Frank DiPascali: The Jersey Guy Behind the Madoff Scam By Kevin Manahan November 12, 2009, 10:17AM

Flanked by his lawyers, Frank DiPascali, in a crisp white shirt, red tie and impeccably fitted gray pinstriped suit, rose slowly from his seat at a long mahogany table in Room 15A of a Manhattan courthouse and faced U.S. District Court Judge Richard Sullivan. The defendant heaved a sigh, his shoulders rising and collapsing, then fetched his prepared statement.

The hands of Bernard Madoff’s lieutenant — the same hands that calmly and without conscience had helped fleece thousands of investors out of $65 billion in a complicated ruse — now trembled as they held the pages containing a printed confession, with last-minute edits scribbled in the margins.

Photo by Christine Cornell/Getty ImagesThis court drawing shows Frank DiPascali, Bernard Madoff's right hand man,
taking the oath before being charged at the New York Federal court on
August 11, 2009. DiPascali pleaded guilty to conspiracy and fraud and
promised to cooperate with authorities.And just that subtle paper-rustling, in a hushed courtroom, forced the overflow crowd to lean forward in their pews to hear DiPascali’s first public words since the world’s largest Ponzi scheme was uncovered. They wanted to know what he knew, what he had done, how he had done it and why he had heartlessly engaged in an investment swindle that ruined thousands of lives.

More than 200 people — investors, media and courtroom curious — had come to hear DiPascali, a Bridgewater resident, confess to his part in the scam as Madoff’s right-hand man. He was — one investor said — “a petty little man who always treated people like dirt, and we wanted to see him get his.”

After months of waiting, they wanted to hear the truth from a man who hadn’t told it much during his life while orchestrating one of the biggest, costliest lies of all time.

But others also came to get a glimpse of the man who, for years, had lived and worked mysteriously in the shadows of the 17th floor of the Lipstick Building — the 34-story glass and steel skyscraper at 885 Third Ave., which, with its two receding sections, resembles lipstick jutting from a tube.

Few, if any, had ever seen DiPascali, and they longed to put a face to the voice — a Marlboro-chain-smoking voice, with a hard New York accent, that had always given them the bum’s rush on the phone. They wanted to see the street-smart guy from Queens who, with just a high school education, had fooled Ivy League-educated investors and Securities and Exchange Commission investigators with degrees from prestigious law schools and master’s degrees in business administration.

John Munson/The Star-LedgerThe Lipstick Building in Manhattan on Third Ave. New York, NY

DiPascali, in the flesh, confessed to 10 counts that included conspiracy, securities fraud, perjury, tax evasion, money laundering and falsifying records and carried a maximum of 125 years in prison, but his two hours of courtroom soul-scrubbing came down to this:

In 33 years, he rose from a teenage go-fer to Madoff’s chief financial officer and criminal confidant by being a guy willing to tell the big lie for the big paycheck — “a guy who did whatever he was told to do,” he said. He cooked the books for Madoff for more than two decades, concocting phony records for stock trades that never happened and then sending millions of pages of fake account statements to investors.

“It was all fictitious,” DiPascali admitted in court, and he knew all along what he was doing was wrong. But Madoff was “a mentor to me and more,” he said. “I was loyal to a terrible, terrible fault.”

As Madoff’s deputy, DiPascali knows who else was in on the hustle, and to avoid dying in prison, the 52-year-old father of four pledged to spend the next eight months fingering them to the FBI, the SEC, the IRS and any other law-enforcement agency that might put in a good word with the judge.

Ironically, Frankie D, who grew up in Howard Beach, N.Y., among wiseguys and thugs, would break the street code of the old neighborhood and sing to the feds.

A lifestyle built on the accounts of lawyers and widows

When it all came crashing down, DiPascali was making at least $3 million a year and living lavishly in a five-bedroom home — with a pool and a cabana — hidden on Mountain Top Road in Bridgewater among seven acres of trees and assessed at $1.38 million. He and his wife, JoAnne, who works for JPMorgan Chase’s mortgage unit in Iselin, owned two black Mercedes, a 2009 Audi S5 Quattro and a 61-foot yacht, which required a full-time captain. The cars and boat — the Dorothy-Jo, which was bought for $1.9 million in 2002 — have been in the custody of federal marshals since April. Prosecutors say DiPascali used at least $1.7 million of investors’ money to buy the yacht.

