Toomre Capital Markets LLC ("TCM") has long suspected that Ruth Madoff was an active co-conspirator with her husband Bernie Madoff in his massive Ponzi scheme. (A reader, for instance, might want to review the TCM post Ruth Madoff: Rube or Accomplice to Bernie? ) Now Federal investigators seem to agree as they are "working around the clock" to freeze the assets of Ruth Alpern Madoff.

On Sunday March 15th 2009, The New York Post published the article Ruth In Crosshair$. This article suggests that federal authorities are working feverishly to prepare a filing asking a Federal judge to formally freeze all of Ruth Madoff's more than $93 million in assets as soon as possible. "The US attorneys will be in court in the next week or so to tell a judge that they believe Mrs. Madoff's assets are derived from ill-gotten gains and that they should be frozen for a certain period of time while the investigation is ongoing," an SEC source said.

The judge will then decide whether there is sufficient reason to believe her assets were legitimately earned or whether they were the proceeds of her husband's $65 billion Ponzi scheme. "You do not need the case to be nailed down, you just need to be able to convince the judge that there is a strong probability that the funds in question came from crime," the source said.

The article continues with additional information about a possible forthcoming criminal indictment. "Law-enforcement sources also told The Post that the asset freeze would be just the first step in a one-two punch against her as prosecutors work furiously to build a criminal case." In the past week, Mrs. Madoff has had needed to part legal counsel with Ira Sorkin who now principally is representing the legal interests of her husband. Ruth Madoff's new criminal defense lawyer, Peter Chavkin, apparently declined to comment on these developments.

About three weeks ago, Toomre Capital Markets LLC ("TCM") wrote about Annette Bongiorno, Bernie Madoff's former long-time secretary, in the post Annette Bongiorno, Madoff Aide Falls Under Suspicion. On Monday March 9th 2009, Ms. Bongiorno is back in the news on the front page of the Markets section of The Wall Street Journal.

In the article entitled Madoff Aide Allegedly Got Fake 'Tickets' of Trading, WSJ reporter Amil Efrati reveals that Ms. Bongiorno allegedly directed two assistants to create the bogus trading "tickets." These tickets documented the purported trades, which in turn resulted in gains that were in line with Mr. Madoff's steady annual returns.

"The two assistants to Ms. Bongiorno, Semone Anderson and Winnie Jackson, did clerical work and helped generate stock-trade confirmations for client accounts, which purported to show gains that were later applied to client accounts. The confirmations are now believed to have been fictitious, according to a court-appointed trustee who is liquidating the Madoff firm. Ms. Bongiorno, 60 years old, was once Mr. Madoff's personal secretary and later oversaw some of the firm's oldest accounts. The two assistants were interviewed by the U.S. attorney's office for the Southern District of New York through what are called proffer agreements, in which prosecutors agree not to use their statements against them as long as they tell the truth, according to people familiar with the matter."

Given that Ms. Bongiorno apparently also actively raised funds for the Madoff fraud from her neighbors in Queens New York, this new information highly suggests to Toomre Capital Markets LLC that Ms. Bongiorno will likely be facing some criminal penalties of her own. Surely, if she was ordering the creation of bogus trade tickets, she must have known for some period that Bernie Madoff's investment operation was a scam. If she further profited from fees received from managing so-called "RuAnn" feeder accounts for friends from her old neighborhood, federal prosecutors are likely to come down on her hard. Of course, though, she might have some juicy information about the possible participation of say Ruth Madoff, Peter Madoff and/or either of the sons, Andy or Mark Madoff that just might mitigate her criminal penalties.

This WSJ article also reveals that Federal prosecutors have recently turned their attention to a separate group that handled many of the institutional investment accounts mired in the Madoff fraud. "That group was headed by Frank DiPascali Jr., 52, who hasn't yet been asked to speak with prosecutors, according to a person familiar with the matter. Mr. DiPascali's lawyer declined to comment on his client's behalf. Mr. DiPascali referred to himself as the "director of options trading" at the firm and Mr. Madoff told investors he executed trades, despite the fact that a court-appointed trustee found that no trading occurred for at least the past 13 years. Prosecutors have asked at least three employees who worked under Mr. DiPascali about his role in the firm, according to a person familiar with the matter. The employees, Eric Lipkin, JoAnn Crupi and Robert Cardile, who is Mr. DiPascali's brother-in-law, also had proffer agreements with prosecutors."

