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Court filing details how Madoff scheme worked

GamingIBMBernard Madoff

Bernard Madoff used a random-number generator, old stationery, a "phantom" trading platform and an aging computer to hide for decades the world's biggest Ponzi , U.S. regulators said in claims against the person they called his "key lieutenant," Frank DiPascali.

An uncontested lawsuit filed Tuesday against DiPascali, 52, includes the Securities and Exchange Commission's most detailed account yet of how Madoff, 71, concealed a fraud leading to more than $64 billion in investor losses.

Under DiPascali's supervision, Madoff's programmers organized accounts on a single IBM AS/400 computer, which would allocate fictitious trades to individual accounts, the SEC said. DiPascali had his staff check trades to make sure the reported prices weren't too high or low for the day.

To keep regulators at bay, he helped create a random-number generator to make it look like trades of various sizes and prices were being carried out in different time zones.

In the event of a surprise visit, one employee was supposed to enter fake trades on a computer while another hid in a nearby office playing the role of a counterparty from a linked computer.

Madoff also kept old stationery and letterhead for his firm in case he needed to fabricate records for prior years, the SEC said. "It was all fake. It was all fictitious," DiPascali said Tuesday in federal court. "I knew everything I did was wrong, and it was criminal, and I did it knowingly and willfully."

Copyright © 2014, The Baltimore Sun
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