Madoff Ex-Aide on Trial Confronted With Backdated Records

The woman who ran Bernard Madoff’s investment advisory business admitted she didn’t tell federal investigators in 2009 that her duties included backdating trades and turning stocks into bonds with a few pen-strokes.

Annette Bongiorno, accused with four former colleagues of aiding Madoff’s $17 billion Ponzi scheme, acknowledged in cross-examination that she omitted details of some of her biggest backdating projects when she was interviewed by the government after the con man’s arrest. She did so, even though she has claimed not to have known that backdating was illegal.

“If I didn’t, it’s because I forgot -- I was scared,” Bongiorno said yesterday in Manhattan federal court. “He told me what to do,” she said, referring to Madoff.

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 his investment unit hoarded customer cash instead of using it to buy securities. Bongiorno, a Madoff employee for 40 years, is in her third day of testimony.

Assistant U.S. Attorney John Zach used his questioning to attack Bongiorno’s credibility. He began by asking her about a 1992 regulatory probe of one of Madoff’s biggest customers, Florida-based investment firm Avellino & Bienes, which was sued by the U.S. Securities and Exchange Commission for failing to register.

The firm was eventually forced to close.

‘No Margin’

Avellino & Bienes, which invested all its customer money with Madoff, was able to return $440 million to investors only after Madoff, Bongiorno and others changed three years of account statements and created a new account filled with thousands of fake trades, the U.S. says. Bongiorno, who ran the project, said she took orders from Madoff and didn’t know it was wrong.

“You didn’t tell the government you re-did three years worth of account statements?” Zach asked.

“I don’t remember,” she replied.

Zach next showed jurors Bongiorno’s paperwork for a 2006 project to apply $125 million to the account of Jeffry Picower, one of Madoff’s biggest clients, after he loaned that sum to Madoff during a liquidity crisis.

The document included a handwritten note by Bongiorno, which she said were instructions from Madoff, to “use $125 million to set up trading with $51 million in gains -- 11 stocks -- 3 are losses, 8 are gains -- No margins,” according to a copy shown in court.

Winners, Losers

Zach showed jurors pages of an April 20, 2006, printout from Madoff’s Bloomberg terminal showing the biggest stock movers from January to April. Bongiorno made check marks next to stocks that met her needs, including Joy Global Inc., which had gained 63 percent, and BEA Systems Inc., which rose 44 percent.

The document also included three losers. All ended up in new backdated account statements for Picower, indicating he bought them in January and profited from the gains.

Picower, who began investing with Madoff in the late 1970s, died in 2009 at age 67. His estate in 2010 agreed to forfeit $7.2 billion to victims of the fraud and the U.S.

Bongiorno said she didn’t know it was wrong to make the changes and was following Madoff’s orders.

‘Any Given Day’

Zach showed Bongiorno records from a 2002 project, asking if she “flipped” seven months of statements for another Picower account and changed millions of dollars worth of stocks into bonds.

“First of all, I didn’t ’flip’ anything,” Bongiorno said. “I did what I was told to do.”

Changing Picower’s purported stocks to bonds helped make his account look more stable, prosecutors have said.

Asked by Zach why she didn’t tell investigators in 2009 about the account changes, Bongiorno said she didn’t know what she told them.

“You didn’t think that was something you should have said?” Zach asked.

Zach asked Bongiorno about the checkbook for the investment advisory business’s account at JPMorgan Chase & Co., which Bongiorno told investigators was known among workers as “Bernie’s checkbook.” Zach asked whether it was really called “Annette’s checkbook.”

She said she hadn’t heard that phrase in “a hundred years.”

Stocks, Bonds

Asked if she knew the difference between stocks, bonds and Treasuries, Bongiorno said, “I really don’t know the difference.”

Under questioning earlier by her defense lawyer, Roland Riopelle, Bongiorno recalled the day Madoff was arrested, saying that was the first time she had ever heard the term Ponzi scheme.

Later, when Madoff’s finance chief, Frank DiPascali, left the office, Bongiorno said he turned her and said, “Don’t worry. I’ll protect you.”

She said she replied, “Protect me from what?” She said she didn’t see DiPascali again until the former executive, who pleaded guilty in the case, testified at the trial as the government’s key witness.

Defense lawyers said the trial may end next month.

The other defendants are Daniel Bonventre, Madoff’s former operations director who ran the broker-dealer unit; Joann Crupi, who managed large accounts in the investment advisory business; and computer programmers Jerome O’Hara and George Perez, accused of writing code to automate the creation of fake account statements and other false documents. All five people have denied wrongdoing.

Prosecutors say the group conspired for decades to trick thousands of victims into believing their deposits were used to buy securities. Instead, the money was placed in a single bank account that paid withdrawals, financed operations and enriched employees, the U.S. says.

Madoff, 75, is serving a 150-year prison sentence in North Carolina after pleading guilty in 2009.

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. LEARN MORE