Madoff Had No Rules for Credit Card Use, Jury Told

Bernard Madoff was generous to his employees and didn’t have policies in place for corporate credit cards used by executives to pay for family vacations and thousands of dollars worth of wine, a jury was told.

There wasn’t an obvious business purpose for many charges, including trips to Disney World and Las Vegas, that Madoff’s securities firm paid each month, Charlene White, whose job included running dozens of monthly reports and helping process company checks, told jurors yesterday in the trial of five former employees accused aiding Madoff’s $17 billion fraud.

“There weren’t any rules,” White testified. It’s “correct” that no expenses were ever turned down and there wasn’t a reason to be suspicious, she said under cross-examination by defense lawyers.

White, who started as a temporary employee at Madoff’s securities firm in 1993, was the second witness to testify in the first criminal trial stemming from the fraud uncovered at the peak of the financial crisis five years ago. U.S. District Judge Laura Taylor Swain in Manhattan said the trial could last as long as five months.

Joann Crupi, one of the former employees on trial who joined Madoff straight out of college in 1983 and went on to manage some of the largest accounts, charged thousands of dollars in personal expenses on her corporate card, the U.S. alleges, and never declared it as income.

Airfare, Wine

White was asked by prosecutors yesterday to confirm the expenses on American Express statements displayed on screens for the jury, including Crupi’s repeated airfare to Orlando, Florida, and Las Vegas and numerous charges at Wine Library in Springfield, New Jersey, including $519.76 in January 2007.

Daniel Bonventre, Madoff’s operations chief who worked with the company’s general ledger and is also on trial, signed company checks to pay for his personal American Express card, including tens of thousands of dollars for shopping trips to Barneys, airfare to Saint Martin, rooms on the island at Hotel Isle de France and dues for his Richmond County Country Club in Staten Island, according to statements displayed for the jury.

White said she never had a reason to believe it was wrong for the company to pay Bonventre’s personal expenses, and that Madoff was generous in general to employees and threw parties for everyone to attend. She said she never interacted with Madoff other than saying hello in the office.

No Quarantine

Earlier yesterday, the FBI agent who arrested Madoff the morning of Dec. 11, 2008, told jurors the agency didn’t secure or “quarantine” any portion of his offices until about five days later.

When the FBI changed the locks and installed security cameras on the 17th floor of the lipstick-shaped skyscraper in Midtown Manhattan where the business operated, the same measures weren’t taken with the two other floors Madoff used, Special Agent Theodore Cacioppi said.

The investigators determined “there was legitimate business activity on the 18th and 19th floors,” said Cacioppi, who worked on the Federal Bureau of Investigation’s white-collar crime squad. The 17th floor, he said, was used to carry out “the biggest Ponzi scheme in history.”

Lawyers for Bonventre have said he was part of Madoff’s legitimate broker-dealer unit and had nothing to do with the fraud.

Massive Fraud

The evening before Madoff was arrested, Cacioppi said he received a message on his BlackBerry from his supervisor alerting him that a massive fraud had been uncovered. The agent said he hadn’t heard of Madoff before then, and that his team assembled at 4:30 a.m. the next day to prepare for the arrest.

Cacioppi, who has worked for the FBI since 2002, said he and another agent interviewed Madoff for about an hour before they arrested him at his home, with his wife, Ruth, present. Two other agents who waited outside then took Madoff to be processed, while Cacioppi visited Madoff’s offices to meet briefly with other agents and investigators from the U.S. Securities and Exchange Commission, he said.

The special agent said he then went to a law firm to interview Madoff’s two sons, Mark and Andrew, who he said hadn’t been willing to be interviewed until then.

The other defendants are Annette Bongiorno, who worked for Madoff for 40 years, including as his personal secretary, and helped run the company’s investment advisory business, and computer programmers Jerome O’Hara and George Perez, who helped generate millions of corporate documents.

In Dark

Prosecutors allege the group assisted Madoff by fabricating fake account statements and regulatory filings for years to keep anyone from finding out about the scheme. The defendants, who have all pleaded not guilty, claim Madoff deceived them and kept them in the dark about his activities.

Cacioppi, a former lawyer who earned a bachelor’s degree in sociology from the University of Vermont, worked on the Madoff case for about six months and is now a team leader for one of the agency’s underwater evidence recovery units, staffed by scuba divers who search for guns and cars used in crimes.

Prosecutors asked Cacioppi to explain to the jury a series of photographs taken by investigators inside Madoff’s offices after his arrest. The images depicted empty desks, rows of seized computer hard drives and servers and tables stacked with papers and office supplies where they were left by employees they day the firm was shut down. Some of the images showed Christmas decorations, including a large snow man by a printer and candy canes on a wall.

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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