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Originally published Thursday, September 26, 2013 at 5:42 PM

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Madoff accountant is arrested on fraud charges

Bernie Madoff’s accounting executive Paul Konigsberg was charged with directing others to falsify records to conceal a fraud that cheated thousands of investors out of nearly $20 billion over decades.

The Associated Press

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NEW YORK — A 77-year-old accounting executive was arrested Thursday on charges he helped direct false bookkeeping during Bernard Madoff’s historic fraud, though his lawyer said his client was himself “a victim of a sociopath.”

The executive, Paul Konigsberg, was charged with five crimes in an indictment unsealed in federal court in Manhattan. Prosecutors said Konigsberg was a senior tax partner at the accounting firm Konigsberg Wolf & Co. when he directed others to falsify records to conceal a fraud that cheated thousands of investors out of nearly $20 billion over decades.

Konigsberg pleaded not guilty at an arraignment. His lawyer, Reed Brodsky, insisted he was a victim of Madoff, the one-time highflying financier who pleaded guilty to fraud charges in 2009 and was sentenced to 150 years in prison. The lawyer noted that the Securities and Exchange Commission as well as thousands of investors were duped for decades by Madoff.

“Mr. Konigsberg was no different,” Brodsky said. “He and his family lost over $10 million.”

Konigsberg was freed on $2 million bail pending a court appearance Monday.

Outside court, Brodsky said Konigsberg was looking forward to clearing his name in court.

“He is a victim of a sociopath, Bernie Madoff,” Brodsky said. Konigsberg declined outside court to comment.

At the arraignment, Assistant U.S. Attorney Matthew Schwartz said Konigsberg was Madoff’s “accountant of choice” with his most important clients. He said Konigsberg backdated trades by months or years to further the fraud and was paid $15,000 to $20,000 a month.

Konigsberg, also a lawyer, is the only person outside the Madoff family to have held an ownership interest in Madoff’s private investment business, the indictment said.

The charges against Konigsberg come as the government faces a December deadline to bring additional charges connected with the Madoff fraud.

The indictment said Madoff steered some of his most important customers “in whose accounts Madoff executed the most glaringly fraudulent transactions” to use Konigsberg as their accountant.

Konigsberg is charged with conspiracy to falsify records, conspiracy to commit fraud, falsifying records of a broker-dealer, falsifying record of an investment adviser and falsifying statements.

The charges, which included a request by the government that Konigsberg be forced to forfeit all property traceable to the offenses, came just days before the start of a trial of five of Madoff’s former employees. Those employees are charged with aiding him in a scheme to defraud his investors that stretched into the 1970s.

When Madoff was arrested in 2008, Konigsberg Wolf handled accounting duties for more than 300 of Madoff’s private securities accounts, court papers said.

Brodsky described the indictment as weak, saying the charges were not supported by facts that could be corroborated.

He criticized the use of information from Madoff’s former finance chief, Frank DiPascali, who pleaded guilty to charges and is cooperating with the government.

Prosecutors, Brodsky said, were “relying on the testimony of a proven liar, the right-hand man of Madoff.”

Information from The New York Times is included in this report.

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