Bernard Madoff’s ex-finance chief lied every day for 30 years and didn’t tell the truth even when pleading guilty to aiding the con man’s fraud, a defense lawyer said in the trial of five of the witness’s former colleagues.
The executive, Frank DiPascali, who admitted to aiding Madoff’s $17 billion Ponzi scheme, testified Dec. 2 in Manhattan federal court that he realized there was fake trading in the firm’s investment advisory business in the late 1970s, not long after he started at the company when he was 19.
Under questioning yesterday by Larry Krantz, a defense lawyer in the case, DiPascali agreed that claim differs from what he told a judge at his August 2009 plea hearing, when he said the fraud became apparent in the late 1980s or early 1990s.
“Is it fair to say you became very good at conning people?” Krantz asked DiPascali yesterday, referring to the lies he told customers for almost three decades.
“I never took a survey,” he responded.
DiPascali is the highest-ranking former Madoff executive to testify in the first criminal trial stemming from the scheme, which was exposed after Madoff’s arrest on Dec. 11, 2008. Five of the con man’s former employees are accused of aiding his fraud for decades and getting rich in the process.
Under questioning by prosecutors on Dec. 2, DiPascali said he knew about the fake trading “for as long as I could remember” and that it had been “obvious” even during his early days at the firm, when he didn’t have experience in the industry.
The former executive’s remarks in court four years ago, when he admitted his role, implied he thought the trading was real for more than a decade after he was hired.
The defendants in the case are Annette Bongiorno, who ran the investment advisory business; Joann Crupi, who managed large accounts; Daniel Bonventre, Madoff’s ex-operations chief; and computer programmers Jerome O’Hara and George Perez, who allegedly wrote code to print out millions of fake account statements and trade confirmations.
Defense lawyers will seek to discredit DiPascali by shedding light on his history of gauging his deceit “according to his targeted audience,” said W. James Payne, a criminal defense lawyer in Shallotte, North Carolina, who isn’t involved in the case.
“The defense will go to great lengths and detail to show what an accomplished liar DiPascali is,” Payne said in an interview. “Getting him to admit that he has told different versions of the truth about this case at different times sets him up to be crossed on how good he is at lying.”
At his 2009 plea hearing, DiPascali told U.S. District Judge Richard Sullivan that he’d participated in the fraud “knowingly and willfully.”
“From at least the early 1990s through December of 2008 there was one simple fact that Bernie Madoff knew, that I knew, and that other people knew but that we never told the clients,” DiPascali said, according to a transcript of the 2009 hearing. “No purchases or sales of securities were actually taking place in their accounts.”
“When did you realize that?” Sullivan asked, according to the transcript.
“In the late ’80s or early ’90s,” DiPascali responded.
DiPascali explained the discrepancy by saying yesterday that his view of how the scheme worked had evolved in the last four years, though he didn’t say how.
Krantz gave DiPascali numerous examples of the former executive lying, including in answers given under oath and in statements to federal investigators.
In his testimony under direct examination by prosecutors, DiPascali gave details of each defendant’s involvement in the fraud, saying they all knew the trading was fake and conspired to hide it from customers and regulators.
Defense lawyers told the jury in their opening statements in October that the government’s witnesses will lie and implicate others in their fraud in a bid to appear helpful and get less time behind bars when they’re sentenced. DiPascali, who faces as long as 125 years in prison, told the jury he’s hoping for a “substantial” reduction in his sentence.
Under questioning by Krantz yesterday, DiPascali agreed he had all the qualities of a con man, though he declined to describe himself as one. DiPascali also acknowledged he had become skilled at lying over three decades, including by appearing calm and relaxed when perjuring himself.
Krantz, who is Perez’s lawyer, showed the jury a transcript of DiPascali’s interview under oath with U.S. Securities and Exchange Commission lawyers in 2006, during an audit that failed to uncover the world’s biggest Ponzi scheme. Krantz had DiPascali read multiple answers from the transcript and then confirm to the jury that the his detailed responses at the time were part of a sophisticated ruse.
Krantz asked the former executive if he considers himself to be an honest man.
“As I sit here today, I undoubtedly consider myself to be an honest man,” DiPascali said. Asked if he’d undergone a “moral transformation” since the fraud ended, he said he had.
Krantz asked DiPascali today about the details of his cooperation agreement with prosecutors, saying the witness was under pressure to name conspirators in order to get a lighter sentence and avoid spending the rest of his life in jail.
“You knew early on that it wouldn’t be enough to get a cooperation agreement if you simply admitted your own personal guilt, true?” Krantz asked.
“I believed that to be true,” DiPascali said.
‘Cast Your Net’
“Isn’t it true that you cast your net against other people you could possibly testify against as wide as you could?” Krantz asked.
DiPascali said that wasn’t true.
Krantz also questioned DiPascali about his initial meetings with the government, called proffer sessions, saying he lied about Perez’s and O’Hara’s level of involvement in a plan to trick the SEC during the 2006 audit.
“Isn’t it a fact that during those initial proffer sessions you falsely accused Mr. Perez and Mr. O’Hara? Isn’t that true?”
“No, it’s not,” DiPascali said.
U.S. District Judge Laura Taylor Swain, who is overseeing the trial, asked Krantz to lower his voice when he began speaking louder into the podium microphone during the questioning.
Lawyers for the other defendants will have a chance to cross-examine DiPascali before the government calls its next witness.
During the lunch break today, when the jurors, defendants and lawyers had left, Swain discussed the trial and her career with a group of about two dozen girls visiting from the Notre Dame Academy in Staten Island, New York.
Swain said she was glad the students were able to witness a “very important case.” She said the length of DiPascali’s testimony, which is in its second week and will continue next week, “is relatively unusual in the world of criminal trials.” She described the jury as “very attentive.”
Madoff, 75, is serving a 150-year prison sentence in North Carolina.
The case is U.S. v. O’Hara, 10-cr-00228, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Erik Larson in federal court in Manhattan at firstname.lastname@example.org