The younger brother of a man who became an icon for financial crime after the economy collapsed in 2008 is poised to plead guilty to criminal charges, taking his place in history alongside Bernard Madoff, the sibling he shared an office with for decades.
Peter Madoff, 66, was taken into custody at his lawyer's Manhattan office around 7 a.m. EDT Friday, according to FBI spokesman J. Peter Donald. The procedure was a prelude to a court appearance scheduled a few hours later.
The plea was to take place at same Manhattan courthouse where his now 74-year-old brother was taken away in handcuffs after he was condemned to 150 years in prison in 2009 for cheating thousands of people of billions of dollars. They are the only Madoff family members to face criminal charges.
The proceeding in which Madoff is agreeing to serve 10 years in prison and surrender his assets will let investigators show what they have learned about the largest Ponzi scheme ever prosecuted since Bernard Madoff revealed in December 2008 that his investment business was a sham.
The government has used the cooperation of six former employees and associates of the Bernard L. Madoff Investment Securities LLC to learn what went on inside the secretive business that caused close to $20 billion to vanish, leaving only a few hundred million dollars where bogus financial statements claimed there was $65 billion.
The plea by Peter Madoff to conspiracy and falsifying records charges links him again to his notorious brother, reviving a relationship in which he kept firmly behind the scenes as Bernard Madoff provided the face of the investment firm that attracted rich and famous clients with too-good-to-be-true returns.
"Peter Madoff is not Bernard Madoff" is how Peter Madoff's lawyers put it when defending him against harsh accusations leveled by a trustee appointed to recover stolen assets.
Details of how the multimillionaire decided to agree to a plea deal haven't been made public. His lawyer hasn't commented on it.
The FBI had been suspicious from the start about a man who had worked side by side with his scheming brother for more than 40 years.
Friends and business associates had described the brothers as very close. Their offices at Bernard L. Madoff Investment Securities LLC in midtown Manhattan were a few feet apart. Their families vacationed together.
A graduate of Fordham Law School, Peter Madoff was the firm's top technocrat.
He was credited with creating a computer trading system for the firm in the late 1970s and early 1980s that was considered groundbreaking at the time. He ran the daily trading operation while his brother focused on the more secretive investment advisory arm.
When Bernie Madoff was arrested, Peter Madoff broke the news to Madoff Securities employees. And he was a co-signer on a $10 million bond that won his brother's release.
Through attorneys, he denied any wrongdoing.
But the denial didn't stop federal authorities from moving to freeze Peter Madoff's assets. He agreed not to dispose of his substantial fortune and promised to curtail his personal spending as the investigation moved forward. His living expenses were capped at $10,000 a month.
The court-appointed trustee also went on the attack, accusing Peter Madoff of financing his high-end lifestyle through the fraud.
A complaint filed in bankruptcy court alleged that the Madoff investment business had transferred more than $77 million to Peter Madoff. It said that between 1993 and 2008, he was paid a total of $36 million in salary and bonuses. And it identified other income for Peter Madoff as memberships to country clubs, including Glen Oaks Club in New York and one of Donald Trump's country clubs.
Given Peter Madoff's "level of financial experience and sophistication," the trustee alleged that he either knew or should have known that he reaped gains "derived from purported transactions grounded in fraud and deception."
The trustee also took aim at his daughter Shana, who once worked as an in-house lawyer at the firm and has denied involvement in the scheme.
"Had Peter, as the Chief Compliance Officer, or Shana, as Compliance Counsel, done their jobs properly, the fraud might have been revealed years earlier," the complaint said. "Either they failed completely to carry out their required supervisory/compliance roles, or they knew about the fraud but covered it up."
Defense lawyers responded by branding the complaint "a sensationalistic attempt to lump together members of the Madoff family and create liability by association." Their court papers claimed the scandal has "left Peter Madoff mired in litigation, and has devastated his family emotionally and financially."