Although his lawyer, Marc Mukasey, described him as a “homebody,” DiPascali enjoyed weekends in Atlantic City and anywhere else he and his wife wanted to go, and they competed in big-money fishing contests. DiPascali’s boat once won $55,070 — and several thousand more in side bets — in a 2007 fishing tournament.

But now he will forfeit it all, prosecutors say.

---

• Jan. 23: Madoff investigation involves Bridgewater man who worked for financier

• March 12: Wall Street titan Bernard Madoff admits massive Ponzi scheme

• March 12: Bernard Madoff goes directly to jail after pleading guilty for bilking investors

---

Every time DiPascali whipped out his corporate Platinum Card — whether it was to gas-up the boat or the cars, buy lavish dinners at the Jersey Shore’s finest restaurants or send his son and his college buddies on vacations to the Bahamas — he was siphoning from the retirement accounts of doctors and lawyers and widows.

He also cheated the IRS out of millions, reporting zero taxable income in 2006, for instance, when he actually earned $4 million. He arrogantly reported no income in 2002 and 2005, too.

“I knew what was happening was criminal and I did it anyway,” he told the judge. “I knew everything that I did was wrong, and I did it knowingly and willfully.”

But even after cops had hauled him away in handcuffs when the judge surprisingly rejected a bail deal, investors walked from the courtroom unfulfilled. Because as they looked for answers, DiPascali provided no real insight. He apologized — to the victims, his family and the government — although “I know my apology means nothing.” With his voice cracking, DiPascali said he was still trying to figure it all out.

“I regret everything that I did,” he said. “I accept responsibility. I’m trying to understand how I went from being an 18-year-old kid (with) a job to someone standing before the court today.”

It’s a truth that might never be found, because almost everything about Frank DiPascali was a lie.

"Frank, the broker"

Lawrence Velvel, now dean of the Massachusetts School of Law, was one of the few investors who had the chance to meet DiPascali before deciding to invest with Bernie Madoff. In April 1995, in Madoff ’s offices in Manhattan, DiPascali explained “the split-strike conversion,” the bogus investment strategy Madoff supposedly was using to compile the steady returns that had investors begging to give him millions.

It was, of course, a lie.

Under the strategy, DiPascali said, Madoff would buy a basket of stocks that were in the Standard & Poor 100. To guard against losses, he simultaneously bought options, called &ldquouts,” that allowed him to sell the stocks if they went down in value. To pay the costs of the puts, Madoff bought “calls,” which allowed the buyer the option to call the shares from Madoff after small gains.

With a small profit here and a small profit there, on tens of thousands of transactions over years and years, the cash would add up: “Bernie is swinging for singles, not home runs,” DiPascali would say.

Miriam Siegman of Manhattan, who says she lost 40 years of personal savings and now stands on the brink of homelessness, called DiPascali “a dog” and “a horrible, horrible man.” Several times, Siegman says, she called to ask about her accounts or to redeem shares to pay for her parents’ medical expenses, and DiPascali brushed her off the phone and made her feel “like I was nothing.” He came up with the money, she says, but treated her “with contempt.”

Others recalled times when DiPascali reacted to any question with a snarly attitude. “If you don’t want your money with us, we can send it all back,” he would say.

Peter Moskawicz, a retired dentist living in California, spoke to “Frank, the broker,” seven or eight times in his 16 years of investing with Madoff. DiPascali, he says, was always curt.

Questions received short answers or no answer at all, and DiPascali never spent more than two minutes on the phone with him, because “he said he was too busy making trades,” Moskawicz says. “And we now know that was a lie. There were no trades.”

He adds: “Frank DiPascali helped steal my IRA, and the SEC couldn’t catch him. You wonder: How did a guy with basically no education do that?”

High school phantom

According to his résumé, DiPascali graduated in 1974 from Archbishop Molloy High School — a Catholic all-boys school run by Marist Brothers. And on a résumé that listed phony jobs and titles, imaginary community service and fictitious stints at Brooklyn College and St. John’s University, his high school education was one of the few truths in his life. But a photo in the yearbook might be his only corroborating evidence.

In a class of 429 students, DiPascali was a phantom. And he still is. The Class of 1974 held its 35th reunion in October, and dozens returned to the school to attend Mass and a dinner, and to relive old times — yearbook photos of them as gangly teens pinned to their lapels. The Stanners, as Molloy students and alumni call themselves, recalled those dreadful, heavily chaperoned dances with Mary Louis Academy, an all-girls Catholic school two miles down the road. They remembered city championships won by the squads of legendary basketball coach Jack Curran.

