[ by Howard Haykin ] The SEC, the U.S. Attorneys Office and the FBI are doing their best to keep up the brisk pace of Peter Madoff's legal odyssey.  At 7:00 a.m., Bernie's younger brother was taken into custody at his lawyer's Manhattan office.  The procedures was a prelude to a court appearance scheduled for a few hours later - where Madoff would make his plea. The SEC filed civil charges against Peter Madoff, 66, while the U.S. Attorneys Office filed parallel criminal charges. The government has used the cooperation of 6 former employees and associates of the Bernie L. Madoff Investment Securities LLC  ("BLMIS") 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 SEC alleges that Peter Madoff ... who served as Chief Compliance Officer and Senior Managing Director at BBMIS from 1969 to December 2008, created stacks of compliance documents setting out supposedly robust policies and procedures over BMIS’s investment advisory operations.  However, Peter Madoff created these compliance manuals, WSPs, reports of annual compliance reviews, and compliance certifications to merely paper the file.  No policies and procedures were ever implemented, and none of the reviews were actually performed, even though Peter Madoff represented that he personally completed the reviews. 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 Bernie Madoff provided the face of the investment firm that attracted rich and famous clients with too-good-to-be-true returns.  In his 2009 guilty plea, Bernie maintained that his brother had nothing to do with it - and for more than 3 years, his brother stuck to the script.

“Peter Madoff helped Bernie Madoff create the image of a functioning compliance program purportedly overseen by sophisticated financial professionals.  Tragically, the image was merely an illusion supported by Peter’s sham paperwork and false filings for which he was rewarded with tens of millions of dollars in stolen investor funds.” -- Robert Khuzami, Director, SEC Enforcement.

According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, Bernie Madoff realized in late 2008 that his decades-long scheme was on the verge of collapse.  He told Peter Madoff that he could not pay billions of dollars of investor redemption requests and wanted to distribute remaining investor money to family, friends, and favored employees before the scheme collapsed.  Peter Madoff then helped choose which family, friends and employees to pay, and rushed to withdraw $200,000 from BMIS’s bank account for himself before the fraud’s final downfall. The SEC alleges that, in addition to creating false compliance materials, Peter Madoff created false B/D and IA registration applications filed by BMIS.  He also failed to implement and review required policies and procedures, and falsified the firm’s books and records.  Peter Madoff was richly rewarded for his misconduct, pocketing tens of millions of dollars through salary and bonuses, fake trades, sham loans, and direct, undocumented transfers of investor funds to himself from the bank account that BMIS used to perpetrate the Ponzi scheme. By engaging in such conduct that Peter Madoff is alleged to have done, would be in violation of a host of rules and regulations: Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Section 207 of the Investment Advisers Act of 1940; aided and abetted violations of Sections 15(b)(1), 15(c) and 17(a) of the Exchange Act and Rules 10b-3, 15b3-1 and 17a-3 thereunder, and Sections 204, 206(1), 206(2), 206(4) and 207 of the Advisers Act and Rules 204-2 and 206(4)-7 thereunder. SEC Staff Credits. Investigation by Aaron Arnzen and Kristine Zaleskas of the NYRO. The SEC’s investigation is continuing. For further details, go to:   [SEC PR 12-126, 6/29/12] and  [SEC Complaint].