Frank Avellino and Michael Bienes nearly fifty years ago started working at the accounting firm run by Ruth Madoff's father, Saul Alpern. Sometime around that time, they and Saul Alpern began referring clients, friends and associates to Bernie Madoff's fledging securities firm. Along the way, they formed a successor firm to the Alpern firm and then began to primarily focus on fund raising in their guaranteed notes that were in turn invested with Bernie Madoff through their firm Avellino & Bienes.

In late 1992, the Securities and Exchange Commission sued these two accountants and two others, Steven Mendelow and Edward Glantz (and his son Richard), together with their respective firms for selling unregistered notes. As a result, they disbanded their investment vehicles and supposedly returned all funds to their investors. Apparently, though, a significant number of investors then turned over their returned assets directly to Bernie Madoff where accounts at Bernard Madoff Investment Securities were opened in their names.

According to investors who have come forward after the Madoff scheme was exposed, Frank Avellino, Michael Bienes, Steven Mendelow and Richard Glantz never completely ceased raising additional funds for Bernie Madoff. While the vehicles and mechanisms they used subsequent to the SEC lawsuits are less well documented, each apparently continued to direct investors to Madoff.

Shortly after the Madoff arrest was disclosed, Michael Bienes suddenly resigned from the Board of Directors of the prestigious Broward Center for the Performing Arts in a short one sentence letter. As Bob Norman of the Broward-Palm Beach New Times writes, "Since the scheme collapsed, he and wife Dianne have dropped out of Fort Lauderdale life and, sources say, emptied their Bay Colony estate of their possessions."

Toomre Capital Markets LLC ("TCM") has been consumed during the few weeks doing the "real" work of our consulting company — that is serving the needs of our paying clients. As a result, with client projects occupying so much of our working day, we have had little spare time to focus further on the Bernie Madoff fraud scandal. Hence, TCM's postings on this subject have been lighter than usual and the moderated comments have not been addressed as quickly as usual.

Please bear with us as the work crunch continues a bit longer. However, even at this early hour of the morning of Thursday February 5th 2009, TCM would like to highlight two pretty remarkable events that have occurred in the past day with regard to the Bernie Madoff affair. The first concerns the quite amazing and frank testimony of Harry Markopolos in both his written testimony and his oral remarks and answers. How could anyone not admire a man long on the tail of the Bernie Madoff? And how could one not come away with a heady admiration of the way that he thoroughly dissected the regulatory failures that allowed the Madoff affair to thrive for so long?

Mr. Markopolos' written testimony is a must read!!! And in his oral testimony, he stated that there are maybe another dozen Madoff "feeder funds" lying in the weeds not yet willing to disclose their near complete losses? Who might those European funds might be? Toomre Capital Markets LLC intends to return to Mr. Markopolos' testimony in the next few days when there is a bit more free time. In the meantime, definitely read what the mainstream media has to say about the unheard Madoff whistle-blower and his Congressional testimony.

The second item that TCM would like to briefly highlight is the document that AlixPartners LLP, a Dallas company hired as the claims agent by the trustee overseeing the liquidation of Bernard L. Madoff Investment Securities. That document was filed in New York federal court on February 4th and contains approximately 13,000 people and/or entities that have thus far been identified as either having had an active account with Bernie Madoff at the time of his arrest or had previously done so. This list of information is truly fascinating!!!

Nina Mehta is a New York-based reporter who writes about trading, the markets, and market structure for her employer Traders Magazine. In her "spare" time she periodically posts to her personal blog called Mehtafiscal. On Thursday January 29th 2009 Nina wrote a long post entitled Loyalty on the Slopes: Madoff Goes Skiing in 2004. This well-written article focuses on a 2004 ski trip to Zermatt Switzerland during which Bernie Madoff (and his wife Ruth Madoff) and Peter Madoff (and his wife Marion Madoff) hosted approximately thirteen friends and/or business associates. Most of those present had ties to Bernie's fraudulent investment advisory business.

