900 accounts under their control. Sometimes clients needed losses for tax reasons, and Madoff and DiPascali could provide those just as easily.
    Like his former neighbor Annette, DiPascali had very flexible work hours. He would show up at the office in the late morning, hardly dressed like the chief financial officer of an investment firm managing $65 billion.
    “He looked to me like an electrician. He had gold chains on and he’s got his pack of Marlboros in his hand and he is whizzing through the office saying hi to this person or that person,” recalled the former computer tech, Bob McMahon.
    “I turned to a young lady I worked with and said, ‘Who is that?’ and she said, ‘Oh, that’s Frank. He works down on seventeen. He’s one of the muckety-mucks.’”
    Whenever SEC auditors or big investors were around, DiPascali would show up in a suit. People on the seventeenth floor knew “something was up” in the final few weeks before Madoff’s arrest because “Frankie was wearing a suit every single day.”
    DiPascali had long since moved from his home in Queens to a $1.3 million estate in New Jersey. He drove a Mercedes and had a large fishing boat, the Dorothy-Jo , with its own captain at a marina in New Jersey. According to investigators, DiPascali’s boat captain, Christopher Warrin, was on the Bernard L. Madoff Investment Securities payroll, at a salary greater than many of the staff who worked in the legal area of the company.
    After a long negotiation, DiPascali pleaded guilty to nine felony counts in August and agreed to “name names and tell all” to federal prosecutors in exchange for a lighter sentence.
    “He has almost no choice given the e-mails and other documentary evidence we’ve found that show he was ordering up false documents on trades,” said one investigator. “But he will still face a long time in prison and there may not be a deal that he will