Ex-Madoff trader admits faking records since 70s

Bernard Madoff's multibillion-dollar fraud began in the early 1970s with several employees working together to fake records when no trades actually took place, a former trader at Madoff's firm said in pleading guilty to criminal charges on Monday.

The former trader, David Kugel, told a Manhattan federal court judge that he and two other longtime Madoff employees, Annette Bongiorno and Joann Crupi, used rates of returns on client statements that were pre-determined by Madoff himself.

"I worked together with them to create the false trades and make them appear on investment advisor client statements and confirmations," Kugel, 66, said in admitting to six charges.

Kugel, who is cooperating with the government investigation, said the trades were executed only on paper. "Specifically between the early 1970s to December 2008 I helped create fake back-dated trades."

When Madoff pleaded guilty in March 2010, he admitted to having begun his fraud in the 1990s, so Kugel's cooperation and admissions confirm suspicions the scheme went on for much longer. Other former employees are cooperating with the government as part of plea bargains, including Madoff's former right-hand man, Frank DiPascali. He is under house arrest.

Bongiorno and Crupi have pleaded not guilty to criminal charges of helping Madoff run a Ponzi scheme that prosecutors have said amounted to as much as $65 billion. A Ponzi scheme is one in which early investors are paid with the money of new clients.

Lawyers for Bongiorno and Crupi were not immediately available to comment on Kugel's court statement on Monday. U.S. prosecutors publicly released a letter last Wednesday telling the judge Kugel was ready to plead guilty [ID:nN1E7AF223].

Bernard L. Madoff Investment Securities LLC collapsed with the December 2008 arrest of Madoff. The disgraced financier pleaded guilty three months later and he is serving a 150-year prison term.

Kugel was released on $3 million bail with strict travel restrictions by U.S. District Judge Laura Taylor Swain after pleading guilty to charges including bank fraud, securities fraud, conspiracy and falsifying records.

He could face up to 30 years in prison on the bank fraud count but is cooperating with the government.

The case is USA v David Kugel, U.S. District Court for the Southern District of New York, No. 10-228.

(Reporting by Grant McCool in New York; editing by John Wallace, Dave Zimmerman)