Nov. 5 (Bloomberg) -- Two computer programmers accused of aiding Bernard Madoff’s $17 billion Ponzi scheme, and extorting the con man in the process, were seen by his secretary looking “smug” as they left a closed-door meeting with Madoff two years before his 2008 arrest, prosecutors say.
Eleanor Squillari, a receptionist and personal secretary for Madoff from 1984 until his investment firm closed, found the meeting with George Perez and Jerome O’Hara noteworthy because Madoff “had a very low level of technical sophistication” and almost always left his door open during meetings, the U.S. said in a Nov. 1 filing in federal court in Manhattan.
Perez and O’Hara are on trial in New York, charged with aiding Madoff’s swindle. Their lawyers asked U.S District Judge Laura Taylor Swain, who is overseeing the trial, to bar Squillari from describing the men’s demeanor when she testifies, claiming it’s unfair speculation. Prosecutors asked Swain to deny the request, arguing Squillari’s observations are relevant.
The U.S. alleges that O’Hara and Perez in 2006 realized their programming codes -- which allowed the firm’s computers to “spit out fake paperwork” -- were essential to keeping the fraud going and demanded more money from Madoff to keep quiet. He gave the men $100,000 each and let them name their own annual bonuses and salary increases, prosecutors say.
Perez’s lawyer, Larry Krantz, said in a Nov. 2 letter to Swain that it would have been “impossible” for Squillari to conclude the men felt smug “simply by observing the defendants walk silently past her following the meeting.”
O’Hara and Perez, who joined Madoff’s firm in the 1990s, acknowledge that a “dramatic meeting” with Madoff took place in 2006, according to their lawyers’ Oct. 17 opening statements to the jury. The men claim that they arranged the encounter to challenge Madoff’s request for computer code they believed might be abused, and that they were “extremely nervous” about confronting him and being fired.
“That a witness observed them immediately after the meeting appearing anything but nervous, but rather appearing smug as they exited Madoff’s office, goes directly to one of the central issues in the case,” Assistant U.S. Attorney Matthew Schwartz said in the letter to the judge. “There is thus no question that this testimony is relevant.”
Krantz said the government’s proposed testimony shows the “lengths it is willing to go to convict the defendants based on sheer speculation and innuendo.”
The programmers’ co-defendants in the case, all accused of helping make fake documents for decades, are Annette Bongiorno, who worked for Madoff for 40 years and ran the investment advisory business; Joann Crupi, who managed large accounts; and Daniel Bonventre, who oversaw the broker-dealer and proprietary trading operations where real trading took place.
The ex-employees have all pleaded not guilty and argue they didn’t know about the fraud until it unraveled with Madoff’s arrest on Dec. 11, 2008.
David Kugel, a trader at Madoff’s brokerage for 38 years who pleaded guilty in 2011 to securities fraud, continued his testimony yesterday, telling the jury that Madoff and Crupi helped him commit mortgage fraud in 2002 by giving him faked account documents to use in a loan application.
Kugel, who hasn’t been sentenced, is the first witness to testify to admit involvement in the fraud. Defense lawyers have said Kugel and others who pleaded guilty will lie to the jury to implicate others and get less time behind bars.
Under cross-examination yesterday by Bongiorno’s lawyer, Roland Riopelle, Kugel agreed that he exposed his wife to federal tax charges by letting her sign joint tax filings over the years without warning her the papers contained false information about his inflated Madoff investment account.
Riopelle asked Kugel if he had put his wife at risk “for a few pieces of silver.”
After a delay of several seconds, Kugel said, “Yes.”
Kugel also agreed he had allowed his son Craig to join Madoff’s company around 2003 without warning him the firm engaged in fraud. His son, who worked in Madoff’s human resources department, pleaded guilty last year to a tax scheme that paid salaries and benefits to people who weren’t employees, including Bonventre’s son.
Kugel also agreed under questioning that he allowed his son and daughter, Heather, to open investment advisory accounts with Madoff, without warning them of the fraud.
“He had an account full of trades you knew to be fake?” Riopelle asked.
“Yes,” Kugel said.
Asked by Riopelle if he considers himself to be a good father, Kugel said yes.
Kugel’s testimony is scheduled to continue today for most of the day. The trial is in its third week of testimony. Swain has said it might last five months.
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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