Feds Cast Wider Net In Madoff Fraud Case

Bernard Madoff arrives at Manhattan federal court Thursday, March 12, 2009, in New York. (AP Photo/Louis Lanzano)
AP Photo/Louis Lanzano
By CBS News investigative producer Pat Milton

CBS News has learned more than 100 subpoenas have been sent out by federal prosecutors in the Bernard Madoff case, as criminal investigators turn their focus to at least 10 others likely involved in the largest financial fraud case in Wall Street history.

It is likely that criminal charges will be brought against as at least 10 individuals in the multi-billion dollar Ponzi scheme, a person familiar with the investigation told CBS News.

Everyone close to Madoff's securities firm has been or is currently under scrutiny, including family members and business associates, the person said.

In addition to the subpoenas, federal investigators have conducted more than a hundred interviews here and overseas, and reviewed volumes of computer files and microfilm records, said the person who spoke to CBS News on the condition of anonymity because the probe is ongoing.

For the FBI and federal prosecutors, Madoff's sentencing is considered "the end of the beginning'' in what is expected to be a very lengthy investigation.

The 71-year-old Madoff began the first day of the rest of his life in prison Tuesday for a crime that a federal judge called "extraordinarily evil.''

Madoff was sentenced in Manhattan Federal court Monday to a maximum 150 years in prison after pleading guilty last March to orchestrating a $65 billion fraud that demolished the life savings of thousands of investors, including charitable organizations.

At the sentencing Madoff apologized to his victims and distanced himself from family and associates maintaining he acted alone.

On Tueseday Madoff's attorney, Ira Lee Sorkin interviewed on CBS' The Early Show, was asked if Madoff acted alone. "Absolutely,'' Sorkin said.

U.S. District Judge Denny Chin who handed down the sentence however suggested that Madoff still hasn't come clean.

"I simply do not get the sense that Mr. Madoff has done all that she could or told all that he knows,'' Chin said from the bench.

So far, only Madoff and accountant David Friehling, who had audited Madoff's investment advisory business for more than a decade, have been charged in the criminal case.

In addition, the Securities and Exchange Commission is conducting a civil investigation into the financial scandal. The S.E.C. recently filed civil charges against co-owners of Cohmad Securities Corp., a brokerage firm that reportedly steered billions of dollars to Madoff's investment company.

According to a SEC complaint filed in federal court in New York earlier this month, Cohmad Securities Corp., reported to be co-founded Madoff, was his "in-house marketing arm" critical to his Ponzi operation. The S.E.C. sued Cohmad, its co-founder Maurice Cohn, his daughter and Cohmad president Marcia Cohn and executive Robert Jaffe for allegedly aiding Madoff in the fraud. Jaffe steered more than $1 billion in investments to Madoff and allegedly was aware of his fictitious operation, according to the S.E.C.

Jaffe, 65, of Palm Beach, Florida, has denied any wrongdoing.

None of the three defendants in the S.E.C. lawsuit have been charged criminally.

The S.E.C. has also charged Stanley Chais, a Los Angeles investment adviser, with placing about $1 billion of investors' funds with Madoff, often without their knowledge. He is charged with withdrawing more than $500 million before the Madoff meltdown, according to the S.E.C.

Trustee Irving Picard who is working to recover money for Madoff's victims filed a lawsuit on Monday in federal bankruptcy court in Manhattan seeking more than $100 million in commissions earned by the people and entities named in the suit.

Picard is also seeking more than $100 million Cohmad employees and their families withdrew from the accounts they had with Madoff.

Picard has also brought civil suits against Jeffry Picower and Chais, both of whom invested heavily with Madoff. The two men made withdrawals of more than $6 billion from Madoff's firm well beyond the principal they deposited, in some cases their returns reached 300% to 950% a year, the lawsuit alleges.

Both men have denied any wrongdoing. They have not been charged in the criminal case.
Meanwhile, the Securities Investor Protection Corp, the government-created insurance system that pays up to $500,000 to individual investors, is processing claims. The deadline to file a claim in the Madoff liquidation proceeding is Thursday, July 2.

Complete Bernard Madoff coverage:

Madoff Feels Remorse, Lawyer Says
10 More To Be Charged, Source Says
Madoff Sentenced To 150 Years In Prison
Ruth Madoff: "Embarrassed And Ashamed"
Madoff's Fraud: A Family Affair?
Transcript of Madoff Sentencing
Analysis: 150-Year Sentence "Grossly Unfair"
Court Sketches: Madoff Sentencing

  • Pat Milton

    Pat Milton is a CBS News investigative producer