And, despite graduates that include New York City police commissioner Ray Kelly, New York State attorney general Andrew Cuomo, actor David Caruso and former NBA star Kenny Smith, the Stanners, cocktails in hand, gossiped about the school’s most infamous alumnus — and what, if anything, they knew about him.

Once again, DiPascali was a reunion no-show, even though he was just 15 miles away. Of course, this time he had a good excuse: Prisoner 62586-054 at the Metropolitan Correctional Center couldn’t get away. Literally.

In a senior yearbook that contains hundreds of photos, DiPascali appears in just one — his graduation head shot. And even then, he blends in among the others, a small and slight, wavy-haired kid with dark, unremarkable features, dressed in the same light blue tuxedo jacket, dark bow tie and white shirt loaned to every student by the photographer.

Whitey Rigsby, a popular all-state basketball star and Archbishop Molloy’s big man on campus in those days, said he “knew everyone” in his class and “just about everybody in the school.” And to prove it, as he sat in his office at Villanova University, where he is a fundraiser, Rigsby pointed at photo after photo and told stories about his ex-classmates, including Caruso, who drew laughs every time he predicted he would be a star.

But what about DiPascali, whose arduous commute from Howard Beach included a bus and subway?

“I’m trying to remember him, but I have no clue,” Rigsby said. “What’s his name again,  DiPasquale? I’ve been through this yearbook and there’s no mention of him anywhere else. He didn’t join any clubs. He didn’t play any sports. But everyone played sports. Look at the rosters. See how many names there are?

“I’m guessing he was there when the bell rang in the morning and left when the bell rang in the afternoon. It doesn’t look like he wanted to stick around.”

DiPascali, it seems, cared more for the school after he left, hiring interns from the school and giving regularly, according to another alumnus who often saw the yearly Archbishop Molloy publication, which listed that year’s contributors, on DiPascali’s desk. “You only got the book if you gave money,” he said. “And Frank got his every year.”

While a dozen former classmates, contacted for this story, gave a shrug via phone or e-mail (“Sorry, don’t remember him&rdquo, Jack Alemany recalled DiPascali. Sort of.

“I have this fuzzy memory of him with Brother Hugh, who was in charge of discipline back then,” Alemany said. “Brother Hugh was a huge guy with hands like catcher’s mitts, and he was palming Frank’s head, just like he did with all of the students. And he was saying something like, ‘I’m going to have to keep an eye on you, DiPascali. You could be trouble.’ ” Alemany laughs. “I guess he was right.”

'Jekyll and Hyde'

DiPascali grew up in a two-family home in a blue-collar neighborhood in Howard Beach, Queens, just blocks from where Michael Griffith, a 23-year-old black man, was beaten in 1986 by white men after his car broke down. Chased onto the Shore Parkway by a mob, Griffith was struck and killed by a car, sparking citywide racial protests. But at the first chance, DiPascali fled the working-man’s borough.

He and JoAnne bought a house in Bridgewater in 1987 and raised their children there before trading up in 2001 but staying in Bridgewater. DiPascali sold the original house to his brother-in-law, Robert Cardile, who also worked for Madoff as DiPascali’s assistant, handling phone inquiries from investors.

While DiPascali’s résumé paints a picture of a man who was active in the Bridgewater community, that, too, is questionable. Little League officials won’t say whether he sponsored teams, as has been reported. Some parents say he coached youth hockey while his sons participated, but others are pretty sure he was just a parent who attended many games, most of the time standing alone by the side of the rink.

Whenever his sons scored a goal or made a good play and the “Cha-Ching” jar was passed, DiPascali stuffed in a $10 or $20 bill. When their kids shined, most parents donated a buck to the fund, which paid for end-of-the-year parties and ice time. DiPascali always carried a wad of cash but never flashed it, according to a former co-worker of DiPascali’s who provided information for this article but asked not to be identified because his new employer requested he keep a low profile.

And when it was time to ante up — whether it was for the youth hockey team or for late-night pizzas for workers at Madoff — DiPascali never hesitated to peel off a few bills.

One hockey parent, who asked not to be identified, recalled when DiPascali praised an undersized but tireless kid who played on the Bridgewater Bears. After a game, DiPascali  patted him on the head: “You have the heart of a lion,” he told the boy. “Don’t ever let anyone tell you what you can’t do. You can do whatever you want.”

