UNITED STATES DISTRICT COURT SOUTHERN DISTRICT of NEW YORK : UNITED STATES of AMERICA : : : 09 Cr
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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK : UNITED STATES OF AMERICA : : : 09 Cr. 764 (RJS) v. : ECF Case : : FRANK DIPASCALI, JR., : Defendant. : : DEFENDANT FRANK DIPASCALI'S MOTION FOR RECONSIDERATION OF BAIL CONDITIONS Defendant Frank DiPascali, Jr., by his attorneys, Bracewell & Giuliani LLP, Marc L. Mukasey and Craig S. Warkol, of counsel, respectfully moves this Court to enter an Order admitting Mr. DiPascali to bail in accordance with conditions set forth herein.1 As set forth below, clear and convincing evidence exists that, upon satisfaction of the new combination of conditions proposed herein, Mr. DiPascali will not pose a risk of flight, and he should be granted bail pending sentencing. I. Background A. Mr. DiPascali's Career At Bernard L. Madoff Investment Securities From in or about 1975 through on or about December 11, 2008, Frank DiPascali worked for Bernard L. Madoff Investment Securities ("BLMIS"). For his first fifteen years at BLMIS, Mr. DiPascali held a variety of jobs, lawful and legitimate, including as a research analyst, an options trader, and a person who "did whatever I was told to do around the office." Transcript of Proceedings dated August 11, 2009 ("Tr.") at 45. Without a 1 The proposed Order is attached to the Government's Motion For Reconsideration Of Bail Conditions, dated October 16, 2009. college education or formal training, Mr. DiPascali thought he was learning how the securities industry worked by observing Mr. Madoff and others. For many years, he thought that he worked at a prestigious and successful securities firm. (Tr. at 45). In the late 1980s Mr. DiPascali became involved in Mr. Madoff's fraudulent activity. Although he did not know the complete scope of Mr. Madoff's criminal conduct, Mr. DiPascali ultimately made the conscious decision to participate in Mr. Madoff's criminal activity by, among other things, falsifying account statements, lying to regulators and misleading investors. Throughout the time period of the fraud, Mr. Madoff lied to Mr. DiPascali. Mr. Madoff led Mr. DiPascali to believe that, despite the fact no trades were being executed, investors would not lose any of their funds because Mr. Madoff owned a massive portfolio of assets that he could liquidate to satisfy redemption requests if, and when, clients requested the return of their funds. As counsel noted during the prior court proceeding in this matter, Mr. DiPascali believed that: . no one is going to get hurt at the end because Bernie Madoff has been telling me he has assets abroad and in real estate and in commodities that are going to make sure that all the clients' money will be able to be returned. So he wasn't out there sort of ripping and robbing and stealing as you might think of it. [I]s [Mr. DiPascali] guilty? 1,000 percent. No question about it. It was okay because Bernie was going to take care of it. Don't worry, Bernie will take care of it. That is how he went to sleep at night. (Tr. at 85). The belief that Mr. Madoff always would be able to satisfy redemption requests, and that clients would not lose their invested funds, brought Mr. DiPascali a degree of comfort. But in early December 2008, Mr. Madoff revealed to Mr. DiPascali that he did not have a portfolio of assets that could be liquidated to return investor funds. At that 2 moment, Mr. DiPascali knew full well that the consequences of the BLMIS collapse would be cataclysmic, that investors would lose billions, and that he would likely face criminal prosecution and a significant prison sentence. B. Mr. DiPascali's Post-Madoff Conduct On December 11, 2008, federal authorities served Frank DiPascali with a grand jury subpoena. Mr. DiPascali understood immediately that he was the target of a criminal investigation. At the time, Mr. DiPascali was a man of substantial means. He had all the tools necessary for one who might be inclined to avoid a prosecution: a passport; unfettered access to over two million dollars; a 61-foot yacht capable of traveling in international waters; a time-sharing arrangement in a private jet service; and several cars. But Mr. DiPascali never considered flight. Upon receipt of the subpoena, he retained counsel, surrendered his passport to his lawyers and, a few weeks later, initiated conversations with the United States Attorney's Office for the Southern District of New York aimed at admitting his guilt and securing a cooperation agreement. Between January 2009 and August 2009, Mr. DiPascali met repeatedly with the United States Attorney's Office, the Securities and Exchange Commission, and the Federal Bureau of Investigation. In addition, he demonstrated his commitment to cooperating with the investigation by voluntarily entering into an agreement with the Government that restrained his assets and imposed strict spending limits on him and his family. He discontinued his private jet time share; surrendered his boat to the U.S. Marshal; forfeited his cars; and surrendered family heirloom firearms to the local sheriff. He also agreed to settle the case filed against him by the SEC and be forever barred from association with a broker dealer or investment advisor. See SEC v. DiPascali, No. 09-cv-07085 (S.D.N.Y.). 