Ruth Madoff given $3.5m before husband's arrest

Wall St swindler Bernard Madoff's wife, Ruth, received US$2 million ($3.53 million) in payments from the family's London business less than a month before his arrest, further drawing her finances into criminal investigations on both sides of the Atlantic.

The Serious Fraud Office (SFO) in the UK yesterday characterised Madoff's London operation as "a cog in the giant washing machine", as it set out how the former Nasdaq chairman ran his US$65 billion Ponzi scheme.

The SFO and the FBI in New York are each investigating who else might have known about Madoff's illegal activities, which stretch back at least to the early 1990s. Madoff claims he acted alone, and his wife has not been charged with any wrongdoing.

The US$2 million transfer to Ruth Madoff personally in late November was revealed by the SFO's Madoff case manager, Glyn Powell.

At that time, her husband had been seeking money to shore up his scheme.

For decades, while pretending to be investing in the stock market, Madoff had been paying clients with the fresh money coming in from new investors. The scheme began collapsing late last year as the new money dried up.

It emerged last month that Ruth Madoff also withdrew US$5.5 million from a brokerage account in the US at about the same time, and then took out another US$10 million on 10 December - the very day her husband made his confession.

Prosecutors in the US are seeking to seize property, including the couple's Manhattan penthouse and three other homes, which is held largely in Ruth Madoff's name. Madoff, 70, was remanded in custody after pleading guilty to 11 charges earlier this month. Three counts of money laundering refer to the transatlantic transfers made between Madoff Investment Securities in New York and Madoff Securities International (MSI) in London, which investigators
believe were made to create the illusion of genuine investment activity and to boost profits at the share-trading arm of his business.

"MSI UK played a significant role in the operation of Bernard Madoff's investment fraud," Powell said yesterday. "It was a cog in the giant washing machine."

MSI claimed to be a legitimate business set up just to invest the Madoffs' own money. Its offices were in the Mayfair area of London, and its traders were monitored by CCTV by Madoff from New York.

The investigation by the SFO is examining whether anyone in the London office knew, or should have known, that the Madoff enterprise was a fraud. Its officers say that there are still many unanswered questions but that their work is making fast progress and they expect that any charges will be filed before the end of this year.

The only other person to have been charged in connection with Madoff's fraud is his auditor, David Friehling, who was freed on bail in New York earlier this month. Friehling was paid up to US$14,000 a month by Madoff, but only "pretended" to audit his business, according to legal filings.

Madoff agreed to a freeze on her assets when her husband was bailed. She has hired a lawyer to represent her, since she is a party to numerous lawsuits from aggrieved investors.

Madoff's fraud is the largest in Wall St's history, hitting 4800 clients, including charities and celebrities. And it has humiliated the Securities and Exchange Commission, which investigated fraud allegations against Madoff yet failed to uncover the fraud.

- INDEPENDENT