At the end of 2013, issues related to the Bernard Madoff fraud were still being litigated. Since Madoff turned himself in to authorities he was never prosecuted in criminal court. This left many unanswered questions with regards to the mechanics of how the fraud was conducted and the role other employees at Madoff’s firm may have played in orchestrating the scheme.
One criminal trial did proceed however, against five Madoff employees, all of who pleaded not guilty:
- Annette Bongiorno – Madoff’s personal secretary
- Daniel Bonventure – company director of operations and an accountant who had worked for Madoff since the 1960s
- Joann Crupi – a former Madoff investment advisor
- Geroge Perez – former computer programmer
- Jerome O’Hara – another former computer programmer
In this trial certain former employees of Bernard Madoff were accused of assisting Mr. Madoff in perpetrating his scheme. The most notable of these individuals was Frank DiPascali who referred to himself as Madoff’s director of options trading and Chief Financial Officer who had worked for Madoff since the 1970s.
Perhaps an employee with multiple shifting titles, particular a CFO who sometimes claims to have key investment responsibilities should be a glaring red flag to investors however, this is said with the benefit of hindsight. Regardless, Mr. DiPascali faced 125 years in prison after pleading guilty to assisting Madoff with the fraud and gave testimony against others in an attempt to lighten his sentence.
While news of the Madoff fraud is nothing new at this point some interesting revelations about the mechanics of the fraud were revealed. Interestingly, employees have turned on their former colleagues and provided testimony which implicates those long suspected of aiding Mr. Madoff in perpetrating his Ponzi scheme.
In particular, some of the more interesting revelations have included:
- Mr. DiPascali lied to securities regulators and fellow employees
- There were a series of interoffice romances among all but one of the defendants in the trial and Madoff was involved in a love triangle with other employees
- Former assistant to Ms. Bongiorno Winnie Jackson, yes Madoff’s assistants had assistants, testified that Ms. Bongiorno would requests that stale dates and prices be used to backdate investor account statements in order to meet pre-determined investor profitability trades. Internally within the Madoff organization these were referred to as, “cut and paste trades.”
During the testimony it came out that in some cases prices that were over a year old were utilized. Making matters worse, no trades were actually ever taking place. Oh by the way, why was Ms. Bongiorno allegedly involved in preparing client statements?…
- Madoff employees would conduct research on option trades. However, the alleged purpose of such research was to look at historical stock splits, trading prices and volumes and then use this data to allegedly backfill fake trades to make client statements look profitable
- Multiple people at the firm allegedly lied to clients, not just senior officials as was originally thought
- Employees were told to keep quiet about large checks being cashed in order to process large payouts to other employees who were invested in the Madoff funds
Oh and topping everything off we learned that perhaps as some sort of depraved acknowledgement that he took pleasure in stealing millions, Madoff kept a four foot sculpture of a giant screw in his office.
No doubt further details will continue to leak out in the years preceding this trial both in and out of the courtroom – unfortunately such information is likely little solace for Madoff’s victims.