London office of Bernard L. Madoff played a large part in his sweeping Ponzi scheme

Serious Fraud Office has been investigating Mr. Madoff’s small London operation since late last year, and investigators now say that Ruth Madoff was paid $2 million in late November by the British office just before her husband’s arrest. British investigators would provide no additional detail on the payment.British regulators said on Friday that the London office of Bernard L. Madoff played a large part in his sweeping Ponzi scheme, in one of the first signs that Mr. Madoff might not have acted alone.The focus of Britain’s investigation is whether anyone in Bernard Madoff’s London office knowingly defrauded investors. On the surface, the London office operated at a far remove in size and business scope from the New York headquarters of Mr. Madoff’s trading and fund management operations. But according to British officials, the company’s fairly small public accounts disguised far larger surreptitious flows — including $1 billion that was sent to the British office and back again to New York headquarters last year.A senior investigator in the case, Glyn Powell, described the London office as “a cog in a giant washing machine,” according to David Jones, a spokesman for the fraud office. Still, Mr. Jones said that regulators had not yet determined whether any individual in the London business knowingly participated in Mr. Madoff’s fraud.
“That is the purpose of the investigation,” he said. “To get to the bottom of that question.” He added that if criminal charges were to be brought against anyone, it would happen before the end of the year.When Mr. Madoff pleaded guilty on March 12 in New York, he acknowledged that he had made frequent and sizable transfers of money between the New York bank account he maintained for his fraudulent advisory business and his London affiliate. The purpose of these transfers, he said, was “to make it appear as though there were actually securities transactions executed on behalf of my investment advisory clients.”Those transfers, which involved more than $250 million, were the basis for the three counts of money laundering that were included in the 11 felony charges against him, according to federal prosecutors. While some of the money was involved in round trips back to New York, they said that some of it was also used to buy and maintain “property and services for the personal use and benefit” of Mr. Madoff, his family and his associates.Mr. Madoff insisted in court, however, that the London business “was principally engaged in proprietary trading and was a legitimate, honestly run and operated business.” Situated in the exclusive London neighborhood of Mayfair, Madoff Securities International was a separate legal entity with a staff of 28, including 14 traders who had a narrow responsibility to trade British and European equities. According to public filings, the unit had £100 million in assets and a £2 million profit in 2007.
Mr. Madoff and his wife generally visited the office not more than twice a year, and while he took a close interest in the unit, overseeing its décor and having cameras send images to his computer in New York, he never used it as a central business hub, according to former employees.Still, the company’s ownership structure gave a hint to the importance that Mr. Madoff attached to the business. Outside of Paul J. Konigsberg, a close family friend and accountant for the Madoff’s charitable fund, the other shareholders were all family members — including Mr. Madoff’s wife, his brother Peter and his sons Mark and Andrew. Mr. Jones said that the fraud office investigation was focused on paid executives at Madoff Securities International.Investigators in the United States have said that Mr. Madoff transferred funds back and forth from the New York and London for more than five years, yet it remains unclear to what extent executives in London were complicit in his fraud when they made these transfers.While overseen by Stephen Raven, a well-known London banker, the London business was also staffed by a core group of executives who had worked for Mr. Madoff for many years and were loyal to him. Mr. Raven and other employees in the London office have said that Mr. Madoff’s scheme came as a shock to them.
Mrs. Madoff’s lawyers have said that she was not aware of her husband’s fraud. And, as a shareholder of the London office, she and other investors in the London business were paid an annual dividend, said a person involved in the case. It is not clear whether the $2 million payment constituted such a payment or not.
A lawyer for Mrs. Madoff declined to comment.