An ex-employee of Bernard Madoff on trial for allegedly aiding his $17 billion fraud oversaw backdating of trades for account statements that sometimes featured “cut and paste” data, a former assistant told a jury.
Annette Bongiorno, who worked for Madoff for 40 years, would request trade dates and prices as much as a year old be used on account statements to reach pre-determined profit goals for customers, and cut out trade data to be taped onto some statements, Winnie Jackson, the defendant’s former assistant, testified yesterday in federal court in Manhattan.
Bongiorno gave “very little explanation” to Jackson when asked how the company’s trading strategy worked, and Jackson, who started working for Madoff in the 1980s, didn’t realize anything she was doing was fraudulent while she was following orders, she said.
Jackson said she never saw Bongiorno “cut and paste” trades onto account statements, though she said her former boss oversaw the creation of the statements and the practice wasn’t uncommon or unusual.
Prosecutors showed Jackson and the jury examples of such statements, which included hand-written notes that Jackson identified as Bongiorno’s. The example included trades for Microsoft Corp. in 2004 that had been taped onto the paper. No trades actually took place at the investment advisory business.
Bongiorno, who helped run the unit at the heart of the Ponzi scheme, has pleaded not guilty in the case. She joined Madoff’s company straight out of high school when she was 19 years old, and argues Madoff tricked her into thinking she was part of a legitimate investment business.
Bongiorno and four other former Madoff employees are accused of conspiring for decades to hide Madoff’s fraud by creating millions of fake documents to trick customers and regulators. Prosecutors are calling former workers, including some who have pleaded guilty, to testify against them.
Also on trial are Daniel Bonventre, who oversaw Madoff’s broker-dealer and proprietary trading units; computer programmers George Perez and Jerome O’Hara and Joann Crupi, who managed large accounts and worked closely with Bongiorno and Jackson. They have also pleaded not guilty. All five deny any wrongdoing and say Madoff duped them for years.
Bruce Dubinsky, a forensic accountant who in 2011 probed Madoff’s fraud by examining millions of corporate documents and deconstructing computer code, testified yesterday that Madoff’s firm was insolvent by December 2002. Dubinsky’s investigation included searching thousands of boxes in Madoff’s off-site warehouse, analyzing BlackBerry and e-mail data and hiring two former computer programmers who worked at International Business Machines Corp. decades ago to help retrieve data from Madoff’s outdated storage devices and computer equipment.
Dubinsky, a managing director at Duff & Phelps LLC, testified that he will explain to the jury how Madoff’s company became “the biggest Ponzi scheme in the history of the world.” He started by explaining what a stock is and how a broker-dealer works. His testimony will continue Oct. 28.
Jackson testified Oct. 23 that her job included collecting historical trade data and prices for specific stocks over past weeks or months, and sometimes as long as a year, so that customer account statements could include backdated trades to reach specific profit requests sought by Bongiorno.
Jackson, who started working for Madoff in the 1980s, told the jury she also helped execute withdrawal requests for Bongiorno directly from her account, usually amounting to $2,500 in cash once or twice a month that she would personally deliver to her then-boss.
Jackson was the fifth witness to testify in the first criminal trial stemming from the world’s biggest Ponzi scheme, which deprived investors of $17 billion in principal and billions more in fake profit. U.S. District Judge Laura Taylor Swain said the trial may last as long as five months.
Prosecutors yesterday showed Jackson a printout of a Madoff customer document for the Picower Foundation that included a handwritten note saying “Fake Sales” at the top of one page and several handwritten numbers interspersed with printed ones. Jackson identified the writing as belonging to Bongiorno.
Jeffry Picower, who died in 2009, had been an investor with Madoff since the 1970s; his estate agreed to a $7.2 billion settlement with the U.S. and the trustee liquidating the Madoff firm.
Under cross-examination, Bongiorno’s lawyer, Roland Riopelle, showed additional pages from the same document, including another handwritten note on the last page that said to “cancel” the trades because they were being used to check for percentages.
Riopelle asked Jackson if, in her experience, the document appeared to be “nefarious,” prompting the U.S. to object over a witness being asked to opine about a document. Swain permitted the question, to which Jackson answered, “No.”
After the jury left, Riopelle told the judge the “Fake Sales” evidence was “particularly toxic” without Jackson’s interpretation.
Riopelle asked Jackson to identify a sample of about a dozen notes that were handwritten by Bongiorno on printed documents about customers’ purported trades. Jackson agreed with Riopelle that the notes showed her former boss regularly sought Madoff’s direct approval or instruction before taking action on trading activity that later turned out to be fake.
The notes said, “Need to check with Bernie” and “Don’t do yet. Bernie will say when to do” and “Don’t do anything until I talk to BLM,” using his initials, according to documents shown to Jackson and the jury.
Defense lawyers argued during opening statements that Madoff trained his employees beginning when they were young and inexperienced so they would help carry out his fraud without knowledge and without training in the securities industry.
Earlier, witnesses testified that Bonventre wrote company checks to himself as a “vendor” for tens of thousands of dollars about once a year, and that Crupi used her corporate credit card to pay for family trips to Walt Disney World.
Madoff, 75, admitted to federal agents in December 2008 that his company was a sham. He pleaded guilty to 11 counts and was sentenced to 150 years in prison. He claimed all along that he worked alone and refused to implicate anyone else.
The case is U.S. v. O’Hara, 10-cr-00228, U.S. District Court, Southern District of New York (Manhattan).
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