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‘Bernie Claus’ Gifts Said to Have Kept Madoff Fraud Alive

Bernard Madoff
Bernard Madoff walks out of Manhattan federal court in New York in a Jan. 5, 2009 file photo. Photographer: Jin Lee/Bloomberg

Bernard Madoff’s five ex-aides on trial for fraud were like children who discovered Santa Claus was a sham and played along to get more gifts, a prosecutor told jurors who will begin deliberating as soon as today.

The defendants, accused of aiding Madoff’s $17.5 billion Ponzi scheme for decades, kept up the “Bernie Claus” act long after realizing the trading in his investment advisory business was fake, Assistant U.S. Attorney Randall Jackson said yesterday in federal court in Manhattan. They did so for money, he said.

“Children always figure it out” after they start asking how Santa could “visit billions of houses in one night” and make so many toys in one year, Jackson said. “Let’s talk about the absurdity of the fundamental premise” that the defendants “engaged in all these activities” and didn’t figure it out.

The criminal trial, which started in October, is the first stemming from Madoff’s swindle, which collapsed after his arrest in December 2008. U.S. District Judge Laura Taylor Swain, who is overseeing the trial, said the jury may begin deliberating today.

The five former colleagues are accused in a 31-count indictment of conspiring to use millions of fake account statements and false trade confirmations to trick thousands of customers into believing they owned shares in the world’s biggest companies. Instead, their cash was used to enrich the firm’s wealthiest clients, give employees exorbitant pay and prop up Madoff’s money-losing broker dealer unit, the government alleges.

Critical Role

“They each played a critical role” in keeping the fraud alive “year after year,” Jackson said in his rebuttal to defense closing statements that ended March 12.

A defense lawyer objected after Jackson’s voice rose to a shout as he described how victims believed they had $65 billion in their accounts, including all the fake profit they thought was real. Principal of $17.5 billion was wiped out.

Defense lawyers said in their closing statements that the government failed to prove its case and relied on speculative evidence and witnesses who lied to get less time behind bars. The U.S. seeks to punish people who were once close to the con man, the lawyers said.

Jackson mocked a claim repeated by defense lawyers throughout the trial that the former aides believed they could backdate trades because the trading was taking place in bulk in Europe, or in the firm’s broker-dealer unit one floor above the investment advisory business, and placed in an inventory for distribution.

Real Trades

If the trading were real, Jackson asked, why did Annette Bongiorno and Joann Crupi -- two defendants who managed accounts for Madoff -- need to research newspapers and third-party electronic trading data to locate historical prices?

“Wouldn’t you at some point have just said, ‘Let’s get the information from the actual trades’? Of course you would,” Jackson said to the jurors. “You would only need to go to the Wall Street Journal, to look at Bloomberg, if you know the trading is a fantasy.”

Copies of the research were displayed for jurors, much of it with Bongiorno’s handwriting.

Jackson questioned Bongiorno’s claim that she was just a “messenger” for Madoff who did paperwork related to trades he requested. The prosecutor reminded jurors that one of Bongiorno’s employees, Winnifer Jackson, testified that Bongiorno screamed at her and used a profanity when she made a seemingly minor clerical error, saying, “What the ---- is this?”

“People don’t scream things like that” if they are just a messenger, Jackson said. “What was so urgent? She was engaged in a multibillion-dollar fraud and she knew that any mistake could lead to disaster.”

Wrote Code

George Perez and Jerome O’Hara, former computer programmers at Madoff’s firm who are also on trial, wrote code that had no legitimate purpose other than to print fake account statements, randomize trading information to make it look real and alter documents needed for regulatory audits, Jackson said.

Writing code for randomized trading times shows the men “were acutely aware” of the fraud, Jackson said. “If the trades were real, the trading times would be coming from a real source.”

Daniel Bonventre, Madoff’s former director of operations and another defendant, worked closely with the investment advisory business despite his claims he only worked at the broker dealer, Jackson said. Bonventre also lied to get bank loans of hundreds of millions of dollars to keep the fraud going and siphoned customer money to the broker dealer, according to the U.S.

Defense Claim

Jackson rejected a defense claim that the only people who knew about the scheme were Madoff and his former finance chief, Frank DiPascali, who pleaded guilty and testified as the key U.S. witness. The prosecutor compared such a scenario to a McDonald’s manager and assistant manager being the only staff who knew it was a burger restaurant and all the other employees were blindfolded.

“People would be burning themselves on grease -- burgers would be going out with chicken McNugget sauce on it,” Jackson said, eliciting laughter from the jury.

Defense lawyers objected when Jackson compared the defendants and the evidence against them -- seized from their former offices -- to bank robbers and drug dealers who left behind bullet casings and fingerprints. Swain upheld the objection, instructing jurors to disregard the characterization.

Defense lawyers also objected to Jackson’s reference to criminal behavior in “The Godfather” film, saying it had nothing to do with the case. Jackson pointed out that the defense lawyers’ closing summations included references ranging from God’s destruction of Sodom and Gomorrah in the Bible to the assassination of John F. Kennedy.

Madoff, 75, pleaded guilty to fraud in 2009 and is serving a 150-year sentence in a federal prison on North Carolina. He has said he carried out the fraud alone.

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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