Toomre Capital Markets LLC ("TCM") encourages readers interested in the Madoff fraud scandal to read Ms. Mehta's excellent work. In that piece the reader will learn more about Maurice ("Sonny") Cohn, Paul J. Konigsberg (and his wife Judy Konigsberg), Alvin J. Delaire Jr. (and his wife Carole Delaire), Marja Engler, her son Steven Engler and his wife Laura Engler as well as Elana Flax and her husband Dr. Herschel Flax of Great Neck, New York. As Ms. Mehta points out, it is unclear whether the final couple on that trip, Jean-Pierre Michaux and Patricia Michaux, had any ties to Bernie Madoff's investment business.

On Thursday January 29th 2009, Bloomberg News ran a story entitled Madoff’s Tactics Date to 1960s When Father-in-Law Was Recruiter. This article suggests that his father-in-law, Saul Alpern, was actively involved in steering clients, friends and their families to Bernie Madoff from the earliest days of the founding of the son-in-laws brokerage firm in 1960.

According to one Cynthia Arenson, the owner at one time of the Sunny Oaks Hotel in New York State's Catskill Mountains region, apparently promised investors double-digit returns from the earliest days. “His son-in-law just opened a firm, and he was doing very well,” said Ms. Arenson, 68, who lost at least $1.25 million with Madoff. “Wouldn’t you encourage your friends to invest with him? Sometimes they got 18 percent, sometimes they got 19 percent.”

Ms. Arenson was a classmate and childhood friend to Ruth Madoff. Like many of Ruth Madoff's friends and classmates at Far Rockaway High School, she too encouraged friends and members of her family to invest money with the Bernie Madoff "bank" or near-guaranteed money machine. The lure of returns between fifteen and twenty percent were apparently too much from getting others to invest in a "good thing".

Like many others, Toomre Capital Markets LLC ("TCM") has been keenly focused on the Bernie Madoff scandal these past few weeks. We have found it simply incredulous that Bernie claims to have pulled off his enormous fraud alone against so many people for such a long period. As a firm practicing in the field of Enterprise Risk Management, TCM has been particularly interested in what lessons can be learned from this scandal and, more importantly, what should be done to prevent a repeat of such personal loss to so many investors in the future.

Since Bernie Madoff confessed to defrauding investors out of close to $50 billion in funds, many have been asking what role, if any, other members of the extended Madoff family played in the fraud. There also have been considerable focus directed at what role the approximately dozen "feeder funds" might have played. Attention particularly has focused on Bernie's brother, Peter Madoff, and his two sons, Mark and Andrew, as well as his wife of more than forty years, Ruth Alpern Madoff. Many would like answers on the key issues of what did the principals know, when did they know that information and what then did they do about it.

On Tuesday January 27th 2009, Lucinda Franks contributed an exclusive story to The Daily Beast website entitled Exclusive: Ruth Madoff's Role Revealed. The summary of the story reads: "In a Daily Beast exclusive, Lucinda Franks says key investigators now believe Ruth Madoff played a larger role than previously assumed in her husband’s Ponzi scheme, and that the fraud began far earlier than other reports have indicated. Plus, she reports, 20 million Madoff documents have been unearthed in a Queens warehouse."

This former New York Times and Pulitzer Prize-winning journalists reveals several interesting new pieces of information about the Bernie Madoff fraud scandal. The first is that funds from the investment advisory business were in fact comingled with Madoff's personal funds and with a market-making fund in which Madoff as a broker-dealer executed orders for customers. Apparently Ruth Madoff, following in the footsteps of her accountant father Saul Alpern, oversaw the accounting records of all three of these accounts. The comingling of money from customer funds is a violation of regulatory rules that require all customer funds to be segregated from those of the broker-dealer. Apparently it was this comingling of funds that enabled the Bernie Madoff scandal to continue for so long.

