U.S. Department of Justice

United States Attorney
Southern District of New York

Tuesday, June 5, 2012

Former Employee of Bernard L. Madoff Investment Securities LLC Pleads Guilty to Tax Fraud and Making False Statements

Craig Kugel, a former employee of Bernard L. Madoff Investment Securities LLC (BLMIS), pleaded guilty today to a five-count superseding information charging him with one count of conspiracy, as well as substantive counts of making false statements in relation to documents required by the Employee Retirement Income Security Act (ERISA), and subscribing to false U.S. individual income tax returns, announced Preet Bharara, the U.S. Attorney for the Southern District of New York; Janice K. Fedarcyk, the Assistant Director-in-Charge of the New York Field Office of the FBI; Victor W. Lessoff, the Acting Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation Division ; Robert L. Panella Special Agent-in-Charge for the New York Regional Office of the U.S. Department of Labor’s Office of Inspector General, Office of Labor Racketeering and Fraud Investigations; and Jonathan Kay, the Director for the New York Regional Office of the U.S. Department of Labor, Employee Benefits Security Administration.   Kugel pleaded guilty in federal court in New York before U.S. District Judge Laura Taylor Swain.   In addition to his guilty plea, Kugel has also agreed to cooperate with the government in its ongoing investigation of the fraud that occurred at BLMIS.

 

According to the superseding information, Kugel was employed at BLMIS and Primex Trading N.A. LLC, its affiliated entity, from 2001 through December 11, 2008.   Kugel’s responsibilities included budget forecasting for BLMIS’s Market Making and Proprietary Trading operations, overseeing the company’s health care plan and reviewing and maintaining its internal employee records and related documents.  

 

Kugel was aware that there were individuals on BLMIS’s payroll who did not work for the firm but who nevertheless received salaries and benefits, and he created and maintained false BLMIS employee records on their behalf.   Specifically, Kugel was responsible for submitting an Annual Return (Form 5500) concerning BLMIS’s employee benefit plan to the U.S. Department of Labor (DOL).   Form 5500 required Kugel to identify accurately the number of employees at the firm, but instead, he included a number of employees who in fact did not work there.

 

During his tenure at BLMIS, Kugel also charged more than $200,000 in personal expenses, including luxury clothes, jewelry, and vacations for himself and his family, to a corporate American Express card, but did not report it as income on his tax returns.  

 

Kugel, 38, faces a statutory maximum sentence of 19 years in prison.   Kugel is also subject to mandatory restitution and criminal forfeiture, and faces criminal fines up to twice the gross gain or loss derived from the offense.   Pursuant to the cooperation agreement entered into with the government, Kugel will forfeit at least $2.3 million.   This forfeiture will be used to compensate victims of the fraud, consistent with applicable Department of Justice regulations.

 

Judge Swain set a sentencing date for Kugel of Dec. 13, 2012.

 

Mr. Bharara praised the investigative work of the FBI, the IRS and the DOL.   He also thanked the Justice Department’s Labor-Management Racketeering Unit of the Organized Crime and Gang Section of the Criminal Division and the U.S. Securities and Exchange Commission.

           

The case is being handled by the office’s Securities and Commodities Fraud Task Force.   Assistant U.S. Attorneys Lisa A. Baroni, Julian J. Moore, Arlo Devlin-Brown, Barbara A. Ward, and Matthew L. Schwartz are in charge of the prosecution.

 

The investigation is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force (FFETF). President Obama established the interagency FFETF to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes.

 

For more information on the task force, visit www.StopFraud.gov .

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Financial Fraud Enforcement Task Force

 Leadership
Eric Holder, Attorney General, Chair
 
 Contact
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What is Financial Fraud?
What is Financial Fraud?

Financial Fraud encompasses a wide range of illegal behavior - from mortgage scams to Ponzi schemes, credit card theft to tax fraud. Everyone is affected by financial fraud.