Madoff Workers Told to Keep Mum at Party on Big Checks

A former Bernard Madoff aide advised her staff not to tell people at the 2008 company Christmas party about checks totaling hundreds of millions of dollars written to firm insiders as Madoff’s fraud was unraveling, a jury was told.

Annette Bongiorno, one of five ex-employees on trial over Madoff’s $17 billion Ponzi scheme, didn’t want other employees to know they were “cutting checks” for family members and longtime customers after rushing to close out their purported trading positions, Semone Anderson, who reported to Bongiorno, testified yesterday in Manhattan federal court. The party was held Dec. 10, 2008, the day before Madoff was arrested.

Many of the checks “were for clients who worked for the company,” Anderson, who was a researcher in Madoff’s investment advisory unit where the fraud occurred, said in her second day of questioning by prosecutors. “She asked me not to discuss what happened at the office at the Christmas party.”

The case against Bongiorno and four of Madoff’s other top aides is the first criminal trial stemming from the fraud, which the U.S. has said began in the early 1970s and grew into the world’s biggest Ponzi scheme before collapsing at the peak of the financial crisis. Prosecutors allege the checks were part of a campaign to spend the last of Madoff’s stolen money in a final insult to the thousands of victims they ripped off.

Mail-Room Temp

Anderson, who started at Madoff’s company in 1996 as a mail-room temporary employee before taking on a full-time desk job, is one of several clerical workers who haven’t been accused of wrongdoing and are testifying against their former bosses.

Former employees who pleaded guilty in the case are also testifying, including Madoff’s finance chief, Frank DiPascali, who is scheduled to take the witness stand next week. Defense lawyers have said DiPascali and other cooperating witnesses will lie and implicate others to win lighter sentences.

Madoff attended the holiday party at a Mexican restaurant near his offices in Midtown Manhattan, and wasn’t himself, Anderson testified yesterday.

“He seemed a lot quieter than he normally was,” she said.

Anderson said she learned at lunch the next day that Madoff had been arrested and rushed back to the office to see what was happening.

Anderson testified that she sent Madoff a book in the North Carolina federal prison where he’s serving a 150-year sentence when she heard he was having a “tough time.”

She also said Madoff used and deceived her.

Backdated Trades

Anderson said her regular duties included helping to backdate purported trades for customers of Madoff’s investment advisory business, which Bongiorno ran. Profit for given months and trades were predetermined, sometimes by the customers, she said.

Anderson said she researched old stock splits, trading prices and volumes on Madoff’s Bloomberg terminal and printed out charts and price ranges to help Bongiorno. The printouts, seized by investigators and displayed for the jury yesterday by Assistant U.S. Attorney John Zach, bore notes in handwriting that Anderson said belonged to Bongiorno.

One such printout showed Anderson had looked in March 2006 for SanDisk Corp. share prices in April 2005 -- data that were then put on some customer statements, Anderson said. No trading actually took place at the investment advisory unit.

“You never believed the trading was fake, that it was created out of thin air, correct?” Bongiorno’s lawyer, Roland Riopelle, asked in cross-examination.

“No,” she said.

Mirror Testimony

Her testimony mirrors that of another Bongiorno assistant, Winnie Jackson, who told the jury last month that her boss would use “cut and paste” trade data on statements.

Bongiorno, who was hired by Madoff straight out of high school in 1968, has denied the charges and claimed she was tricked by Madoff into believing the business was legitimate.

Anderson identified handwriting by another defendant, Joann Crupi, who managed large accounts, on documents related to daily wire transfers to Madoff’s biggest customers.

Crupi ordered dozens of such wires in the days before Madoff’s arrest, including $200 million for investment adviser Stanley Chais, one of Madoff’s biggest customers, and $580 million to an account linked to Fairfield Greenwich Group, which ran funds that directed money to Madoff for years, according to documents shown to the jury and identified by Anderson.

Other People

Under questioning by Crupi’s lawyer, Eric Breslin, Anderson agreed yesterday that even though Crupi wrote the daily amounts for wiring, she received that information from other people, including some who have pleaded guilty.

Loris Caulfield, a special agent with the Federal Bureau of Investigation, testified yesterday about her role in the U.S. probe of the fraud. She said she examined a stack of checks totaling about $173 million that were found in Crupi’s desk and placed in a box of her belongings by agents in December 2008.

Some of the checks were dated the day of Madoff’s arrest, including one for more than $700,000 to Crupi, Caulfield said. The stack also included checks for $7.2 million to Bongiorno and $25.8 million for her husband, Rudy, Caulfield testified.

Rudy Bongiorno, who isn’t accused of wrongdoing, attended the trial yesterday and stared as an image of the check in his name was displayed on flat-screen monitors in the public area of the courtroom.

The checks on Crupi’s desk were never cashed, and some of them had the signature line torn off, Caulfield said.

Beach Home

Jason Wake, a forensic accountant for the FBI, told the jury yesterday that Crupi used money from the investment advisory’s bank account at JPMorgan Chase & Co. to buy a beach home in Mantoloking, New Jersey, with her partner starting in June 2008.

On trial with Crupi and Bongiorno are Daniel Bonventre, who ran Madoff’s broker-dealer unit, where real trading took place; and computer programmers George Perez and Jerome O’Hara, who allegedly automated the production of fake account statements. All have pleaded not guilty.

The case is U.S. v. O’Hara, 10-cr-00228, U.S. District Court, Southern District of New York (Manhattan).

Before it's here, it's on the Bloomberg Terminal.