Nov. 21 (Bloomberg) -- Bernard L. Madoff’s former controller, who helped him siphon customer money for years to hide trading losses, told a jury she was in a state of denial when she begged prosecutors not to charge her two years ago.
Enrica Cotellessa-Pitz, who in 2011 pleaded guilty to aiding Madoff’s $17 billion fraud, initially lied to the U.S. Attorney’s Office in a letter seeking mercy and proclaiming she’d done nothing wrong, she testified yesterday in the trial of five former colleagues in Manhattan federal court.
“I was basically in denial,” Cotellessa-Pitz, who faces as long as 50 years in prison, told a jury. “I was emotionally in a place that I can’t really comprehend at this time. It was a very dark period for me.”
Cotellessa-Pitz is one of about half a dozen former Madoff employees who pleaded guilty in the case and plan to testify against those who haven’t. It’s the first criminal trial stemming from the scheme, which prosecutors say started in the early 1970s and imploded at the peak of the financial crisis.
Cotellessa-Pitz, who joined Madoff’s firm in 1978 and became controller a decade before it collapsed, pleaded guilty in December 2011 to falsifying regulatory records and committing broker-dealer fraud, though she said she wasn’t aware of the underlying Ponzi scheme.
Before she signed a cooperation agreement, which doesn’t guarantee a reduction in her sentence, Cotellessa-Pitz wrote prosecutors urging them not to charge her. She had heard from her lawyer that charges were imminent, she said.
“Pleading guilty to a felony count is something I never thought I would have to face, and I sit here before you asking you to reconsider that decision,” Cotellessa-Pitz wrote in the letter, according to a copy displayed for the jury. “Hindsight is always 20/20 and what may seem obvious to everyone now was not apparent at the time it was occurring.”
Her letter went on to say that although she had carried out tasks that “stepped on my moral integrity,” she “never thought they were illegal or criminal.”
Yesterday, Cotellessa-Pitz said her claims of innocence at the time were lies, and that she knew she was breaking the law by helping Madoff hide the mounting losses in his legitimate broker-dealer unit by siphoning money from his investment advisory business, where the fraud was taking place. She said yesterday that even though she knew she was violating accounting rules and lying to regulators, she didn’t know about the fraud. That part of her 2011 letter was true, she said.
“I believed in and trusted Bernie, like so many other people and industry professionals,” Cotellessa-Pitz said in the letter. “He manipulated them and he manipulated me.”
The ex-controller’s testimony has focused on her former boss, Daniel Bonventre, who ran the broker-dealer unit and is one of the five on trial for allegedly helping Madoff hide his fraud. He has pleaded not guilty and says Madoff tricked him.
The other defendants are Annette Bongiorno, a Madoff employee for 40 years who ran the investment advisory business and was close friends with Cotellessa-Pitz; Joann Crupi, who managed large accounts; and computer programmers George Perez and Jerome O’Hara, who allegedly automated the production of fake account statements for Madoff’s customers.
All five defendants have pleaded not guilty. Their lawyers said in opening statements to the jury that the government witnesses are willing to lie and implicate others to win lighter sentences.
Cotellessa-Pitz testified on Nov. 19 that Madoff held a meeting of his inner circle in 2005, attended by Bonventre, to discuss ways to hide the broker-dealer losses, saying, “We all know what we do here.” She also said Bonventre lied on bank-loan paperwork and helped make fake documents.
Bonventre’s defense lawyer, Andrew Frisch, asked Cotellessa-Pitz under cross-examination today if she remembered complaining to Madoff about Bonventre’s stepson, who worked at the securities company and was “addicted to cocaine” and frequently slept under his desk at work.
“I did not know that was a fact,” Cotellessa-Pitz said. “I don’t remember if I complained to Bernie.”
Frisch also said Cotellessa-Pitz has a history of speaking her mind when she’s opposed to something. He told the jury she wrote a letter in 2007 to a leader in her Catholic church, a monsignor, “complaining that what he was doing was not morally right.” He didn’t elaborate on the contents of the letter.
Cotellessa-Pitz also wrote complaint letters to the New York City Department of Environmental Protection, and to an assemblywoman, Frisch said. Frisch showed her the letters, some of which she initially said she didn’t remember writing.
Frisch asked Cotellessa-Pitz if she had asked Madoff in 2005, around the time she was asked to fake documents for a U.S. Securities and Exchange Commission audit, “if there was something going.” She said yes, and that Madoff had responded by saying, “nothing was going on and not to worry.”
Frisch asked dozens of questions about the various lies Cotellessa-Pitz told prosecutors before deciding to plead guilty. She spent long periods in silence on the witness stand before answering some queries, and frequently asked for questions to be repeated.
During one exchange, when Cotellessa-Pitz couldn’t immediately identify Bonventre’s handwriting on a large box of documents placed on the witness stand, Bongiorno’s husband, Rudy Bongiorno, laughed and shook his head in an otherwise silent courtroom.
In the days after Madoff’s arrest on Dec. 11, 2008, Cotellessa-Pitz said she and Bonventre went for a walk near Madoff’s offices in Midtown Manhattan and talked about the situation. She was afraid and anxious, and Bonventre attempted to explain the accounting situation, she said.
“Bernie has separate arrangements with his friends,” Bonventre told her, according to her testimony. “He can do it the way he wants to.”
Bonventre, who was arrested in February 2010, sent a text message to Cotellessa-Pitz after he was charged, saying not to worry about him, she testified. She responded by telling him she was praying for him and his family, and then forwarded the message to her lawyer, she said.
Cotellessa-Pitz, under questioning by prosecutors yesterday, said her salary at the time of Madoff’s arrest was $450,000 a year, and that the final balance in her personal investment advisory account at the firm was about $3.5 million.
Everything she earned and invested “is gone,” she said.
The former controller is currently working at a local dentist’s office, filing insurance claims, according to her testimony. She said she lost her career, her savings and her reputation after Madoff’s arrest, and that she is “basically destitute” and doesn’t know how she’ll finance her child’s college tuition.
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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