The former controller for imprisoned financier Bernard Madoff blamed him Monday for directing her to deceive investors, regulators and the Internal Revenue Service as she pleaded guilty to conspiracy and other charges.
"I did not know that Madoff and others were stealing investors' money," Enrica Cotellessa-Pitz said as she entered the plea in U.S. District Court in Manhattan, becoming the sixth person to plead guilty and admit a role in a fraud that Madoff claimed he carried out alone. "For that, I am terribly sorry."
Cotellessa-Pitz , 53, said she wanted investors and the public to know that she is cooperating fully with prosecutors. Besides conspiracy, she pleaded guilty to falsifying books and records and making false filings with the Securities and Exchange Commission.
The charges carry a potential of up to 50 years in prison for a woman who admitted a major role in the multi-decade fraud that cheated thousands of investors out of the roughly $20 billion they invested with a man whose once-sterling reputation on Wall Street caused many people to feel honored to be allowed to rest their money with his private investment business.
Cotellessa-Pitz said she started working at Bernard L. Madoff Investment Securities LLC in 1978 while she was studying economics in college. She was named controller in late 1998. She said Madoff and others within months were directing her to put false entries in the company's books to make it appear profitable trades were being made and that losses were not incurred.
She said she also prepared reports for the SEC and annual reports that falsely represented what was happening in Madoff's business.
The massive Ponzi scheme was revealed in December 2008, when Madoff confessed to his sons that his business was a sham. He pleaded guilty a few months later to fraud charges and was sentenced to 150 years in prison. He insisted throughout that he acted alone in his crimes. Now 73, Madoff is imprisoned at a federal prison in North Carolina.
Cotellessa-Pitz said she participated in the fraud from 1999 through December 2008 and assisted in foiling the SEC and the IRS when they attempted to conduct audits.
In court papers filed Monday, the SEC said Cotellessa-Pitz helped shield Madoff's operations from the scrutiny of auditors and regulators by falsifying the company's internal books and records and periodic financial statements.
The SEC said that when Madoff's investment business received requests for information from auditors and regulators, "Madoff responded not only with oral misrepresentations, but also with an impressive array of falsified reports and data."
The commission cited in particular a 2005 inquiry in which the SEC questioned Madoff about his private investment business. It said that Madoff and others gave Cotellessa-Pitz inflated numbers "to support the fiction then-recently advanced by Madoff that (his company) managed money for a small number of `special clients.'"
In truth, the SEC said, Madoff had thousands of clients.
During her plea, Cotellessa-Pitz also said she helped Madoff limit his tax liability by manipulating the numbers reported to tax agencies. The SEC said trading assets and profit-and-loss accounts were reduced for tax returns filed from 2001 through 2003 after New York State tax authorities notified Madoff in 2004 that they planned to audit the returns. It said a similar charade was carried out in 2007 when the IRS audited Madoff's 2004 tax return, when Madoff had under-reported gross receipts by of millions of dollars.
The SEC said Cotellessa-Pitz was being paid more than $450,000 annually by 2008 and had two accounts with her husband at Madoff's firm that were supposedly worth more than $3 million when the fraud came to light. The SEC said she and her husband had deposited approximately $251,000 into their accounts and had withdrawn more than $485,000.
Sentencing was set for June 22.