Investigation Into Madoff Fraud Turns to a Small Circle of Accountants HendersonvilleNews.comAs Bernard L. Madoff faces another big day in court Thursday, some details are emerging about how he operated his vast Ponzi scheme.
But many questions remain, including those surrounding a small group of accounting firms that represented many of Mr. Madoff’s investors — often at the behest of Mr. Madoff or those close to him. Some of these firms are being subpoenaed or questioned by regulators
A number of investigative agencies, for example, are making inquiries into Friehling & Horowitz, a three-employee firm based in a New City, N.Y., strip shopping mall, which provided auditing services for Mr. Madoff’s brokerage firm, Bernard L. Madoff Investment Securities. Andrew M. Lankler, a lawyer for David G. Friehling, declined to comment.
Another accounting firm that was involved with Madoff clients is Sosnik Bell, which produced year-end tax statements for Madoff investors based on information Mr. Madoff provided.
Unlike most brokerage firms, Mr. Madoff never prepared year-end statements for his clients. Instead, a business partner recommended that Madoff investors use Sosnik Bell, in Fort Lee, N.J., which provided Madoff investors with annual profit-and-loss statements for tax purposes.
From this connection, Sosnik Bell’s client roster stretched across the country and included family foundations with up to $50 million invested in the Madoff firm. Federal filings showed that these clients paid Sosnik as little as $700 for the work.
“The Sosnik Bell activities were totally simple and straightforward,” said Robert Anello, a lawyer for the firm, which he said was not under investigation. “It was all above board.”
Mr. Anello said that Sosnik Bell had no inkling of Mr. Madoff’s deception, and that Scott M. Sosnik and Larry Bell had personally lost millions of dollars.
In New York, the most prominent accountant in Mr. Madoff’s inner circle was Paul J. Konigsberg, head of a midsize firm, Konigsberg Wolf & Company, with 13 partners.
Mr. Konigsberg, who has known Mr. Madoff for over 25 years, was the only nonfamily shareholder in Mr. Madoff’s London operation.
In addition, a principal in Mr. Konigsberg’s firm was Steven B. Mendelow, who had settled with the Securities and Exchange Commission more than a decade ago for having funneled clients to a Madoff fund outside of federal regulations.
Clients were often directed to Mr. Konigsberg by Mr. Madoff and his family. Mr. Konigsberg prepared the tax returns for two Madoff family foundations and his name appeared on the tax returns of foundations of six other families, many of which have lost millions, even hundreds of millions, of dollars, according to the foundations’ federal tax filings. He also represented scores of individual Madoff investors.
Mr. Konigsberg was so close to Mr. Madoff that when Mr. Madoff and his brother, Peter, organized a 2004 ski trip to Zermatt, Switzerland, to attend a weeklong event sponsored by the SWX Swiss Exchange, Mr. Konigsberg and his wife were part of Mr. Madoff’s 13-person group.
“Who takes their accountant on a ski trip?” said Lars Toomre, head of Toomre Capital Markets, a Greenwich, Conn., financial risk analysis firm that maintains a Web site on the Madoff scandal. “Konigsberg is always around Madoff.”Charles A. Stillman, the lawyer for Mr. Konigsberg, said that his client engaged in no wrongdoing and, in fact, lost money as well. Mr. Konigsberg has received a grand jury subpoena and he is being “totally cooperative with anybody investigating anything,” Mr. Stillman said.
Mr. Stillman added that Mr. Konigsberg did not steer his clients into Madoff investments. But, he said, Mr. Madoff made payments to Mr. Konigsberg for accounting services to some Madoff clients, who represented 5 percent of the firm’s business.
Mr. Konigsberg’s Madoff-related clients included Carl and Ruth Shapiro, Boston philanthropists whose foundation lost $145 million, and whose son-in-law Robert M. Jaffe is a Madoff business partner now under investigation. The Shapiros, through a spokeswoman, declined to comment.
Another prominent client was Jeanne Levy-Church, a philanthropist whose Madoff losses forced her to shutter her JEHT Foundation. Mr. Konigsberg also signed the tax returns of her parents’ foundation, the Betty and Norman F. Levy Foundation, which lost $244 million. Ms. Levy-Church declined to comment.
In London, Mr. Konigsberg held a small ownership position in Madoff Securities International, a brokerage firm that Mr. Madoff maintained in the wealthy Mayfair section. That firm is now under investigation as part of the British Serious Fraud Office’s inquiry into Mr. Madoff’s overall business operations in Britain.
Mr. Konigsberg “has come up in the investigation but is not the focus of the inquiry,” said one official in London who has been briefed on the inquiry, which he said was in its early stages.
The stake in the London operation was given to Mr. Konigsberg by Mr. Madoff in the mid-1980s, according to Mr. Stillman, as payment for work done by Mr. Konigsberg for the London firm. The stake paid no dividends, and Mr. Stillman valued it at $35,000.
Mr. Mendelow has also been subpoenaed and is cooperating, according to his lawyer, who said he engaged in no wrongdoing. In 1993, Mr. Mendelow settled with the S.E.C. after setting up a firm, Telfran Ltd., that raised $89 million and gave it to the accounting firm of Avellino & Bienes, which handed it to Mr. Madoff. Telfran and Avellino & Bienes had to close shop as a result of the settlement.
“I don’t think he has done anything to promote Mr. Madoff since the 1992, 1993 decree,” said Stanley S. Arkin, Mr. Mendelow’s lawyer.
================================================================
Please send your comments, news tip and press releases to
GreenwichRoundup@gmail.com or click on the comments link at the end of this post.