3 On August 11, 2009, Mr. DiPascali entered into a cooperation agreement with the Government and pleaded guilty to a ten count criminal information. The Information charged Mr. DiPascali with conspiracy, securities fraud, investment adviser fraud, falsifying books and records of a broker-dealer, falsifying books and records of an investment advisor, mail fraud, wire fraud, money laundering, perjury and attempting to evade or defeat taxes. During his allocution, Mr. DiPascali admitted that, from the late 1980's or early 1990's, he "helped Bernie Madoff, and other people, carry out the fraud that hurt thousands of people." (Tr. at 44). He also acknowledged the "one simple fact that Bernie Madoff knew, that I knew, and that other people knew but that we never told the clients [or] the regulators like the SEC. No purchases o[r] sales of securities were actually taking place in their accounts. It was all fake. It was all fictitious." (Tr. at 46). Later, he confessed that, "I knew what was happening was criminal and I did it anyway." (Tr. at 52). At the close of his allocution Mr. DiPascali reiterated his intent to help the Government and stated, I know my apology means almost nothing but I hope my actions going forward with the government will mean something and I promise to dedicate all my energy to try to explain to others how this happened. I hope my help will bring some small measure of comfort to those who have been harmed. (Tr. at 55). The Court accepted Mr. DiPascali's plea and adjudged him guilty. 4 C. The Prior Bail Proceeding At the conclusion of the guilty plea proceeding, the Government and the defense jointly proposed, for the Court's approval, a combination of release conditions for Mr. DiPascali. The proposed bail terms included: (a) a $2.5 million personal recognizance bond, co-signed by three financially responsible persons and secured by $400,000 of equity in the house belonging to Mr. DiPascali's sister; (b) the surrender of Mr. DiPascali's travel documents, with no new applications permitted; (c) travel only within the Southern District of New York, the Eastern District of New York, the Eastern District of Pennsylvania and the District of New Jersey; and (d) regular supervision by Pretrial Services. These conditions were offered to the Court with a mutual understanding between the Government and Mr. DiPascali that, pursuant to his cooperation agreement, Mr. DiPascali would continue to work full-time with the U.S. Attorney's Office, the FBI and the SEC, to explain all he knew about the Madoff operation and provide truthful and complete cooperation. The Court rejected the proposed conditions as insufficient to eliminate the risk of Mr. DiPascali's flight. Your Honor noted that, after a guilty plea, "there is a presumption that the defendant will be detained, remanded pending sentencing." (Tr. at 69). According to the Court, the package was "fairly symbolic and not terribly onerous in light of the other facts in this case." (Tr. at 71). The Court cited several deficiencies in the bail package. First, the Court found that Mr. DiPascali "has ample incentive to flee" because "[he] is 52 years old," "facing a maximum term of imprisonment of 125 years," (Tr. at 69), and "the [G]uidelines would be 5 recommending a life term." (Tr. at 70). Second, the Court stated that the amount of the bond and the security component was ". completely dwarfed by the amount of restitution and forfeiture in this case. $170 billion is what the plea agreement provides for Mr. DiPascali to forfeit. So it would seem to me that a 2.5 million dollar bond thrown on top of that mountain doesn't count for much." (Tr. at 70). Third, the Court noted that although the bond co-signers "would have some moral suasion over him" there are: thousands of victims who . lost more than $2.5 million. So the fact that three more victims might be thrown on top of a long list of victims doesn't strike me as a terribly compelling basis to believe that Mr. DiPascali would be deterred from engaging in conduct that would constitute a violation of the terms of his bail or flight. (Tr. at 70-71). At the conclusion of the proceeding, the Court noted that it had "explained what [its] concerns are and what the burden is" and invited the parties "to renew the [bail] application" at a future time.