The Friday January 23rd 2009 edition of The Wall Street Journal included an article entitled Probers Work Backward on Madoff written by Kara Scannell and Amir Efrati. This article summarizes the unusual case in the Bernie Madoff scandal where the principal figure was the first to confess to his criminal behavior. Normally, prosecutors and investigators work their way up the chain to the principle figure(s). In the Madoff case, they have been forced to work backwards to figure out who else could have helped Mr. Madoff, who said that he acted alone.

According to the article, the SEC recently issued subpoenas to a Madoff lieutenant, one JoAnn "Jodi" Crupi, and a brokerage firm affiliated with Mr. Madoff. Ms. Crupi is represented by lawyer Eric R. Breslin. Regulators are focused on documents about her compensation and her dealings with certain firm clients, including some charities. They also have asked for access to her personal computer. This last request makes Toomre Capital Markets LLC ("TCM") wonder whether regulators suspect that there were communications with clients from private e-mail accounts (as reportedly happened earlier in the timeline of this scandal).

Also, apparently regulators are preparing to issue a second subpoena to another Madoff associate, Frank DiPascali. He is represented by lawyer Marc Mukasey of the firm Bracewell & Giuliani LLP in New York. Mr. DiPascali has been reported to be Mr. Madoff's senior assistant (or even chief financial officer) and, according to Bloomberg News, investors' "Go-To" guy in the operation of the investment management business. According to investor Tim Murray of Minnesota, Mr. DiPascali was a “street-smart New Yorker” who fielded calls about the millions of dollars he entrusted to the firm. “To a Madoff customer with a discretionary account, he is the guy,” said Mr. Murray, 57, a real-estate developer. “There is nobody else.”

Ms. Crupi and Mr. DiPascali both worked on the now infamous 17th floor where the investment management portion of Bernie Madoff's business was kept separate from the broker/dealer market making operations. Like many who have learned of this fraud, authorities do not believe Mr. Madoff's assertion that he acted alone in pulling off such a large fraudulent scheme that seems to have stretched back at least three decades and involved literally thousands of investors. Those investors received monthly and quarterly account statements that are now believed to be fraudulent. One of the open questions is: Who helped Bernie Madoff prepare such detailed and ultimately fraudulent statements?

Another possible accomplice is Ruth Alpern Madoff, Bernie's wife. Bernie and Ruth apparently met in high school. As a consequence, many have found it hard to believe, especially in a firm that was so concentrated with family members, that Ruth was unaware of her husband's fraudulent activities. While there is not yet concrete evidence that Ruth assisted her husband, apparently there is documentation that indicates that Ruth had reconciled the firm's bank accounts at some point. Earlier reporting and blog posts on the Internet suggest that Mrs. Madoff started off as Bernie's bookkeeper when the new broker/dealer operation started off housed in the office space of her father's accounting firm. At what point Mrs. Madoff ceased to perform that internal bookkeeper role is unclear.

The Wall Street Journal article also reports that Manhattan prosecutors (unclear whether Federal, New York State and/or New York City) have joined the SEC in looking to what role was played by the big "feeder funds" in the Madoff fraud. Since there were a number of such "feeder funds" (including Fairfield Greenwich Group, Tremont Capital, Banco Santander, Bank Medici and Ascot Partners [run by Ezra Merkin] to name the five biggest ones), such investigations are likely to continue to for some months and possibly years to come. Other possible "gate keepers" to the Madoff investment pool that authorities might be looking at include Robert M. Jaffe, Jerry Breslauer, Richard Spring, Bramdean Alternatives, Prospect Capital, Stanley Chais, Cohmad Securities and Fort Lauderdale accountant Michael D. Sullivan. It remains unclear what continuing role, if any, Bernie Madoff's original "gate keepers", Frank Avellino, Michael Bienes, and Steven Mendelow, might have had in feeding investor funds to Madoff after their settlement with the SEC in late 1992 for selling unregister guaranteed investment notes.

The WSJ article concludes with the revelation that prosecutors are also focusing on the role of vendors that did work for the Madoff firm. Apparently to create the illusion of a legitimate investment-advisory business, Mr. Madoff paid an as-of-yet unnamed research firm for work, even though the firm's investment arm made few, if any, trades for clients. Presumably, the prosecutors also are looking at the various accounting and legal firms that enabled the Madoff scandal to continue undetected for such a long period.