Daniel Bonventre, one of five former aides to Bernard Madoff on trial over the con man’s $17 billion Ponzi scheme, gambled big by choosing at the last minute to testify in his own defense, former prosecutors said.
Bonventre’s decision to take the stand yesterday in Manhattan federal court is a sign his legal team may be concerned about the strength of the government’s case, said Marcos Jimenez, a former U.S. attorney in Miami who’s now a criminal-defense lawyer with McDermott Will & Emery LLP.
Bonventre stood in court last week to tell U.S. District Judge Laura Taylor Swain he wouldn’t testify in the first criminal trial stemming from Madoff’s swindle. Under the Fifth Amendment to the U.S. Constitution, defendants can avoid possible self-incrimination by staying off the stand.
“It’s a calculated risk that shows the defendant is very, very concerned about the prosecution’s case and decided to forfeit his constitutional right not to testify,” Jimenez, who isn’t involved in the case, said in a phone interview.
During his testimony yesterday, Bonventre denied knowing anything about the Ponzi scheme, which prosecutors allege the group supported with millions of fake trades and false account statements that tricked customers into believing their cash was being used to buy securities. No trading took place in the investment advisory business at the center of the fraud.
Bonventre’s reversal on the testimony “is odd and may signal some desperation,” said Richard Scheff, a former federal prosecutor who now represents defendants in white-collar criminal cases. “You always want to reserve the right to change your mind without having indicated previously which way you were going to go.”
A defendant may decide to risk a tough cross-examination by prosecutors on the off chance it will create reasonable doubt for at least one juror, because convictions require a unanimous verdict, the attorney said.
“If he does a good enough job of explaining his conduct, which is unlikely, he could convince one or two jurors that he’s not guilty -- that could create a hung jury and that’s a win for him,” Jimenez said.
Bonventre, who is scheduled to take the stand again today, will benefit if the jury values the personal nature of his testimony as opposed to hearing his side of the story through other witnesses, the former prosecutors said.
“The general rule for me is not to put my client on the stand because there’s too much risk in doing so,” said Scheff, the chairman of Philadelphia-based Montgomery McCracken Walker & Rhoads LLP. That said, “most juries welcome the testimony -- it allows them to hear the defense from the horse’s mouth.”
The criminal trial, now in its fifth month, is the first stemming from the swindle, which collapsed after Madoff’s arrest in December 2008. Madoff, 75, is serving a 150-year sentence in a federal prison in North Carolina after pleading guilty in 2009 to the unprecedented fraud.
Bonventre, who worked for Madoff for four decades and ran his broker-dealer unit, told jurors yesterday that when he questioned some of his former boss’s unusual business practices over the years, Madoff gave answers that sounded plausible or sent Bonventre on a “wild goose chase” to make it appear he was interested in fixing perceived flaws.
“Do you believe you deliberately closed your eyes” to the fraud, Andrew Frisch, Bonventre’s lawyer, asked him.
“Absolutely not,” Bonventre responded.
Bonventre denied allegations he helped create fake investment paperwork to aid his boss in filing false tax documents -- one of the allegations in the 33-count indictment in the case.
“Did anyone use ‘fake’ or ‘fraudulent’ to describe what you were doing?” Frisch asked.
“No,” Bonventre said.
Bonventre told the jury about three occasions when he said he questioned Madoff about a business practice, including asking why he executed and cleared his investment advisory trades in Europe, incurring additional costs. Bonventre said he told Madoff he could do the work in New York, with the trading platform used in the broker-dealer unit, “for pennies.”
Madoff had Bonventre put together a proposal for moving the work to New York, a project that took two months, Bonventre said. Madoff didn’t respond for several months and ultimately said he didn’t want to change the process, according to Bonventre.
“I just figured” Madoff “was resistant to change,” Bonventre said. “He liked things the way they were.”
When Madoff confessed, it was discovered there was no trading in the investment advisory unit, and that Madoff lied about trading in Europe to explain the lack of a paper trail for the trading activity.
Bonventre also rejected government claims he conspired with Madoff to funnel millions of dollars of customer money from the investment advisory business to the broker-dealer unit when it was losing money. Madoff would regularly remind staff that he was the sole proprietor of the business, giving him leeway in what he did with company funds, Bonventre testified.
Madoff’s comments implied “he could do whatever he liked,” Bonventre said.
Madoff also was known for being very strict about following his rules at work, Bonventre said.
“I realize now that could have been part of his desire to not get tripped up,” Bonventre said.
Bonventre said he worked 18 hours a day with Madoff in the years before computerization, when more manual work was required to keep up with high demand on Wall Street. During that time, Bonventre said, he grew to like Madoff and admire the way he treated people, especially employees and their families.
Madoff “was generous, kind, considerate,” Bonventre testified. “I give him credit for teaching me how to listen. He always seemed to have the right answers.”
“Now, I think he was a terribly ill man,” Bonventre said. “It’s difficult to reconcile everything I knew about him for 40 years and everything I know now.”
Bonventre said he now wonders whether Madoff’s kindness wasn’t a performance intended to trick everyone around him and bolster his plan to hide the Ponzi scheme.
Bonventre, who was born and raised in the Bushwick neighborhood of Brooklyn, New York, said he started working at his parent’s grocery store when he was 8 and helped out there until he was 20.
Hired at 22
He said he was 22 when he got a job at Madoff’s company, and that he got the position through his cousin, who also worked there. He said he took six years to complete a two-year associates degree, and that he didn’t continue in college because he was getting “on the job training” from Madoff.
The other defendants are Annette Bongiorno, who ran the investment advisory unit at the center of the fraud; Joann Crupi, who managed large accounts; and computer programmers George Perez and Jerome O’Hara, accused of writing code to automate the deception as the scheme expanded rapidly in the 1990s.
Prosecutors began presenting testimony by industry experts, Madoff’s accomplices and his former clerical staff in October. Swain said the trial testimony is expected to end this month, followed by jury deliberations.
The case is U.S. v. O’Hara, 10-cr-00228, U.S. District Court, Southern District of New York (Manhattan).