Peter Madoff was the No. 2 at Madoff Securities. He was close to Bernie. He ran trading, compliance, and technology. Peter and Bernie’s offices were steps apart. They skied together. They schmoozed with the salesmen who gathered assets for Madoff Investments. They shared the insistence on black and grey office decor. Peter’s daughter Shana ran compliance. Peter once told a subordinate to stop using blue pens because the firm only used black. (Obsessive-compulsiveness apparently ran in the family.)
Peter was the first person Bernie told about the Ponzi Scheme–a day before Bernie told his sons. There is now a question as to why Peter didn’t report it immediately, like Bernie’s sons.
Tom Lauricella and Aaron Luchetti of the WSJ have poked into Peter’s life. They haven’t found any evidence that he knew about the fraud. Based on the details they report, it is presumably possible that Peter didn’t know about the fraud, but, it seems inconceivable that he didn’t wonder from time to time. (And as head of compliance, this wondering presumably should have led to some investigation.)
The biggest red flag for us is that Bernie Madoff ran a huge broker-dealer firm but claimed he made the trades for his investment accounts at broker-dealers in Europe. Why on earth would he do that except to hide what he was doing? And why on earth wouldn’t an innocent, whip-smart brother, No. 2 at the firm, who had presumably been involved in every SEC investigation and press article questioning the returns over the years, ask his brother about that (and all the other obvious questions).
And then there’s the question as to whether Peter had his personal money managed by Bernie. If he didn’t, this will be topic A of the investigation. (If he thought Bernie was legit, why wouldn’t he?)
The evidence may end up being entirely circumstantial, but our guess is Peter is cooked.
The WSJ: In a firm defined by family ties, Bernard, 70 years old, and Peter, 63, were especially close. With an office a few feet from his brother, Peter helped create innovative electronic-trading systems on which much of Madoff Securities’ success and reputation was built. For the past two decades, Peter ran the day-to-day trading operations of what the firm described as its core business.
“Peter was very savvy on the technology front,” says Edward Nicoll, who was a trading client of Madoff Securities as a co-founder of Waterhouse Securities Inc. “At every stage he automated Madoff’s operation and that gave them a trading advantage.”
No information has surfaced to suggest that Peter knew of or participated in the alleged fraud. Though he was chief compliance officer, his operational duties as head of trading formally were separate from the investment-advisory business at the heart of the alleged Ponzi scheme. Neither Peter nor his lawyer, Rusty Wing, responded to requests for comment…
It isn’t clear if Peter has been asked to cooperate with the continuing investigation being conducted by the Securities and Exchange Commission and the Manhattan U.S. attorney’s office. Investigators didn’t return calls for comment…