02/17/2009 05:12 am ET Updated May 25, 2011

1992 Ponzi Scheme Investigation Missed Signals About Madoff

Seventeen years ago, federal investigators questioned for the first time whether Bernard L. Madoff was connected to a Ponzi scheme. Their inquiry centered on Frank Avellino, an accountant who had been funneling investors to Mr. Madoff since the 1960

The investigators did not get far. Within days, Mr. Avellino agreed to return to investors the money he and his partner had raised and to pay a small fine to the Securities and Exchange Commission. The inquiry petered out, and Mr. Avellino -- represented in the case by Ira Lee Sorkin, the same lawyer who now represents Mr. Madoff -- kept sending money to Mr. Madoff.

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