Bernard Madoff’s wife, Ruth, is now an “object of the investigation” by federal authorities probing her husband’s $64.8 billion Ponzi scheme, a report claimed last night, hours after the accused swindler revealed he will plead guilty tomorrow.
He faces a potential 150-year prison sentence for swindling thousands of investors over decades.
A source told The Daily Beast Web site that “eventually, many members of Madoff’s family will either be indicted” or cut plea deals.
The site quoted sources who said new information has surfaced suggesting that Madoff’s “inner circle transferred assets to their wives . . . thought to be laundered through an English bank.”
In addition to Ruth, who has worked at her husband’s firm, Bernard also had employed his two sons, Mark and Andrew, his brother, Peter, and his niece, Shana.
Ruth Madoff – who plans to get her own attorney – “was considered ‘innocent at first’ ” but now “is believed to have received at least $70 million from her husband and is now, therefore, an object of the investigation,” according to The Beast’s source.
MORE: Madoff Bench Angers New Yorkers
Bernard Madoff has allegedly been hampering probers’ efforts to learn where his scheme’s money went.
“He’s jerking everyone around,” the source told the Web site. “Every day he changes his tune about where the money went and where it is. He’s trying to protect his family.”
The Beast story, written by Lucinda Franks, said probers are looking at some 20 people.
They include Madoff’s relatives, his employees, people who ran the “feeder funds” that invested their clients’ money with him, and British lawyers and accountants who may have helped him transfer funds to an “entity” whose board included his wife.
Madoff, 70, appeared yesterday at a hearing in Manhattan federal court, where Judge Denny Chin asked defense lawyer Ira Sorkin, “It is the expectation that he will plead guilty?”
“That is a reasonable expectation,” Sorkin replied.
Chin said he will sentence Madoff in “several months” for the massive fraud that prosecutors now say totaled $64.8 billion, not the previous estimate of $50 billion. The new total includes phony profits that Madoff claimed he had generated.
Meanwhile, prosecutors revealed new details of the fraud, including Madoff promising some clients an eye-popping 46 percent annual return on their investments.
Madoff, according to court documents, claimed he was using a so-called “split strike conversion” strategy, investing client funds in a basket of 35 to 50 stocks in the S&P Index, and hedging by buying and selling options.
He also claimed that when he was not invested in securities, he would park client money in ultra-safe US government securities.
In reality, authorities said, Madoff gave investors the illusion of profits by tapping into their own and others’ original money when they requested payouts – a classic Ponzi scheme. Madoff also created the false impression that he was actively trading by hiring “numerous employees to serve as a ‘back office,’ ” many of whom “had little or no pertinent training or experience in the securities industry,” court records say.
He allegedly had these workers “communicate with clients and generate false and fraudulent documents, including” account statements and trade confirmations.
He also shuttled $250 million in client funds from his New York firm to his London offices, and then had that money returned to New York “to give the appearance that he was conducting securities transactions in Europe on behalf of the investors when, in fact, he was not conducting such transactions,” legal papers say.
So far, at least 25 victims have asked to speak at tomorrow’s hearing.
“There is no plea bargain here. Those victims who objected to a plea bargain no longer have a reason to object,” Chin said.
Chin said he will allow a limited number of victims to speak briefly, but only if they disagree with his rulings on two issues: his acceptance of Madoff’s guilty plea and whether or not to revoke his $10 million bond on the spot.
The judge said he would signal his decisions on both matters before ruling, and would hear from “only those who want to convince me to do something different.”
No victim likely will object either to Madoff pleading guilty or being jailed pending sentencing.
“The whole world wants to see him in the same dungeon as the Count of Monte Cristo,” a former Manhattan federal prosecutor said.