Ex-Madoff trader says fraud began earlier

Jailed financier Bernard Madoff's multibillion-dollar Ponzi scheme stretched back to at least the early 1970s, when his employees used historical information about stocks to create false trades for customer statements, a former trader revealed as he pleaded guilty Monday to criminal charges.

David Kugel pleaded guilty in U.S. District Court in Manhattan to conspiracy, securities fraud, bank fraud, falsifying business records and falsifying the books of an investment adviser, charges that carry a potential penalty of up to 85 years in prison. A cooperation deal with prosecutors that leaves Kugel free on $3-million bail would earn him leniency at a sentencing tentatively scheduled for May 4. As part of the plea, he agreed to forfeit $3.5 million to the government.

The 66-year-old Kugel told Judge Laura Taylor Swain that he was engaging in fraud in the private investment wing of Madoff's Manhattan-based business in the early 1970s.

He said he was "deeply sorry." Kugel admitted that he helped create fake, backdated trades for Madoff's private investment business along with two other people already charged in the Madoff fraud and others.

"I want the court to know I will do all I can to cooperate with the government," Kugel, of Manhasset, said while describing his fraud.

He said his deceit stretched from the early 1970s to Dec. 11, 2008, when Madoff revealed that a business he started in the 1960s had turned into a giant Ponzi scheme, causing the loss of $19.5 billion invested by thousands of people and institutions, including charities.

Madoff, who is serving 150 years in prison for orchestrating the largest known Ponzi scheme in history, told the court during his guilty plea to fraud charges in March 2009 that it had been going on less than two decades.

But Kugel said he and other Madoff employees were faking trades in the 1970s to give "the appearance of profitable trades when, in fact, no trading had occurred."