Madoff Business Partner Pleads Not Guilty

Sep 27 2013 | 10:49am ET

An accountant and longtime business partner of Bernard Madoff has been charged with aiding and abetting the arch-fraudster's scam.

Paul Konigsberg was arrested yesterday morning and pleaded not guilty during a short court appearance in the afternoon. He was freed on $2 million bond.

Konigsberg was indicted on two counts of conspiracy and three of falsifying records. If convicted, the 77-year-old faces up to 40 years in prison.

Prosecutors allege that Konigsberg, the 15th person to face criminal charges in the case, assisted Madoff and Madoff lieutenant Frank DiPascali, both of whom have pleaded guilty, in dummying up phony and back-dated account statements to cover up the $65 billion Ponzi scheme. Madoff also routinely recommended Konigsberg's tax services to clients.

"In order to keep his scheme hidden for so long, Madoff needed the assistance of certain willing outsiders that could be trusted to handle the otherwise suspicious activity," the indictment alleges. "Madoff directed many of his clients—including some of his most important customers, in whose accounts Madoff executed the most glaring fraudulent transactions—to use Paul J. Konigsberg, the defendant, as their accountant."

Konigsberg is a long-time Madoff friend and business associate who was the only non-family member to serve as a shareholder of Madoff's London business.

Konigsberg was also hit with a Securities and Exchange Commission lawsuit yesterday.

Konigsberg's lawyer denied that his client had done anything wrong and called him "a victim of a sociopath—Bernie Madoff." Reed Brodsky, himself a former federal prosecutor, noted that Konigsberg's family lost some $10 million in the scam.

The arrest and indictment come as prosecutors race against a statute of limitations that expires in December, on the anniversary of Madoff's arrest and confession. Konigsberg's lawyers rejected a request from the U.S. Attorney's office that they waive the deadline, a request that was refused.

They also come on the eve of the trial of five former Madoff employees accused of assisting the scam.

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