An employee who has been singled out as a member of Bernard L. Madoff’s “inner circle” pleaded guilty on Monday to charges that he doctored documents to fool auditors, faked payroll records and obtained a loan by inflating the value of his personal accounts.
Eric S. Lipkin, a second-generation employee who worked at Mr. Madoff’s secretive investment advisory business for 16 years, pleaded guilty to conspiracy, bank fraud and falsifying financial records in a cooperation deal with prosecutors. He admitted his role in the Madoff fraud, telling the judge that he “worked to deceive auditors.”
“I’m very sorry for my conduct,” he said.
Mr. Lipkin became the third Madoff employee to plead guilty in the continuing investigation into the fraud that cost thousands of people billions of dollars. In 2009, prosecutors obtained confessions from the Madoff firm’s independent auditor and from Frank DiPascali Jr., Mr. Madoff’s longtime deputy and chief lieutenant.
His guilty plea clearly shifts the legal landscape for five other former Madoff employees facing criminal charges in the case. Those defendants — who include Daniel Bonventre, the former chief of operations at the Madoff firm, two computer programmers and two office administrators — are facing charges that were based in part on grand jury testimony by Mr. DiPascali, who is cooperating with the government investigation while awaiting sentencing.
All five defendants have denied the prosecutor’s allegations and are awaiting trial — trials at which Mr. Lipkin will now almost certainly join Mr. DiPascali on the list of potential government witnesses. In agreeing to a plea bargain with Mr. Lipkin, the prosecution seems to be calculating that he could be a more credible witness than Mr. DiPascali, who played a central role in the complex deceptions that allowed Mr. Madoff to keep his Ponzi scheme alive for so long.
Mr. Lipkin also agreed to settle a related civil fraud case brought by the Securities and Exchange Commission. Without admitting or denying the agency’s accusations, Mr. Lipkin agreed to forfeit profits and pay a fine to be determined later by a court.
Irving H. Picard, a court-appointed trustee seeking to recover billions of dollars in losses for thousands of clients in Mr. Madoff’s Ponzi scheme, said in a lawsuit last year that Mr. Lipkin misled investigators when he provided false information and fabricated trade blotters during an S.E.C. investigation in 2005 and 2006.
Mr. Lipkin also admitted that he falsified payroll records to include people who he knew did not work at the firm. This, prosecutors said, enabled those people to receive retirement and other benefits to which they were not entitled.
Mr. Picard’s lawsuit had labeled Mr. Lipkin a member of Mr. Madoff’s inner circle, saying he profited from the fraud and was an active part of attempts to cover it up.
The lawsuit said Mr. Lipkin’s father, Irwin, was one of the first people hired by Mr. Madoff when he started his investment business and helped build the firm from scratch in 1964. Eric Lipkin followed his father into the company in 1992 and acted as a lieutenant to Mr. Madoff, as well as the company’s payroll manager, Mr. Picard said.
The elder Mr. Lipkin denies that he had any knowledge of the Ponzi scheme, according to his lawyer, Gary S. Redish.
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