A long-time trader at Bernard Madoff's former investment firm entered a guilty plea to fraud charges that created new questions on the role of other Madoff accomplices and the duration of the multi-decade $65 billion Ponzi scheme. David Kugel, 66, pled guilty to six charges in a plea hearing this week, including conspiracy to commit securities fraud, conspiracy to commit bank fraud, securities fraud, falsifying books and records of a broker dealer and investment advisor, and bank fraud. Kugel faces a sentence of 85 years in prison should he receive the maximum penalty under each of the six charges.
During his plea hearing, Kugel made several statements that are seemingly in contradiction to Madoff's previous assertions that he acted alone in carrying out the fraud since the mid-1980's. Specifically, Kugel implicated two other Madoff employees, Joann Crupi and Annette Bongiorno, and alleged that he had provided the two with historical price information that was then used to create a history of trades that were consistent with market records and allowed Madoff's fraud to continue under the radar. Madoff had previously asserted that he had single-handedly perpetrated the fraud. Additionally, Kugel also admitted that the supply of this pricing information had first taken place in the early 1970s. In various interviews since his sentencing, Madoff maintained that the scheme did not start until the early 1990s - nearly twenty years later than Kugel alleged.
Kugel stated that his gathering of historical pricing information began upon request from Bongiorno. Kugel culled the information from the Wall Street Journal and provided it to Bongiorno until the early 1990s, when he began providing the data to Crupi. Bongiorno and Crupi have denied the charges and are currently awaiting trial.
In his Plea Agreement, Kugel agreed to a forfeiture order of $170 billion, along with property in Boca Raton and New York. The U.S. Attorney's Office also agreed to ask for a reduction in Kugel's future sentence through the filing of a 5K1.1 motion should he provide substantial assistance in parallel investigations or prosecutions, likely those of the two implicated Madoff employees awaiting trial.
United States District Judge Laura Taylor Swain set the next hearing date as May 4 after prosecutors asked her not to set a sentencing date. Such a practice is common while prosecutors work to build their case and work with Kugel in the parallel cases against Bongiorno and Crupi.
In a separate proceeding, the Securities and Exchange Commission charged Kugel with multiple violations of federal securities laws. Kugel has agreed to settle the SEC's charges, which will result in a permanent injunction against Kugel and a requirement that he forfeit any ill-gotten gains.
A copy of the Kugel Indictment is here.
A copy of the Kugel Plea Agreement is here.
A copy of the SEC Complaint is here.