The feds on Thursday widened their criminal probe of Bernie Madoff, arresting the Ponzi king’s longtime accountant, a member of the arch-schemer’s inner circle, for allegedly cooking the books on the world’s largest investor fraud.
FBI agents arrested Paul Konigsberg at his lawyer’s Manhattan office around 7 am. Konigsberg, 77, of Greenwich, Conn., later pleaded not guilty in Manhattan federal court to a five-count indictment charging him with conspiracy to falsify records and commit fraud.
He was released on bail after posting a $2 million bond.
Konigsberg helped recruit new investors to Madoff’s Ponzi scheme and even “held a small interest in Madoff Securities International, making him the only person outside the Madoff family to hold an ownership stake,” a law enforcement source said.
He“dictated transaction activity in his customers’ accounts to employees of Madoff Securities,” the source added.
But Konigsberg’s lawyer Reed Brodsky claimed the money man and his family members were actually ripped off for more than $10 million through the epic $65 billion Ponzi scheme.
“He is a victim of a sociopath – Bernie Madoff,’ Brodsky said.
Brodsky also claimed the government is relying on flimsy evidence, including “unreliable” testimony from former top Madoff lieutenant Frank DiPascali, who has already pleaded guilty to helping with the Ponzi scheme and documents left behind by former Madoff secretary Annette Borgiorno, who is heading to trial Oct. 7 for her alleged role in the scheme.
Konigsberg directed the creation of false books and records for Madoff Securities, backdating hundreds of millions of dollars in phony trades for month – if not years – as part of the decades-long investor ripoff, the feds charged.
“In order to keep his scheme hidden for so long, Madoff needed the assistance of certain willing outsiders that could be trusted to handle otherwise suspicious activity,” the indictment says.
“In particular, Madoff directed many of his clients — including some of his most important customers, in which account Madoff executed his most glaringly fraudulent transactions — to use Konigsberg.
“… By December 2008, [Konigsberg’s firm] handled various accounting assignments in connection with more than 300 of Madoff Securities investment advisory accounts,” the indictment alleges.
Among his assignments was one of Madoff’s “oldest and important customers” who “deposited and withdrew tens of billions” over the years from Madoff Securities, the indictment says. Konigberg was paid $15,000 to $25,000 a month for over a decade specifically handling this client.
The indictment also alleges that Konigsberg through his arrangement with Madoff Securities also arranged for a relative to get a $20,000-a-year no-show job there with full benefits. The relative, listed as an unnamed co-conspirator, pocketed $320,000 plus health benefits from 1992 until 2008 when the firm collapsed.
Konigsberg was a founding partner of Konigsberg Wolf & Company, a midtown accounting firm no longer in operation.
Madoff — who was sentenced to 150 years behind bars — was arrested in Dec. 2008, so Konigsberg’s arrest comes only a few months before a 5-year statute of limitations for charges in the Madoff case ends.