A former employee at convicted financier Bernard Madoff's firm admitted to adding fake employees to the payroll and creating fraudulent accounts, part of a plea deal on Monday over bank fraud and other charges.

The former payroll manager, Eric Lipkin, told U.S. District Judge Laura Taylor Swain in New York that in 22 years of employment in the investment advisory arm of Bernard L. Madoff Investment Securities LLC, he conspired with others to falsify records and deceive authorities.

Madoff, 73, and eight others have been criminally charged with running a multibillion-dollar Ponzi scheme that collapsed in December 2008, shaking up regulators who missed years of warning signs of the fraud.

Madoff is serving a 150-year prison sentence after pleading guilty in March 2009 for what is considered the biggest investment fraud in history. A Ponzi scheme is one in which early investors are paid with the money of new clients.

Lipkin told the judge that from at least 1986, I created false payroll records.

As one example of putting no show employees on the payroll, he said that in 2008 he was instructed by operations manager Daniel Bonventre to put Bonventre's son on the payroll. The son and others who did not work at the firm received salaries and benefits.

Bonventre and other former employees have also been charged and are free on bail pending trial, including Annette Bongiorno, Joann Crupi, Jerome O'Hara and George Perez.

Under Lipkin's plea agreement, he will cooperate with the office of the Manhattan U.S. Attorney and the FBI in its investigation of the Madoff fraud.

Lipkin, 37, also said in Manhattan federal court that he created false reports to be sent to the Depository Trust Co (now called the Depository Trust & Clearing Corp) clearing house for buyers and sellers of securities.

I knew these documents were false because they were created by me, said Lipkin, who was released on bail of $2.5 million after the plea proceeding.

Lipkin said the false reports were given to auditors to mislead them.

The U.S. Securities and Exchange Commission said it filed civil charges against Lipkin, who had consented to a proposed partial judgment, which must be approved by a court. It said Lipkin received annual bonuses from Bernard Madoff and received $720,000 from him to buy a house, an amount he never repaid.

Lipkin pled guilty to criminal charges of conspiracy and falsifying books and records to commit bank fraud. The most serious charge of bank fraud carries a maximum possible 30-year prison sentence.

The case is USA v O'Hara et al, U.S. District Court for the Southern District of New York, No. 10-228.

(Reporting by Grant McCool, editing by Gerald E. McCormick, Gary Hill)