Posts Tagged bernie madoff

Five Former Employees of Bernie Madoff Found Guilty Of Fraud

WSJ article by Christopher M. Matthews

Verdict Comes After Four Days of Deliberations and Trial of More Than Six Months

madJurors found five former employees of Bernie Madoff guilty of fraud, a verdict that shows the convicted Ponzi schemer got a wide range of help keeping afloat a scam that ran for decades and cost investors $17 billion.

The defendants, who included two trading managers, two computer programmers and the firm’s director of operations, were found guilty of conspiracy to defraud investors and securities fraud. The outcome means that jurors were convinced all five in some way helped Mr. Madoff perpetrate the massive fraud. They each face decades in prison.

The result, which comes after four days of deliberation, caps a trial that lasted more than six months and hands prosecutors a win in their only attempt to bring a Madoff case before a jury.

Testimony during the trial showed the extent of the efforts Mr. Madoff and his employees went to disguise their fraud, everything from creating computer programs that generated fake documents to lying to regulators and auditors.

Computer programmers Jerome O’Hara and George Perez were convicted of creating phony customer accounts, while portfolio managers Annette Bongiorno and JoAnn Crupi were convicted of concocting phone trading records. Daniel Bonventre, a former operations director for Mr. Madoff, helped gin up phone books and records, the jury found.

Mr. Madoff himself was sentenced nearly four years ago to 150 years in prison. He has insisted he carried out the long-running scheme on his own. Prosecutors turned to an array of witnesses, including several of Mr. Madoff’s former employees, to establish that wasn’t the case.

The government’s star witness was Frank DiPascali Jr., the former chief financial officer who worked with Bernie Madoff for 33 years. Mr. DiPascali was on the stand for more than a month and in sometimes emotional testimony implicated all of the defendants, telling jurors he worked with all five to produce fraudulent records.

In one instance, he recalled asking Mr. O’Hara to produce records after an outside auditor from KPMG showed up at the firm. Mr. DiPascali said that when he went to get the document hours later he witnessed Messrs. O’Hara and Perez and Ms. Crupi putting it in the fridge to cool it down after it came off the printer and throwing the document around like a “medicine ball” in order to make it look used.

Mr. DiPascali, 57 years old, pleaded guilty in 2009 and faces as long as 125 years in prison. He is confined to his home as part of a cooperation agreement with the government that could result in a recommendation for a more lenient sentence.

The defense attorneys tried to discredit Mr. DiPascali as a professional con-man who would say anything in a bid to reduce his sentence. During a combative and lengthy cross-examination, they asked him about the five boats he was given by Mr. Madoff and whether he would have made more money if he was paid for every lie he told.

Other testimony focused on the alleged spending habits of the defendants, who prosecutors say became millionaires in their time working at the firm. Ms. Bongiorno, for example, bought a Bentley and two Mercedes-Benz automobiles as well as a $6.5 million condominium in Florida, which she said she purchased in order to “downsize.”

With the verdict, more than a dozen people, including Mr. Madoff, have either pleaded guilty or have been convicted of crimes connected to the Ponzi scheme.

The defense attorneys didn’t dispute that their clients fabricated documents that misled clients and regulators. But they sought to portray them as innocent victims of the scheme’s masterminds.

One of the defense attorneys, Gordon Mehler, described Mr. Madoff and Mr. DiPascali as “two of the greatest criminal masterminds in human history.” The defendants trusted Mr. Madoff—”a titan, a guru, a Wall Street genius,” according to Annette Bongiorno’s attorney, Roland Riopelle—and merely did what they were told.

Ms. Bongiorno testified in her own defense, a somewhat rare occurrence in white collar trials, and said she never thought it was suspicious to backdate trades because her only instruction in the financial services industry had come from Mr. Madoff. Mr. Bonventre also testified in his own defense, and said that because he wasn’t involved in the trading, he never realized the firm was a fraud.

