Feb. 11 (Bloomberg) — Bernard Madoff’s wife withdrew $15.5 million from a brokerage account at a firm co-owned by her husband late last year, including $10 million on the eve of his arrest, Massachusetts securities regulators said.
Ruth Madoff, 67, removed $5.5 million on Nov. 25 and the rest on Dec. 10 from New York-based Cohmad Securities Corp., according to a complaint filed today by Secretary of the Commonwealth William Galvin. Bernard Madoff was arrested Dec. 11 for allegedly operating a $50 billion Ponzi scheme.
Galvin, the state’s top securities regulator, said evidence of the withdrawals supports his claim that Cohmad and Bernard L. Madoff Investment Securities LLC are “so intertwined that they could be viewed as a common enterprise.” He is seeking to revoke Cohmad’s state securities registration for failing to fully cooperate with his investigation about its relationship with Madoff.
While Ruth Madoff hasn’t been charged in the case, a person familiar with the investigation told Bloomberg News in December that U.S. regulators were trying to determine whether she maintained secret records related to the alleged scheme.
Bernard Madoff, 70, was arrested in New York after allegedly confessing that he and his firm used new money to pay old investors in a Ponzi scheme. He was released the same day he was arrested on a $10 million bond guaranteed by his wife and secured by his Manhattan apartment.
Ruth Madoff agreed to forfeit homes in Montauk, New York, and Palm Beach, Florida, if her husband flees. He faces as much as 20 years in prison if convicted of securities fraud.
The Madoffs were required in December to furnish a complete list of assets they held in a confidential tally to the U.S. Securities and Exchange Commission. John Heine, a spokesman for the SEC, declined to comment on whether the withdrawn money was on the list of assets.
Irving Picard, the trustee liquidating Madoff’s firm, has recovered about $946.4 million in cash and securities for customers of the bankrupt firm.
Government prosecutors tried to have Madoff jailed in January for violating a court-ordered asset freeze by attempting to dispose of $1 million in valuables.
Madoff mailed $1 million in watches and jewelry, including Tiffany and Cartier watches and a diamond necklace, to relatives in December. A federal court judge in Manhattan allowed Madoff to remain under house arrest in his Upper East Side apartment.
Richard Schulman, a business litigator at New York law firm Bryan Cave LLP, said the Madoffs likely won’t face any sanctions related to the withdrawals as long as the money was disclosed to the SEC.
If not, and if the money is traceable to her husband or his firm, Ruth Madoff could face prosecution for “aiding and abetting a crime” in trying to protect assets from seizure, he said. Schulman doesn’t represent any Madoff victims.
Walter Pagano, head of litigation consulting and forensic accounting services at accounting firm Eisner LLP in New York, said investigators will want to know if Ruth Madoff had any knowledge of fraud organized by her husband when she made the withdrawals. The second withdrawal occurred the same day Madoff allegedly informed his sons about the Ponzi scheme.
Cohmad is named in Galvin’s complaint as a “feeder fund” to Madoff’s investment firm. Cohmad earned more than $67 million over eight years sending investors’ money to Madoff, the complaint said. Galvin called the two firms “deeply intertwined.”
Madoff Investments made monthly payments to Cohmad over eight years “that appear to add up to $67 million,” the complaint said. The payments made up more than 84 percent of Cohmad’s total income, the complaint said.
From CBS News:
This is not the first move by Ruth Madoff that has raised eyebrows. A CBS News investigation that aired on Jan. 30 discovered Bernard Madoff’s wife also took steps, before her husband’s arrest, to protected their $9.5 million Palm Beach, Florida home from being taken away in a bankruptcy proceeding. A unique Florida “homestead” law allows some homes to be shielded from creditors. Property records, obtained exclusively by CBS News show Ruth tried to get “homestead” status in 2006 at the same time federal authorities were probing Bernard Madoff. Her initial application in 2006 was rejected. She then reapplied on September 18, 2008, less than two months before federal authorities detained her husband.