Says one highly placed person involved in the inquiries: “If Ruth Madoff had an office there for 37 years and kept the books of this account, wouldn’t she have had some inkling that something was wrong? She’s there all the time and her husband just blows it by her? They are a really tight couple, did he really keep this secret from her every day of their marriage?” Ira Lee Sorkin, the lawyer for both Madoffs, apparently had no comment.

The second key piece of new information is the revelation from a person close to the case that Madoff has admitted to law enforcement officials that the Ponzi scheme began more than forty years ago — much earlier than most have speculated. Needless to say, there are many irate investors from this enormous and extremely long-running fraud. "Madoff himself has told authorities that he acted alone, and while no hard evidence has emerged to refute that, many members of his extended family are targets of irate victims whose savings has evaporated. Some of those family members have gone to authorities and are talking to them about letters they have received that threaten their lives."

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?

Over the past couple of days, Toomre Capital Markets LLC ("TCM") has spent some time focusing on the Bernie Madoff fraud scandal and particularly on how he could have perpetuated the fraud in such a great amount on so many investors over such a great period of time. Some of the resulting TCM posts have included:

• Update on Bernie Madoff Scandal and Feeder Funds,
• Ezra Merkin and Madoff Feeder Funds Face More Lawsuits,
• Fairfield Greenwich Sued Again Over Madoff Losses,
• Bob Jaffe, Bernie Madoff's Man To See, Ducks Subpoena,
• Frank Avellino, Michael Bienes and Bernie Madoff and
• Madoff's Fund May Never Have Made Any Investments.

TCM has been particularly interested in what lessons might be learned from this scandal, particularly regarding the areas of Enterprise Risk Management and due diligence. Let's summarize TCM's understanding to date about Bernie Madoff's early days:

Apparently Bernie Madoff started out in 1960 with $5,000 in funds that he had "saved" from a lifeguard and home sprinkler installation jobs. He was married to his high school sweetheart, Ruth Alpern Madoff. He may have worked earlier for his future father-in-law at the Manhattan accounting firm Alpern & Heller where Frank Avellino and Michael Bienes also then worked. His first investor was the philanthropist was Carl Shapiro. Apparently, though, Bernie Madoff never made a single trade for his investment business customers.

Starting in 1962, Frank Avellino and Michael Bienes solicited monies that were then "invested" with Bernie Madoff that generated steady returns for investors in the range of 13.5 per cent to twenty per cent. Their investment solicitation business was so successful that by 1984 Avellino and Bienes gave up their accounting business. By 1992, Avellino and Bienes had amassed more than 3,200 investors and approximately $450 million in investment principal.

Then, in late 1992 based upon a tip from an anonymous source about a possible Ponzi scheme, the SEC investigated Avellino & Bienes ("A&B"). The SEC was surprised to learn that the funds were invested with the then current Chairman of the NASDAQ, a certain Bernie Madoff. The books apparently were in order and according to reports at the time, "all of the money was there." Hence, the SEC only sanctioned Avellino and Bienes for running an unregistered investment advisor and ordered that the firm close after returning all of the funds to its investors. Apparently, Madoff, Avellino and Bienes also returned "every cent" to those early investors.

At that point in 1992, given that:

1. Bernie Madoff had been running his fraud for about twenty years,
2. Bernie Madoff apparently had been "generating" returns of at least 13.5% per year (or at least that is what he reported to A&B), and
3. Bernie Madoff also apparently never did a trade (and hence never had any market exposure)

One question suddenly screams out: What were the sources of the funds that Madoff used to return both the interest earned and investment principal A&B's investors in 1992? In short, if Madoff was running a Ponzi scheme for A&B (as alleged in 1992), what other sources of funds were available to Madoff? Did he have as much other "invested" monies at that point? Or did he have some "rabbi" (like Carl Shapiro thought he was being in November 2008) from whom Bernie Madoff borrowed money?

(Apparently, subsequent to the SEC settlement, many of the A&B unregistered note investors rolled over their investments into accounts directly with Bernie Madoff's securities firm. One has to wonder though why none of these investors inquired about and/or confirmed whether that firm was indeed registered as an investment advisor.)