Indictment: Paul Konigsberg One Of Few Outsiders Who Kept Scheme Quiet

NEW YORK (CBSNewYork/AP) – A senior partner at a Manhattan accounting firm was arrested Thursday on charges he participated in and helped direct false bookkeeping during Bernard Madoff’s historic fraud.

Paul Konigsberg was held for an arraignment in federal court in Manhattan, where an indictment charged him with conspiracy to falsify records, conspiracy to commit fraud, falsifying records of a broker-dealer, falsifying record of an investment adviser and falsifying statements.

Konigsberg, a lawyer who was a senior tax partner at the accounting firm Konigsberg Wolf & Co., is the only person outside the Madoff family to have held an ownership interest in Madoff’s private investment business, the indictment said.

It said Madoff, who is serving a 150-year prison sentence after admitting the fraud in 2009, steered some of his most important customers “in whose accounts Madoff executed the most glaringly fraudulent transactions” to use Konigsberg as their accountant.

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

The indictment said certain outsiders helped Madoff keep the fraud secret. It said that thousands of investors were cheated out of nearly $20 billion and that the outsiders were trusted to handle otherwise suspicious activity.

Konigsberg’s attorney, Reed Brodsky, insisted in court that his client was not aware of the Ponzi scheme and that he himself was a victim.

As WCBS 880’s Irene Cornell reported, Brodsky said Konigsberg and his family lost $10 million in the scheme.

“He was fooled, along with the rest of the world, by Madoff’s phony trading statements,” said Brodsky.

Konigsberg, 77, was released on $2 million bond.

The charges, which included a request by the government that Konigsberg be forced to forfeit all property traceable to the offenses, come 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.

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