Securities Law Blog

According to a New York Post article today, Bernie Madoff has given a 4 plus hour statement to attorneys representing some of his investors. The details follow:

In an extraordinary 4½-hour interview from behind bars, convicted Ponzi schemer Bernie Madoff told a San Francisco trial lawyer yesterday that he got away with his $65 billion scam because regulators weren't paying attention.

There were times "that he [Madoff] visited with the SEC. . .when he thought, 'They got me,' " the attorney, Joseph Cotchett, told a group of reporters camped outside a federal prison in Butner, NC, where Madoff is serving a 150-year sentence.

Cotchett, who represented former CIA agent Valerie Plame against the Bush administration, landed the interview after threatening to sue members of Madoff's family, including his wife, two sons and brother.

Armed with two packs of quarters so that Madoff could get food from the prison vending machines, Cotchett and his partner Nancy Fineman grilled Madoff and his attorney about who knew what and when.

In order to take the heat off certain members of his family, Madoff "spelled out how the fraud was committed" during the face-to-face session.

"He gave us a lot of information that we believe will help us aid the victims tremendously," Cotchett said. "He was very direct and didn't hold back anything."

"The detail was extraordinary. I was very surprised at how candid and open he was."
Cotchett said that Madoff told him that "it all started in the mid-'90s," and that the disgraced financier provided "the details of how it all started."
But, Madoff was "very remorseful."

Cotchett said Madoff repeatedly apologized for the harm he caused victims, about a dozen of whom are represented by Cotchett.

Cotchett declined to elaborate on specifics disclosed by Madoff yesterday, saying, "The details of how it all went down are going to be more clearly laid out in the next complaint," which he said should be filed in the next few weeks.

Cotchett said it's safe to assume Madoff's brother, Peter, who served as his firm's chief compliance officer, will remain a target of the complaint.

Cotchett has yet to decide whether to target Madoff's wife Ruth or their sons Andrew and Mark.
The lawyer said he was Madoff's first visitor, adding that "his wife has not been here, his son has not been here, no one's been here."

Cotchett said Madoff is estranged from his sons.
"The sons have not spoken with their father or mother since Madoff's arrest on Dec. 11."

"We're the first people to meet with Bernie since he's been here," said Cotchett, who described him as healthy looking.

"He seems to be working out," said Cotchett, adding that Madoff was looking "a lot better" than he's looked in pictures of late.

S.Cheryl Bauman and Atlanta-based broker-dealer J.P. Turner & Company, LLC, were charged with having violated Rule 30(a) of Regulation S-P ("Safeguard Rule") between 2001 to 2006. The SEC specifically noted that JP Turner:

• failed to failed to adopt and implement policies and procedures designed reasonably to safeguard customer records and information as required by Rule 30(a);
• because it allegedly never complied with Rule 30(a), among other things, the firm never gave its managers or brokers guidance on how to protect customer records or how to dispose properly of such records when they no longer are needed.
• in September 2006, the account records of over 5,000 brokerage customers were left abandoned for several weeks at curbside outside the former home of a JP Turner RR in Alpharetta, GA.

About J.P. Turner & Co. and Ms. Bauman. The B/D has been registered with the SEC since 1997. It has 488 brokers, and over 150 branches located throughout the U.S. During the relevant period, Ms. Bauman served as either chief compliance officer or assistant chief compliance officer. As a compliance officer, the SEC notes that Ms. Bauman had been delegated responsibility for ensuring that the firm complied with the above Safeguard Rule requirements. Having failed to carry out those responsibilities, Ms. Bauman herself was herself deemed to have violated the Safeguard Rule.

Abandoned Customer Records. JP Turner's failure to comply became apparent in September 2006. In connection with a residence change, a then-RR placed records of more than 5,000 current and former JP Turner customers curbside at his residence in suburban Atlanta, for pick up by a trash hauler with whom he had contracted to retrieve and destroy the records. The customer records contained names, addresses, DOBs, SSNs, bank account numbers and account statements. However, the hauler never collected the records, which remained abandoned until JP Turner retrieved them two weeks later. To date, there's been no indication any customer has become a victim of identity or other financial crime.

Ms. Bauman, among other things, will cooperate fully with the SEC in any and all investigations, litigations or other proceedings relating to or arising from these matters. [SEC Administrative Proceeding 3-13551, 7/17]