Top Madoff Exec Talking To Feds

Ever since Bernie Madoff admitted running the world's largest Ponzi scheme, investigators' focus been on what close members of his family knew about the scam.

Now the case has taken an unexpected turn. Madoff's right hand man is negotiating with prosecutors - and may be ready to provide inside information about the scheme that swindled investors out of billions of dollars, as CBS News chief investigative correspondent Armen Keteyian reports.

CBS News has learned of a potential plea agreement between Madoff's longtime chief financial officer, Frank DiPascali, and federal prosecutors.

According to a source with knowledge of the Madoff investigation, negotiations between DiPascali's attorney and the government intensified after the arrest of Madoff's accountant David Friehling, who was said to be cutting his own deal, last month.

"I think it behooves him to come forward say what he has to say, say what he knows," said Elizabeth Crotty, a former Manhattan district attorney. "Hopefully its helpful to the investigation and then he gets less time."

The only non-family member of Madoff's inner circle, DiPascali is a college dropout who grew up in the rough and tumble neighborhood of Howard Beach, Queens. He joined Madoff's firm in 1975, rising over the next 33 years to become his right-hand man, and the key contact for investors.

Investors like Dr. Murray Morrison, who said in a meeting last October DiPascali opened a window into a secret side of Madoff's operation.

"He told us Bernie Madoff said they probably shouldn't put anything in e-mail," Morrison recalled.

A source said DiPascali had "nothing incriminating" on any Madoff family members, including brother Peter, the firm's chief compliance officer, or Madoff's two sons, Andrew and Mark, who headed the firm's trading division.

However, in exchange for a reduced sentence, DiPascali is prepared to name names - to divulge the inner workings of Madoff's scheme, including his part in creating what the source called "doctored account statements."

Now CBS News has learned the federal government has expanded its investigation to funds that raised money for Madoff, something DiPascali is said to know something about.