Longtime Madoff employee pleads guilty

An employee who's been singled out as a member of Bernard Madoff's "inner circle" pleaded guilty Monday to charges that he doctored documents to fool auditors, faked payroll records and obtained a loan by inflating the value of his personal accounts.

Eric Lipkin, a second-generation Madoff employee who worked at Madoff's secretive investment advisory business for 16 years, pleaded guilty to conspiracy, bank fraud and falsifying financial records in a cooperation deal with prosecutors. Lipkin, 37, admitted his role in Madoff's epic fraud, telling the judge that he "worked to deceive auditors."

"I'm very sorry for my conduct," he said.

Irving Picard, a court-appointed trustee seeking to recover billions of dollars in losses for thousands of clients in Madoff's Ponzi scheme, said in a lawsuit last year that Lipkin misled investigators when he provided bogus information and fabricated trade blotters during a Securities and Exchange Commission probe in 2005 and 2006.

Lipkin also admitted that he falsified payroll records to include people that he knew did not work at the firm. This, prosecutors said, enabled the individuals to receive retirement and other benefits to which they were not entitled.

Sentencing was set for Dec. 15, though that date was expected to be postponed. The charges carry a potential penalty of 70 years in prison and $7 million in fines, though cooperation was likely to earn Lipkin a substantial reduction.

Lipkin also agreed to surrender any property related to the fraud, including his Ridgewood, N.J., home and accounts held in the names of his wife and children. He also will pay a $1.4 million judgment. U.S. District Judge Laura Taylor Swain permitted him to remain free on $2.5 million bail, secured by $800,000 in cash or property.

Lipkin became the third Madoff employee to plead guilty to a crime in the massive fraud that cost thousands of people billions of dollars.

Madoff, 73, surrendered in December 2008 after revealing the fraud to his sons. By then, only a few hundred million dollars remained in the firm's accounts.

Madoff is serving a 150-year prison sentence after pleading guilty in 2009.

He has repeatedly claimed he acted alone.

Picard's lawsuit had labeled Lipkin a member of Madoff's "inner circle," saying he profited handsomely from the fraud and was an active part of attempts to cover it up.

The lawsuit said Lipkin's father, Irwin, was one of the first people hired by Madoff when he started his investment business, and was one of the key workers who began building the firm from scratch in 1964. Eric Lipkin followed his father into the company in 1992 and acted as a "lieutenant" to Madoff, as well as the company's payroll manager, Picard said.

Picard accused both father and son of being aware of the Ponzi scheme and helping to conceal it, all while pocketing about $9.2 million in customer money through fictitious stock trades.

Besides Lipkin, the other Madoff employees to plead guilty include his independent auditor and his longtime deputy. Five others who worked for the firm have been charged but have pleaded not guilty.