Ex-Madoff Executive Tells Jury She Wasn't Fazed by Backdated Trades
Annette Bongiorno, who ran the investment advisory business at the center of Bernard Madoff’s $17 billion Ponzi scheme, told a jury she backdated customer trades almost every day and didn’t realize it was wrong.
Madoff’s use of historical buy-and-sell dates to reach pre-determined profits on securities trades was standard procedure at the firm, Bongiorno testified yesterday in Manhattan federal court, where she and four other ex-Madoff employees are accused of aiding the con man’s fraud. During her 40 years at the company, no one suggested the process was a scam, she said.
“Did it seem strange to you to be entering them after-the-fact?” Roland Riopelle, Bongiorno’s lawyer, asked her, referring to the trades in customer accounts.
“No,” she replied.
The criminal trial, now in its fifth month, is the first stemming from the scheme, which collapsed after Madoff’s arrest in December 2008 revealed no trading took place in his investment advisory business. Madoff, 75, is serving a 150-year prison sentence in North Carolina after pleading guilty in 2009.
Bongiorno and her four former colleagues, who were part of Madoff’s inner circle for decades, all claim their former boss duped them into helping carry out the scam. They argue Madoff intentionally sought out employees who didn’t have experience in the industry and who could be molded to do things his way.
Riopelle in particular has highlighted his client’s lack of higher education and said Bongiorno was swayed by Madoff’s personality and reputation over the years.
“I loved Bernie,” she said. “He was like my big brother. I had a lot of respect for him.”
Bongiorno was hired by Madoff to do secretarial work in 1968, when she was 19, after she’d spent a year as a receptionist at Bank of America Corp. She said Madoff discouraged her from seeking additional education in the securities industry as her responsibilities expanded to include managing large customer accounts and running the investment advisory business’s day-to-day functions.
“He said, ‘everything you need to know, I’ll teach you,’” Bongiorno said of Madoff. “He didn’t want me to go back to school.”
“Did you ever commit a fraud?” Riopelle asked her later.
“Never knowingly,” replied Bongiorno.
Bongiorno told the jury she believed Madoff purchased securities in bulk and then distributed them as long as a year later to customers based on the trading dates they chose. She said she believed Madoff was using the trading operations of his broker dealer business to make such “big-block” purchases and fill his inventory of stocks.
“They were always backdated,” Bongiorno said of the trades.
“Did that concern you?” Riopelle asked.
“No,” she answered.
Madoff’s biggest customers would openly request backdated trades for their accounts, and no one suggested the process was part of a Ponzi scheme, Bongiorno testified.
Bongiorno said her first duties at the firm in the late 1960s included typing and opening mail, a workload that usually kept her at the office until 9 p.m. or 10 p.m. Madoff sent her and other employees home in taxis or hired cars to make sure they arrived safely, she said.
Bongiorno said her parents, with whom she lived, became concerned when they saw her getting out of a car late at night with a man, who they later learned was Madoff’s brother, Peter, who worked at the firm and lived in her neighborhood.
She said her parents asked her to find a new job, a request they dropped after meeting the Madoffs and their wives for dinner.
“They didn’t say anything to me about working late after that,” because they came to trust Madoff, Bongiorno told jurors.
Bongiorno said she wasn’t pleased when she was given more responsibilities at the firm in the years after she was hired.
“I only wanted to be a secretary,” Bongiorno said. “I didn’t like working with numbers. It’s not what I wanted to do.”
When Madoff hired a secretary during her early years at the firm, Bongiorno said she quit because she believed the new position, filled by someone else, would prevent her from ever taking that role.
After telling her boss, Irwin Lipkin, and other staff members that she wouldn’t come back, Madoff met her personally at a diner in Queens, New York, where she lived, to talk to her.
“He said whatever he had to say to get me to come back,” Bongiorno said.
Though Bongiorno returned to Madoff’s firm, she was never his secretary after that. Her workload grew to include hiring employees to work for her, training them as the firm transitioned to using computers, and managing the company’s biggest accounts, according to her testimony.
Bongiorno, recounting her personal feelings for Madoff, said he paid for her honeymoon to France and England when she married in the 1980s. She cried when asked to describe how Madoff helped her care for her sick mother in the months before she died. Bongiorno said Madoff arranged for her mother to be placed in a facility that had previously told her it couldn’t admit new patients, allowing her to be close to her family.
Bongiorno told the jury that when she asked Madoff how he gained admission for her mother, he replied, “I made them an offer they couldn’t refuse.”
Bongiorno testified today that news of the high returns on Madoff’s accounts prompted as many as 25 of her extended family members and friends of her family to invest with Madoff through a group account managed by Bongiorno. Madoff wouldn’t let them open individual accounts because they didn’t have enough money, she said.
“It just kind of snowballed because the returns were so high,” Bongiorno said.
Bongiorno said she never spoke about trading strategy with customers because she didn’t understand it, even though she understood individual trading terms.
“He taught me a lot,” she said. “I was there for 40 years, but to talk about market strategy, it’s not in my head. Never was, never will.”
Isaac Maya, who invested with Madoff for years and was a friend of four decades to Bongiorno and her husband, Rudy, testified for the defense yesterday. He told the jury he believes the former executive is an honest woman who “admired” Madoff.
“I consider her to be a very honest person, a credible person,” Maya testified before Bongiorno took the stand.
Bongiorno attended Maya’s daughter’s wedding a few weeks after Madoff’s arrest even though some of the bride’s relatives in attendance had lost money in the fraud.
Maya said he respected Madoff based on what he heard from Bongiorno, as well as from the high returns he received and the fact that he saw Madoff on TV testifying before Congress while “channel surfing” late one night.
“It was pretty impressive,” Maya said. “I’m thinking, ‘Wow, here’s the guy looking after my shekels.’”
The other defendants are Daniel Bonventre, Madoff’s director of operations, 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.
Separately, Bonventre last week won dismissal of two claims against him the 33-count indictment in the trial, after U.S. District Judge Laura Taylor Swain agreed prosecutors had failed to show the former executive had lied in Labor Department filings to secure a “no show” job for his son at Madoff’s company. Swain denied his request to dismiss tax-related claims.
Prosecutors allege the group conspired for decades to create millions of fake trade confirmations and account statements, tricking thousands of victims into believing their deposits were being used to buy securities. Instead, the money was placed in a single bank account used to pay customer withdrawals, finance operations of Madoff’s company and enrich employees, the U.S. said. When the scheme collapsed, investors lost $17 billion in principal and another $43 billion in fake trading profit they believed was held in their accounts.
Bongiorno’s testimony was unexpected until three days ago, when Riopelle alerted the judge to his decision. Her direct testimony will continue today followed by cross-examination by prosecutors.
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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