On Thursday March 12th 2009, Bernie Madoff pled guilty to all eleven counts associated with his vast and long-running Ponzi scheme. He did so without a plea agreement and hence did not disclose any information about who else might have been involved in the scheme. Hence, many questions remain about the small group of accounting firms that were connected with Bernie Madoff's activities in one form or another.

Ahead of the plea hearing, The New York Times published an article written by Leslie Wayne and William K. Rashbaum entitled Investigation Into Madoff Fraud Turns to a Small Circle of Accountants. This article discloses that a number of investigative agencies are making inquiries into Friehling & Horowitz, Sosnick Bell, Konigsberg Wolf & Company and Avellion & Bienes. Apparently Paul Konigsberg and Steven Mendelow, both affiliated with Konigsberg Wolf, have been subpoenaed for more information about their relationships and involvement with Bernie Madoff's fraud scheme.

In this article, Lars Toomre and Toomre Capital Markets LLC ("TCM") were quoted. The specific quote was: “Who takes their accountant on a ski trip?” said Lars Toomre, head of Toomre Capital Markets, a Greenwich, Conn., financial risk analysis firm that maintains a Web site on the Madoff scandal. “Konigsberg is always around Madoff.” (For those visitors to this website looking for more information, feel free to click one of the many links that will take you to further information.)

As TCM has written previously on this website, it is extremely unlikely that Bernie Madoff committed this massive fraud over more than twenty years without the help of others. We are likely to read in the coming weeks and months that Madoff's accountants either willingly assisted Madoff or turned a blind eye to his supposedly amazingly consistent returns. What is really amazing is that all of the accountants associated with Madoff have claimed through their lawyers that they lost "millions" in the Madoff fraud.

Has anyone paused to ask how modest accountants of rather middle-class means somehow accumulated millions of dollars through their professional services work? Toomre Capital Markets LLC is not familiar with many accountants or CPAs who became multi-millionaires through their professional work. Are you? What were the sources of the "millions" of dollars that they supposedly subsequently lost in the Madoff investment pool?

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!!!

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?