Madoff Inner Circle Loses Appeal of Ponzi Scheme Convictions

  • Five associates appealed over claims jury was race-baited
  • Terms are 2 1/2 to 10 years, less than time sought by U.S.

Bernard Madoff’s former inner circle is running out of options.

A federal appeals court in New York on Wednesday upheld the fraud convictions of five of his former aides, leaving the Supreme Court as their last hope for reversal based in part on claims of racial bias by a black prosecutor.

The court rejected claims that former Assistant U.S. Attorney Randall Jackson had gone too far with references to the civil rights movement and racial equality just minutes before a jury composed of minorities began deliberating on the fate of the defendants, who are white. The court also tossed aside claims that the government lacked enough evidence at trial.

"The evidence we presented over nearly six months of trial demonstrated that each of the five defendants was a ‘vital’ and ‘integral’ member of Madoff’s scheme," said Matthew L. Schwartz, another prosecutor on the case who’s now at Boies, Schiller & Flexner LLP in New York.

The ruling, handed down less than a month after the panel heard arguments, signals that prosecutors have wide latitude in the way they speak to juries, draw analogies and point to faults in their counterpart’s arguments, even if judges are critical of their language. It’s also a win for thousands of victims of the $17.5 billion scam.

Boston Massacre

Jackson, the appeals court found, was more likely responding "somewhat opaquely" to the defense’s own "curious historical analogies" during the trial, including references to the acquittals of British soldiers involved in the 1770 Boston Massacre after being represented by future president John Adams.

"While the prosecutor’s choice of subject was peculiar, and his rhetoric needlessly grandiose, it did not constitute severe misconduct," the appeals court said.

The court also rejected extensive arguments about a lack of evidence in the case, as well as other forms of alleged misconduct by prosecutors, such as repeated claims that the defense’s claims were "absurd" and "ridiculous."

"The strength of the evidence here indicates that the same result would have been obtained, even without the purported government misconduct," the justices said.

During Jackson’s closing statement, he noted that the courthouse’s jury assembly room was named after Constance Baker Motley, a civil rights activist and the first black woman federal judge. U.S. District Judge Laura Taylor Swain, who oversaw the trial, is also black. The defense lawyers were all white. Jackson’s performance was later praised by some jurors.

Managers and Coders

The defendants are Daniel Bonventre, who ran Madoff’s broker-dealer business for almost 40 years; Annette Bongiorno, who joined the firm as a teenager and for decades ran the investment advisory unit at the center of the fraud; Joann Crupi, who managed large accounts; and computer programmers George Perez and Jerome O’Hara, who prosecutors said wrote code to generate fake trading data and false account statements that appeared to be authentic -- a crucial element of the scam as it grew rapidly in the 1990s.

"These defendants were victims of Madoff’s misuse of his iconic status, and are paying for it with more than just money," defense attorney Andrew Frisch said in a statement about the appeals court ruling. He said there would be an appeal to the U.S. Supreme Court.

Madoff’s Arrest

The ruling is the latest development in a fraud that came to light with Madoff’s arrest in December 2008, spawning a wide-ranging criminal case, a contentious bankruptcy and countless civil cases that are still winding through court. A jury in 2014 found the former aides guilty of creating fake trades and account statements for decades to help the fraud.

The five former colleagues have remained in prison during their appeal. Their 2 1/2-year to 10-year sentences amounted to less than half the time sought by the government. That didn’t stop the judge from criticizing Jackson, saying in a post-trial ruling that his racial references were “at best ambiguous and at worst unfathomable.”

The U.S. last year dropped an appeal seeking to increase the sentences. Defense lawyers interpreted the shorter prison terms as proof that the evidence was weak despite the convictions on all counts.

Frisch said in court filings that Jackson’s references to Motley’s civil rights-era work in courtrooms in the U.S. South, and Motley’s desire to apply the rule of law equally, were “abominable” in the context of the Madoff fraud.

Billions Recovered

Madoff, 77, pleaded guilty and is serving a 150-year term. More than a dozen others were also prosecuted. Irving Picard, the trustee hired to wind down Madoff’s firm, recovered about $8.6 billion for victims.

The defense attorneys also claimed that Jackson was inflammatory during the trial when he compared Madoff to an imaginary “Bernie Claus” and the defendants to children who pretended to believe in him to get presents. Frisch added that Jackson had evoked a “veiled innuendo” referring to Bonventre’s Italian-American heritage by making references to the behavior of criminals in “The Godfather” and “The Sopranos.”

At the appeals court hearing in March, Assistant U.S. Attorney Aimee Hector argued that Jackson’s language was strong but not inappropriate. She acknowledged that in retrospect a different argument might have been made, but that prosecutors have their own style.

Jackson and the two other prosecutors on the Madoff case left the U.S. Attorney’s Office after the trial and joined Boies, Schiller & Flexner.

The case is U.S. v. O’Hara, 15-50, U.S. Court of Appeals for the Second Circuit (Manhattan).

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