5 ex-aides of Madoff guilty in fraud case

Prosecutor: They played crucial roles

Annette Bongiorno, center, former longtime secretary for imprisoned financier Bernard Madoff, is led from federal court on Monday, March 24, 2014, in New York. Bongiorno is among five former employees of Madoff convicted of fraud that enriched them and cheated investors out of billions of dollars. (AP Photo/Bebeto Matthews)
Annette Bongiorno, center, former longtime secretary for imprisoned financier Bernard Madoff, is led from federal court on Monday, March 24, 2014, in New York. Bongiorno is among five former employees of Madoff convicted of fraud that enriched them and cheated investors out of billions of dollars. (AP Photo/Bebeto Matthews)

NEW YORK - Five former employees of imprisoned financier Bernard Madoff were convicted Monday on charges stemming from their roles in operating the biggest Ponzi scheme in U.S. history, a $17.5 billion fraud exposed by the 2008 financial crisis.

The three men and two women were convicted of conspiracy to defraud clients, securities fraud, and falsifying the books and records of a broker dealer. Prosecutors obtained convictions on all 31 charges, though only one defendant was charged in some counts.

The defendants failed to convince a federal jury in Manhattan that they were ignorant of the fraud despite being part of the inner circle at Madoff’s New York-based firm.

Hatched in the 1970s, Madoff’s fraud targeted thousands of wealthy investors, Jewish charities, celebrities and retirees. It unraveled in 2008 when the economic crisis led to more withdrawals than Madoff could afford to pay out. In addition to $17.5 billion in principal, it erased about $47 billion in fake profit that customers thought was being held in their accounts.

The verdict, after five months of testimony and four days of deliberations, is a victory for the U.S. government, coming in the only criminal trial brought in the five years since the scam was revealed. Madoff refused to cooperate with prosecutors.

Some clients learned they lost their life savings after Madoff’s confession and arrest Dec. 11, 2008, leading to criticism of regulators who repeatedly overlooked the scam. Madoff, 75, pleaded guilty the next year and is serving 150 years in a North Carolina prison.

Prosecutors began investigating Madoff’s highest-ranking employees soon after his arrest. While the con man claimed to have carried out the fraud alone, several of his former workers later pleaded guilty, including his ex-finance chief, Frank DiPascali, who testified at the trial as the government’s key witness.

The defendants are Annette Bongiorno, who ran the investment advisory unit at the center of the fraud; Joann Crupi, who managed large accounts; Daniel Bonventre, the ex-operations chief of Madoff’s broker-dealer; and computer programmers George Perez and Jerome O’Hara, accused of automating the scam as it grew rapidly in the 1990s.

“As the jury unanimously found, these five defendants played crucial roles in constructing and maintaining the house of cards that was the Madoff investment fraud,” Manhattan U.S. Attorney Preet Bharara said in a statement.

The convictions “demonstrate what we have believed from the earliest stages of the investigation: This largest-ever Ponzi scheme could not have been the work of one person,” Bharara said. “The trial established that the Madoff fraud began at least as far back as the early 1970s, decades before it came to light.”

Some of the defendants lowered their heads as the verdict was read. Crupi clasped her hands while Bongiorno wrote on the verdict sheet, nodding as each count was read.

The maximum potential sentences range from 78 years to 220 years in prison when the charges for each defendant are stacked up. After sentencings were set for the last week of July and U.S. District Judge Laura Taylor Swain rejected requests that the defendants be immediately detained, the defendants emerged from court to hug family members. They declined to comment as they passed reporters.

Testimony began in October with industry experts, accountants, tax employees, federal agents and former clerical staff members who worked at Bernard L.

Madoff Investment Securities LLC’s offices on three floors of a Midtown Manhattan skyscraper. They all gave evidence against the former employees, some of whom worked for Madoff since the 1960s and left extensive paper trails found in storage boxes, filing cabinets and 1980s-era computer systems.

The defendants were accused in an indictment of conspiring to use millions of fake account statements and false trade confirmations to trick customers into believing they owned shares in the world’s biggest companies. Instead, prosecutors said, the victims’ money was used to enrich the firm’s wealthiest clients, give conspirators exorbitant pay and bonuses, and keep the Ponzi scheme afloat.

Madoff’s scam, disguised as an exclusive investment-advisory business, was made popular by its steady returns, even when the economy struggled. The success of Madoff’s broker-dealer business and his extensive ties on Wall Street and in New York politics added to his allure.

The trial made public the greatest detail yet of how Madoff was able to dupe the U.S. Securities and Exchange Commission and other investigators during audits. The defendants banded together during late-night sessions to create hundreds of fake statements showing new trading strategies and create fake reports showing their securities holdings, witnesses said.

The former colleagues got rich off the fraud, benefiting from backdated trades in their personal investment advisory accounts, as well as inflated salaries and bonuses intended to buy their loyalty and silence, prosecutors said. They used the stolen cash to buy mansions, yachts and beach homes and pay for country club memberships and private schools, prosecutors said.

Some of the defendants were also accused of disguising untaxed income as business expenses, using corporate credit cards to payfor tropical cruises, family vacations and expensive wines and meals for years without paying the money back.

The jury rejected claims by the five former aides that Madoff duped them into carrying out his fraud by giving them tasks that prevented them from seeing the big picture. Several of the defendants claimed they thought the trading was taking place in London and that the trades depicted on customer statements were coming out of Madoff’s inventory of securities.

Defense lawyers argued that the five co-workers were kept in the dark about the fraud and were tricked by Madoff’s personality. Crupi’s lawyer, Eric Breslin, compared Madoff in October with “the Great Oz” hiding behind a curtain with his employees seeing him as “almost a god.”

Attorney Gordon Mehler said his client, O’Hara, was“used, abused, manipulated, lied to, snookered and bamboozled” by two of the greatest criminal masterminds in history.

Bongiorno’s attorney, Roland Ripoelle, said Bongiorno “saw $50 million of what she thought was her own money but was really Bernie Madoff’s monopoly money go up in smoke. … Ms. Bongiorno relied on Mr. Madoff, and she was fooled by him.”

Breslin said Crupi was a victim of “the lies that they told her to her face, year after year.”

The government’s case was bolstered by testimony from five former Madoff employees who pleaded guilty and agreed to cooperate, including the former finance chief, DiPascali, who spent 17 days on the witness stand.

Information for this article was contributed by Larry Neumeister of The Associated Press.

Front Section, Pages 1 on 03/25/2014

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