Did Bernie Madoff act alone in Ponzi scheme fraud? Trial of five former employees begins
Nikhil Kumar is The Independent's New York correspondent. He was formerly assistant editor on the foreign desk and has also done a variety of jobs on the city desk, where he wrote about markets, commodities and other business and economics topics.
Monday 07 October 2013
When Bernie Madoff’s Ponzi scheme first came to light, Wall Street was shocked by the scope of the fraud. At $65bn, it rendered even the most seasoned traders – people who are used to dealing with millions everyday –speechless. But there was more to come, for when the disgraced financier subsequently claimed that he had acted alone, everybody was left wondering how one man could have perpetrated such an immense fraud over so many years.
This week, prospectors will attempt to put such speculation to rest as they make the case that Madoff, who is serving a 150-year sentence for his misdeeds, did not act alone. In a trial that is due to begin on Tuesday and expected to conclude early next year, government lawyers will seek to convince a jury that the five defendants in the case, all ex-Madoff employees, helped the convicted fraudster mislead investors.
Prosecutors are expected to draw heavily on the testimony of Frank DiPascali, once a top lieutenant of Madoff’s, who has already pleaded guilty for his role in the fraudulent scheme. All five defendants in the case deny involvement in the Ponzi scheme.
In his testimony, Mr DiPascali, an ex-chief financial officer for Madoff and a 33-year veteran of his firm, is likely to back the prosecution’s claim that the five defendants worked with him to keep up the illusion of a thriving investment business when, in fact, they were running a Ponzi scheme. In a previous court hearing, he admitted that the enterprise was “all fake”.
To maintain the fiction, which ultimately led to billions of dollars worth of losses for clients, the five defendants are alleged to have carried out fraudulent tasks. Prosecutors claim that the ex-operations chief, Daniel Bonventre, helped cook the books, while the portfolio managers, Annette Bongiorno and Joann Crupi, made up trading records
Two computer programmers, Jerome O’Hara and George Perez, meanwhile, are alleged to have helped the firm mislead regulators.
Not so, say their lawyers, who in documents filed ahead of the case suggest their clients were themselves duped. In the case of the programmers, for example, lawyers have claimed they simply performed assigned tasks. Mr Perez’s lawyer, in an email to Reuters, said “the government has made a tragic mistake” by going after the programmer, who intends to show that “he never became a knowing participant in any of the crimes charged.”
The defence is also expected to question the reliability of the prosecution’s star witness, DiPascali, who could be seen to have an incentive in seeking to lessen his own penalty.
Prosecutors also claim that while the defendants were helping Madoff in his fraudulent enterprise, four of them were involved in “romantic” or “sexual” relationships, including possibly with Madoff himself.
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