Former BLMIS Controller Pleads Guilty To Role In Massive Ponzi Scheme

Former BLMIS Controller Pleads Guilty To Role In Massive Ponzi Scheme

NEW YORK - (Mealey's) The former controller of Bernard L. Madoff Investment Securities LLC (BLMIS) has pleaded guilty to criminal counts and agreed to cooperate with the U.S. government in its ongoing investigation into the fraud committed at BLMIS, according to a Dec. 19 press release issued by U.S. Attorney Preet Bharara (United States of America v. Enrica Cotellessa-Pitz, No. 10-cr-0228, S.D. N.Y.). 

(Press release.  Document #57-120117-017X.)

 

According to the press release, Enrica Cotellessa-Pitz pleaded guilty to a count of conspiracy, as well as substantive counts of falsifying books and records of a broker-dealer, falsifying books and records of an investment adviser and making false filings to the Securities and Exchange Commission. 

Cotellessa-Pitz pleaded guilty before U.S. Judge Laura Taylor Swain of the Southern District of New York.  As part of her plea agreement, Cotellessa-Pitz has also agreed to cooperate with the government in its ongoing investigation into the fraud committed at BLMIS, according to the press release.   

She faces a statutory maximum sentence of 50 years in prison and is subject to mandatory restitution and criminal forfeiture and faces criminal fines "up to twice the gross gain or loss derived from the offense," according to the press release. 

According to the press release, Cotellessa-Pitz has further agreed to a forfeiture of more than $97 billion.  Judge Swain released her on a $2.5 million bond on the condition that the bond be co-signed by eight financially responsible individuals and secured by $800,000 in cash and property.  Her travel is restricted to the Eastern and Southern Districts of New York, and Cotellessa-Pitz has surrendered her passport. 

Her sentencing date is set for June 22. 

Judge Swain issued an order on Dec. 20 directing the government to "determine what property it will seek to have forfeited and confer promptly with defense counsel to ascertain whether the defense opposes the forfeiture sought." 

(Order.  Document #57-120117-019R.) 

Cotellessa-Pitz was employed at BLMIS from 1978 to Dec. 11, 2008, and began serving as BLMIS's controller in 1998.   

According to the press release, the government alleged that "[b]eginning in the 1990s until the collapse of BLMIS in 2008, Cotellessa-Pitz, allegedly along with other co-conspirators, created false and misleading entries in the books and records of BLMIS and in reports filed with the SEC.  The false and misleading entries were used to disguise transfers of funds from the BLMIS Investment Advisory (IA) business to BLMIS's Market Making and Proprietary Trading operations.  The transfers made the Market Making and Proprietary Trading operations of BLMIS appear profitable when they were not." 

"In addition, Cotellessa-Pitz, allegedly along with other co-conspirators, created false and fraudulent documents that were given to the SEC in connection with its audit of BLMIS.  Cotellessa-Pitz, and allegedly other co-conspirators, also created false and fraudulent documents in connection with tax audits of Bernard L. Madoff," according to the press release. 

The SEC also charged Cotellessa-Pitz on Dec. 19 with aiding and abetting a violation of Section 17(a) of the Securities Exchange Act of 1934 and SEC Rules 17a-3, 17a-4 and 17a-5, as well as Section 204 of the Investment Advisers Act of 1940 and Rule 204-2 thereunder in connection with her role in the operation and concealment of the Ponzi scheme. 

(Complaint.  Document #57-120117-020C.) 

The complaint was filed in the Southern District of New York.   

Bharara, along with Assistant U.S. Attorneys Lisa A. Baroni, Julian J. Moore, Arlo Devlin-Brown, Barbara A. Ward and Matthew L. Schwartz, all in New York, represent the government in the criminal proceedings.

The SEC is represented by Regional Director George S. Canellos, as well as SEC New York Regional Office staff members Andrew M. Calamari, Robert J. Burson, Alexander M. Vasileseu, Aaron P. Arnzen and Kristine M. Zaleskas in New York. 

Cotellessa-Pitz is represented in the criminal proceedings by Timothy J. Treanor of Sidley Austin in New York. 

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