That was DiPascali, said those who worked with him: He had a soft side. But as quickly as he revealed it, he could snap into the guy with a chip on his shoulder and a vulgar vocabulary. “Frank was Jekyll and Hyde,” the former co-worker said. “He was a roller-coaster ride. Luckily, I could tell when he was in a bad mood. I stayed away.”

Mid Atlantic fishing tournment. Frank DiPascali circled in red.

In December 2002, DiPascali applied for an unexpired term on the Bridgewater school board with the fabricated résumé. In a letter, he told the board: “I am confident the experience I have in my business career will enable me to contribute ideas that will help the board.” DiPascali had never shown an interest in local politics, and he didn’t after being rejected.  Knowing what they know now, board members look back curiously on his sudden interest.

On Dec. 9, minutes after interviewing DiPascali, the board appointed another applicant to the seat: “Obviously, we weren’t impressed,” says board member Al Smith.

The 17th floor

Madoff employees feared DiPascali. Along with a hair-trigger anger, he had unusual and unlimited access to the boss. Crossing him could get them fired. DiPascali huddled with Madoff every day, sometimes in “The Tank,” a soundproofed conference room on the trading floor.

A flip of the switch would shoot gas between the double-paned glass, turning the windows opaque. Employees couldn’t understand why Madoff had chosen DiPascali to oversee the operation. He wasn’t the usual investment-broker type. In fact, he clearly hated them. Tanned and well-groomed, DiPascali roamed the halls in pressed jeans, three-button golf shirts and boat shoes, with no socks — a short guy with short hair and a short temper who mocked those with degrees.

DiPascali was the only employee who could talk back to Madoff, and other employees wondered what he had on Bernie. “We joked that he must have pictures,” one said. The 17th floor, where DiPascali invented the paperwork that kept the Ponzi scheme alive, was unlike any other at Madoff Investment Securities. Most offices were impeccably clean and smartly decorated.

They smelled of money — and lots of it. But on the 17th floor, the world DiPascali ruled but few saw, obsolete computers and dot-matrix printers gathered dust. Documents and files were strewn about. Madoff proudly gave office tours to his biggest investors, but he rarely, if
ever, showed them the 17th floor.

Madoff often visited DiPascali’s office, a room intentionally designed without windows and tucked into a corner on Seventeen. When the door was shut, no one could see in. DiPascali chain-smoked in that office, ignoring the law and the risks to his fellow employees. And no one at Madoff had the guts to ask him to stop. Anyone — other than Madoff — who wandered near the office would be greeted by DiPascali, snarling like a junkyard dog protecting his territory.

“He’d say, ‘What are you doing in here? Get out! You don’t belong here!’ ” the former co-worker who talked to Inside Jersey at length remembered. “Whatever was going on in there, he didn’t want you to know.”

The company’s explanation for Seventeen being off limits: Madoff didn’t want anyone stealing the secret formula for the split-strike conversion.

Entering a new universe

No matter how often he apologized and how much attorney Marc Mukasey begged, it was clear on that August afternoon that DiPascali — “1,000 percent guilty,” by Mukasey’s own words — was headed to jail. Judge Sullivan couldn’t be convinced that DiPascali — facing astronomical jail time, fines and the forfeiture of almost everything he owned — wouldn’t flee, even if his beloved sister was posting her home, even if friends were putting up sacks of cash, and even if DiPascali’s mom, in failing health, needed him.

Mukasey gave another reason why his client wouldn’t run: “On Dec. 11, he came to my office, shaking and crying,”

Mukasey said. “He stepped out of that universe and into the real kind of world. He is now in a universe with laws and rules and regulations and oaths and promises and trusts.”

Despite DiPascali’s history for avoiding the truth, prosecutor Marc Litt says he believes DiPascali can provide “substantial assistance” in a “very documented, intensive investigation” that includes “literally millions of pages of documents and data and computer equipment.”

Added Litt: “If we didn’t think he could provide substantial assistance, we wouldn’t have entered into (a plea) agreement.”

Before being handcuffed and led away from the courtroom, DiPascali rubbed his temples and held his head in his hands, aware that he was not going home again and probably wouldn’t be for a long time, if at all. Reality was setting in. He was about to enter another new universe — where they demand the truth.