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US authorities Thursday arrested a former accountant for disgraced Bernard Madoff's Ponzi scheme on criminal charges of falsifying records and conspiring to bilk investors.
Paul Konigsberg, a longtime accountant for Madoff Securities, pleaded not guilty on five counts in a federal court in downtown New York City.
Konigsberg was released on bail, according to a person familiar with the case.
The Justice Department indictment depicts Konigsberg as a critical supporter and enabler of Madoff's Ponzi scheme.
"In order to keep his scheme hidden for so long, Madoff needed the assistance of certain willing outsiders that could be trusted to handle otherwise suspicious activity," the indictment said.
Konigsberg "participated in, and sometimes directed, the creation of false books and records," the indictment said.
Konigsberg "was well aware" of the falseness of many trades "and sometimes had input into their composition," the indictment said.
In parallel, the Securities and Exchange Commission announced civil charges against Konigsberg.
"Konigsberg played a vital role in Madoff's deception of his oldest and wealthiest clients over many years," Andrew Calamari, director of the SEC's New York Regional Office, said in a statement.
"Konigsberg's acquiescence, cooperation, and collaboration were essential to the Madoff fraud."
The Madoff investment scam declared strong returns for more than three decades, but in reality was a Ponzi scheme enabled by a stream of fake investments and false documents.
At the time of its collapse in 2008, Madoff Securities boasted it had about $65 billion in client assets, whereas in fact it had only about $300 million.
The savings of many investors, foundations and families was wiped out in the collapse.
Madoff had assured certain clients of a specific rate of return, which was demonstrated by backdating some transactions.
In several cases, Konigsberg allegedly worked with or directed other Madoff employees to backdate transactions.
Some of the backdating was done for tax purposes, the indictment said. In some cases, Konigsberg also worked as the accountant of the investor.
The indictment includes charges of falsifying records of a broker-dealer and falsifying records of an investment adviser.
The grand jury's charges cover the period of the early 1990s through December 11, 2008, when the scheme was exposed and Madoff arrested.
Madoff, 75, a former chairman of the Nasdaq stock exchange, is currently serving a 150-year sentence in North Carolina after pleading guilty in 2009.
A lawyer representing Konigsberg, Reed Brodsky, said his 77-year-old client "is an innocent victim of Bernie Madoff" and would fight the charges.
"In their witch hunt arising out of the largest Ponzi scheme in history, the government conveniently ignores that the sociopath Bernie Madoff deceived everyone around him -- from the most sophisticated investors to the SEC itself," Brodsky wrote in an email to AFP.
The indictment seeks forfeiture of assets gained through the fraud. Konigsberg could also serve up to 40 years if convicted, a spokeswoman for the US Attorneys' office said.
The SEC's complaint seeks disgorgement of ill-gotten gains, financial penalties, and permanent injunctions against Konigsberg. The regulator said its investigation was ongoing.