Jurors in the criminal trial of five former Bernard Madoff employees accused of aiding the con man’s $17 billion fraud won’t hear testimony that he joked about the firm’s “dumb” accountant, a judge ruled.
Madoff’s view of David Friehling, who provided accounting services for his securities firm for two decades and later pleaded guilty in the case, is hearsay and can’t be mentioned in a defense lawyer’s cross-examination, U.S. District Judge Laura Taylor Swain in Manhattan decided yesterday.
Madoff’s former finance chief, Frank DiPascali, asked his boss in a conversation about Friehling, “Have you been paying him off or is he just dumb?” the defense lawyer, Roland Riopelle, said in court without the jury present. Madoff responded that the accountant was dumb, which Riopelle said, shows he and DiPascali were “moving around other people like pieces on a chess board.”
DiPascali, who pleaded guilty to aiding Madoff’s fraud and is appearing as a government witness in a bid for leniency, is the highest-ranking former executive to testify in the first criminal trial over the scheme that was exposed after Madoff’s 2008 arrest. The five ex-employees are accused of using fake account statements and trade confirmations to trick customers for decades and get rich in the process. No trading took place in the firm’s investment advisory business.
Testimony that Madoff and DiPascali “had a chuckle at Friehling’s expense” helps show the extent of the conspiracy led by the two men, said Riopelle, the lawyer for Annette Bongiorno, who worked for Madoff for 40 years and ran the investment advisory unit at the center of the fraud.
Friehling pleaded guilty to fraud in 2009 and agreed to cooperate with U.S. prosecutors. He said that even though he didn’t know about the Ponzi scheme, he never conducted an independent probe of Madoff’s firm as accounting rules required and knowingly used false records to reduce Madoff’s tax bills.
Bongiorno, who joined Madoff’s firm when she was 19, has pleaded not guilty and claims Madoff tricked her into believing his business was real. Her lawyer’s cross-examination has focused on DiPascali giving her orders that resulted in her helping create fake documents.
Swain yesterday also denied a request by another defense lawyer, Gordon Mehler, to show the jury an aerial photograph of DiPascali’s New Jersey mansion and an image of DiPascali dressed casually at an outdoor company party in Montauk, New York, in about 2001.
Assistant U.S. Attorney John Zach objected to the photos being shown, saying the house, which DiPascali described as his $2 million “dream home,” has already been described in detail to the jury, including a pond in the back yard where DiPascali said he threw an unregistered gun as the fraud was collapsing. The image of DiPascali at the party makes him look “sinister” in “cool” sunglasses with his hands clasped in front of him, Zach said.
In her ruling, Swain said the party photo doesn’t offer anything new and can be interpreted as DiPascali either “rubbing his hands in greed, or perhaps praying before lunch.”
The other defendants in the case are Joann Crupi, who managed large investment 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 questioning 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, who pleaded guilty in 2009 and faces as long as 125 years in prison, told the jury he’s hoping for a “substantial” reduction in his sentence.
Riopelle asked DiPascali if he had reached a secret deal with the government to cooperate in exchange for the U.S. agreeing not to charge his brother-in-law, Robert Cardile, who worked closely with him at Madoff's firm for years. DiPascali, who said Cardile was involved in several aspects of the fraud, said there was no such deal.
``Did Mr. Cardile participate in preparing trading information that was not true?'' Riopelle asked DiPascali. ``He did,'' DiPascali said.
``Was Mr. Cardile present in your office for meetings when Mr. Madoff would come down and discuss executing the fraud with you?'' ``He was,'' DiPascali responded.
``Did Mr. Cardile prepare documentation relating to fraudulent T-bill purchases or Treasury bill purchases that furthered the fraud at Madoff Securities?''
``He did,'' DiPascali said.
Prosecutors objected to the line of questioning after Riopelle asked DiPascali if Cardile had been charged. Swain permitted the question after defense lawyers explained the relevance to their defense.
``There is good reason to believe, whether the witness admits it or not, that there is a side deal between him and the government in which the agreement is he will fall on the sword in exchange for letting his brother-in-law go,'' Riopelle told Swain.
DiPascali previously testified he lied to Cardile and manipulated him and other employees to get them to carry out work necessary to continue the fraud.
Madoff, 75, was arrested on Dec. 11, 2008, after admitting his company was a fraud. He 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).