The Securities and Exchange Commission has filed fraud charges against a longtime employee of Bernard Madoff, accusing him of helping Madoff create phony business and trading records that helped deceive investors about the multibillion-dollar Ponzi scheme.
The charges were filed Monday against Eric Lipkin, 37, who was employed by Madoff since he was a teenager. He worked in the firm’s payroll and benefits department starting in May 1992, and around 1996 he began working in Madoff’s investment advisory business.
The SEC’s complaint, filed in U.S. District Court for the Southern District of New York, alleges that for more than a decade, Lipkin helped Madoff defraud investors and mislead auditors and regulators about Madoff’s fraudulent, multi-billion-dollar advisory operations. According to the complaint, Lipkin processed payroll records for “no-show” employees, falsified records of investors’ account holdings, and played a role in executing the fictitious “split-strike conversion” investment strategy that Madoff and Bernard Madoff Investment Securities claimed to be pursuing on behalf of its clients.
In fact, Madoff used investors’ funds to enrich himself, his family and his associates, and to pay off other investors. Lipkin also helped Madoff deceive regulators by preparing fake Depository Trust Clearing Corp. reports showing the sham investments for clients. Lipkin received annual bonuses from the firm, including for his work to mislead auditors and examiners, and he received $720,000 from Madoff to purchase a house, an amount he never paid back.
Without admitting or denying the allegations of the SEC’s complaint, Lipkin has consented to a proposed partial judgment, which, if entered by the court, will impose a permanent injunction against Lipkin and require him to disgorge ill-gotten gains and pay a fine in an amount to be determined by the court at a later time.
He also pleaded guilty in court Monday to six criminal charges, including bank fraud, conspiracy, falsifying books and records of a broker-dealer, falsifying books and records of an investment advisor, and making false statements to facilitate a theft concerning the Employee Retirement Income Security Act. Lipkin agreed to cooperate with the government. He was released on a $2.5 million bond, but could face up to 70 years in prison. He agreed under the plea deal to forfeit at least $1.4 million, along with his interest in his home and various investment accounts.
The SEC noted that Lipkin holds no professional licenses, is not registered as a representative of a broker-dealer, and has never had any registration in the securities industry.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access