Bernard Madoff’s right-hand woman for four decades, who’s on trial for allegedly aiding his $17 billion fraud, overheard the same lies for years about her boss’s wealth that tricked everyone else, a jury was told.
Annette Bongiorno, who ran the investment advisory unit at the center of the Ponzi scheme, was often nearby when Madoff talked about overseas investments and ownership in French banks, Madoff’s ex-finance chief testified today in Manhattan federal court. Madoff’s claims led some workers to believe he had invested customer money, said Frank DiPascali, who pleaded guilty for his role in the fraud.
“Am I correct that until the very end it was your personal belief that Mr. Madoff had sufficient personal wealth to pay back investors?” Bongiorno’s lawyer, Roland Riopelle, asked DiPascali. “Yes,” he said.
Bongiorno, who joined Madoff’s firm straight out of high school in 1968, claims Madoff tricked her into aiding the fraud by lying about his business and keeping her in the dark about the securities industry. Four former colleagues who are on trial with her have made similar claims in their defense.
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. The five former employees are accused of aiding his fraud for decades and getting rich in the process.
“By getting DiPascali to admit that he was duped by Madoff, it makes it easier to argue that Bongiorno believed Madoff as well,” said Richard Scheff, a former federal prosecutor who’s chairman of Philadelphia-based law firm Montgomery, McCracken, Walker & Rhoads LLP. “The goal is to raise a reasonable doubt in the jury’s mind that someone who is duped can be complicit in a complex, years-long fraud.”
Under cross-examination today by Riopelle, DiPascali also said Bongiorno backdated fake trades and altered account statements to trick regulators after receiving handwritten instructions directly from him. DiPascali also agreed that Madoff regularly gave him tasks without giving him important relevant information.
“Isn’t it true there were times Mr. Madoff gave you an order and you realize now, in retrospect, that he did not always tell you what he was doing?” Riopelle asked DiPascali.
“That is correct,” he said.
Madoff didn’t have overseas investments and used money from new customers to finance withdrawals from earlier ones. No trading took place. The scheme fell apart when hedge funds and other big customers sought to take out more money than Madoff had left, resulting in what DiPascali called a tearful confession in Madoff’s office a few weeks before his arrest.
Today’s questioning hasn’t addressed DiPascali’s claim that Bongiorno knowingly tricked customers about what was being done with their money, even if she was taking orders from her superiors and believed Madoff was rich.
“It is difficult to determine during a trial what piece of evidence, or combination of evidence, will have the tendency to raise a reasonable doubt,” said Scheff, who isn’t involved in the case. “The goal is to get enough arrows in your quiver to make an argument at closing.”
The cross-examination today covered numerous documents that were shown to the jury, including many that were discussed in detail during DiPascali’s direct examination by prosecutors. At several points during the day, at least one juror was seen closing her eyes for extended periods and U.S. District Judge Laura Taylor Swain, who is overseeing the case, invited everyone in the courtroom to stand up and stretch.
DiPascali, who pleaded guilty in 2009 and faces as long as 125 years in prison, said that even though he knew there was no real trading in the investment advisory business, and that all their customer statements and trade confirmations were fake, he believed Madoff had enough money to pay everyone back. He said Madoff left investment documents in his office like “props” to trick his top aides into thinking he was wealthy.
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. Bongiorno worked at the firm when he started there.
The other defendants in the case are Joann Crupi, who worked with Bongiorno and 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.
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 said in opening statements in October that the government’s witnesses would lie and implicate others in their fraud in a bid to appear helpful and get less time behind bars when they’re sentenced. DiPascali told the jury he’s hoping for a “substantial” reduction in his sentence.
Swain has said the trial, which started in October, may last as long as five months. She scheduled a two-week break during the December holidays.
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 Manhattan federal court at firstname.lastname@example.org