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New York, NY - Witness: Fake Trades And A Fridge Used In Madoff Fraud

Published on: December 3, 2013 10:01 AM
By: Reuters
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In this courtroom drawing, Frank DiPascali, right, a longtime employee of Bernard Madoff, takes the stand in Manhattan Federal Court. (AP Photo/Elizabeth Williams)In this courtroom drawing, Frank DiPascali, right, a longtime employee of Bernard Madoff, takes the stand in Manhattan Federal Court. (AP Photo/Elizabeth Williams)

New York - Bernard Madoff’s longtime lieutenant testified on Monday that several former colleagues were deeply enmeshed in Madoff’s decades-long Ponzi scheme, using everything from fake trades to a refrigerator to hide the truth about the fraud.

Frank DiPascali, Madoff’s one-time chief financial officer, told jurors in New York federal court that the scheme stretched back “as far as I can remember,” to his earliest days at the firm as a 19-year-old in the mid-1970s.

DiPascali, 57, is the government’s star witness in its case against five former Madoff employees charged with abetting Madoff’s fraud. It is the first criminal trial stemming from the scheme, which imploded in late 2008 and cost investors an estimated $17 billion.

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The five defendants in the case are Daniel Bonventre, the director of operations for the firm’s back office; Annette Biongiorno and Joann Crupi, who managed clients’ investment accounts for the unit where the fraud took place, and computer programmers Jerome O’Hara and George Perez.

They all claim that Madoff tricked them into believing his investment business was legitimate.

Madoff, who is serving a 150-year prison sentence, has said he acted alone.

PLAYING IT COOL

On Monday, DiPascali testified that Biongiorno inserted fake trades into customer statements, including hedges that were never placed, in order to make it seem as though clients had not lost money when the stock market cratered in 1987.

He also said Crupi aided Biongiorno in creating falsified statements and hiding the fraud from customers. O’Hara and Perez, meanwhile, helped write computer programs to conceal the fraud from regulators and outside auditors, he said.

At one point, when an auditor from KPMG came to look at documents, DiPascali prepared fake records from certain days to show him. The auditor, however, asked for a specific day for which records had not been created.

“Now I have a big problem,” DiPascali testified. He called O’Hara and, with the auditor standing over his shoulder, asked him to go “into the archives” for the nonexistent records.

Later that day, DiPascali said, he walked into an office where Crupi, O’Hara and Perez were throwing the newly created documents around “like a medicine ball.”

They had put the papers, still hot from the printer, in a refrigerator to cool them down and were now trying to make them seem used, DiPascali said.

TOUCHING OFF A TANTRUM

He also described Madoff’s reaction to the news that accountants Frank Avellino and Michael Bienes were under U.S. Securities and Exchange Commission scrutiny for selling unregistered shares to clients and promising returns between 13.5 percent and 20 percent.

Since the accountants invested all of their clients’ money with Madoff, he was concerned that the SEC’s investigation would unravel the fraud. An enraged Madoff stalked the hallway outside DiPascali’s office, swearing and “throwing himself around the office like a lunatic,” DiPascali said.

“He could not afford to have the SEC dig any deeper,” he said.

Biongiorno led an effort to revise Avellino’s and Bienes’ statements to corroborate the supposed trades in their account, DiPascali said.

DiPascali began his testimony by describing the morning of December 11, 2008, when Madoff awakened him at home with a phone call to tell him the FBI was in the office.

“I said, ‘Why are you calling me?’” DiPascali said. “And I threw my phone across the room.”

He had already learned that the firm was “entirely bust,” he said.

When Assistant U.S. Attorney John Zach asked what that meant for DiPascali, he replied, “That I was going to jail.” Within days, he said, he and his lawyers were arranging to cooperate with government investigators.

DiPascali pleaded guilty in 2009. He faces up to 125 years in prison. He said that by agreeing to cooperate, he was hoping for a “substantially” lighter sentence.

His testimony is expected to last several days, including cross-examination by lawyers for the five defendants, who have said DiPascali is a chronic liar in search of a deal.



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Read Comments (3)  —  Post Yours »

1

 Dec 03, 2013 at 10:37 AM PaulinSaudi Says:

Bernie's sons told the police that he confessed to them. Am I correct in saying only one or two other people have been convicted in all those years? That is to say, the police agencies have done a remarkably bad job of investigating this mess and bringing people to justice.

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 Dec 03, 2013 at 11:31 AM Liepa Says:

Reply to #1  
PaulinSaudi Says:

Bernie's sons told the police that he confessed to them. Am I correct in saying only one or two other people have been convicted in all those years? That is to say, the police agencies have done a remarkably bad job of investigating this mess and bringing people to justice.

Have you not noticed that no one including none of the five defendants as well as the governments main witness, Frank Dipascali have ever pointed a finger in the direction of Madoff's sons, that must give you a clue!

By the way, quite abit of money has been recovered and returned to investor's, so as a whole this affair has been handled fairly, under the circumstances! .

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 Mar 04, 2014 at 10:37 PM DanHeld Says:

I'm hoping that justice is truly done here with convictions and long sentences of more than ten years in a federal lockup for these lying, thieving Bernie Madoff skells who helped perpetuate this huge fraudulent scheme. How the POSh** Annette Bongiorno could state that she lived frugally when she had an expensive mansion in Boca Raton, a Bentley luxury car, several Mercedes-Benz, and a luxury home in Manhasset, Long Island, and was privy to and an essential co-conspirator in this Ponzi Scheme, is beyond my aging, fragile mind. And let's not forgive Bernie for hiring the ugliest women on the East Coast to work directly for him ... ugh! Add 'bad taste' to Bernie Madoff's many flaws ....

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