Prosecutors called the defense theories “preposterous,” and urged jurors to reject their “fantasy” defenses. Assistant U.S. Attorney Randall Jackson said the defendants’ explanations were akin to portraying themselves as helpers in the workshop of Santa Claus, who never realized everything was make-believe. But even children figure out that Santa doesn’t exist, Mr. Jackson said.

“Madoff Securities was not Santa’s factory,” he said. “The defendants in this case were not children. During the decades they worked at Madoff Securities, they were adults.”


Posted by:  Steven Maimes, The Trust Advisor


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New Woody Allen Film (Blue Jasmine) Brilliantly Picks the Market’s Madoff Scars

The latest Woody Allen drama, “Blue Jasmine,” is all about Cate Blanchett’s somewhat tragically bewildered New York socialite, but the shadow of Bernard Madoff hangs heavy in the background of just about every scene. Opens in theaters nationwide this weekend.

It’s hard to remember that Madoff’s massive pyramid scheme imploded at the end of 2008, the year when far more prestigious Wall Street firms were collapsing on both sides and the market itself came close to melting down.

But a $65 billion case of outright fraud resonates a lot more deeply with retail investors than a lot of the esoteric derivatives and other instruments that seized up in the credit crunch, so Madoff became the symbol of the crash in ways that no faceless CDO, MBS or MMF ever will.

Madoff was the human side of the market’s rise and fall, which is why this movie should be required viewing for every advisor who works with those retail investors today.

In Allen’s version of the story, “Hal” (played by Alec Baldwin as a consummate WASP sleaze) stands in for Madoff while Cate Blanchett is brilliant as riches-to-rags wife “Jasmine.”

The events unfold largely as they did in real life up until the crooked husband goes to jail, and then it becomes the wife’s show — and Allen’s fictionalized story of her post-Ponzi life.

It’s not too early for the buzz to start around Blanchett winning another Academy Award for this, simply because she makes a character that would otherwise become a caricature into someone complex and even pitiable by the time the credits roll. Bernie or his fictional doppelganger was the villain of both stories, but at least in Allen’s world, Mrs. Madoff is the victim and the star.

And it’s worth dissecting once again just how Madoff’s victims felt when they learned their money was gone. This case provoked rage against financial advisors like none other. Celebrities, charities, clergy bought Bernie’s claims and bet big chunks of their investable assets on his scheme, only to watch it all evaporate.

The regulators were so embarrassed that even to this day the SEC and FINRA hold the Ponzi scheme in special contempt and will move mountains to root out even the slightest hints of anything that looks, smells or quacks like Bernie’s scam.

Custody and sham accounting were the big red flags. Advisors who maintain custody of their own clients’ assets are under the microscope 24/7 now because it was too easy for Bernie to doctor his statements for decades with no third-party custodian watching over his shoulder.

And his accounting firm was, according to all accounts, a cruel joke more interested in rubber-stamping his performance numbers than asking the hard questions.

Insiders blew the whistles as loudly and often as they could, but the tips were never really followed up on, even after Bernie suddenly decided to register as an RIA a decade after getting the scam rolling. FINRA and the SEC blamed each other and nothing got done until it was too late.

You’re nothing like Bernie Madoff. You have rules governing your behavior and people checking your claims. It’s still a good idea to let your clients and prospects know what exactly you do to protect them to the point where you couldn’t pull off anything like this even if — in the most bizarre scenario imaginable — you actually wanted to try.

Remind them that there are bad actors in the market and teach them how to spot the warning signs. They should check the discipline records on file with the regulators and call around. You can show them how to do this by starting with your own disclosure forms and official supervisory profile.

Clearly Bernie’s ghost is still present for Woody Allen at least. And if this movie refreshes the memories of people who lost money or know someone who did, a little exorcism may be called for.

Madoff was the best marketing device for honest advisors in years. It’s just a shame that so many innocent people had to lose so much money to give everyone else a way to learn a key lesson.

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