When he finally pleaded guilty to a massive Ponzi scheme on March 12, 2009, Bernard Madoff told the court that for about two decades, he did actually invest his client's money in securities. He stopped doing so and embarked on his Ponzi scheme, he said, during the recession of the early to mid-'90s. He said it was only then that he began depositing funds from clients that were supposed to be for stock investments into a bank account, and used that money to pay redemptions requested by other clients.
It now appears that even this version of the truth from Madoff was false. On Monday, a former Madoff employee pleaded guilty to charges of conspiracy, securities fraud, bank fraud, falsifying business records and falsifying the books of an investment adviser. The AP reports that Kugel told the court that at Madoff's request, he and other Madoff employees began creating faking trades in the early 1970s that were included on statements sent to investors. Kugel said that the fake trades on the statements were designed to give "the appearance of profitable trades when, in fact, no trading had occurred."
Specifically, Kugel said,
he scanned old newspaper stock tables to collect data such as the trading range for a stock for a given day and the volume of shares that were traded so that fake trades could be listed on statements based on historical stock prices. The volume of shares was necessary to know so that fake trades involving millions of dollars on behalf of Madoff investors would not add up to more than the volume of shares traded in any stock in a day, he said.
If Kugel is to be believed, then even the story Madoff offered at his 2009 guilty plea was fictional, just like everything else.