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Banking and Finance

Jury Convicts Former Madoff Employees Of All Charges

 In the first trial to take place since Bernard Madoff's massive Ponzi scheme shocked the world more than five years ago, five former employees at Madoff's investment firm were convicted by a New York federal jury for their participation in Madoff's scheme.  After nearly 3 days of deliberations, a federal jury found former staffers Daniel Bonventre, the firm's back-office director of operations, Annette Bongiorno, Madoff's administrative assistant, Joann Crupi, an account manager, and computer programmers Jerome O'Hara and George Perez, guilty of all charges.  Perhaps fittingly, the five-month trial now ranks as the longest white collar trial in decades.  

Following Madoff's arrest in December 2008, prosecutors began to increasingly doubt his claims that he was singularly responsible for the largest investment fraud in history.  Following Madoff's 150-year sentence in June 2009, prosecutors charged at least fifteen former employees with complicity in Madoff's scheme.  Nine of those charged pleaded guilty rather than face trial.  

According to prosecutors, each of the five defendants played an active role for years in helping Madoff cover up the fraud.  This included the development of computer programs by O'Hara and Perez that contained fraudulent information designed to generate fictitious reports and evade suspicion from regulators. Bonventre allegedly falsified financial statements and other documents in order to obtain hundreds of millions of dollars in loans from financial institutions, as well as arranging for his son to obtain a "no-show" job by providing false information to the Department of Labor.  Bongirono and Crupi managed hundreds of accounts on the investment advisory side of the business, "executing" backdated trades in this accounts on paper only to achieve rates of return pre-determined by Madoff.  

One of the ex-employees that pleaded guilty was Frank DiPascali, who was widely regarded as Madoff's right-hand man during the decades-long fraud.  As part of his agreement with prosecutors, DiPascali has provided extensive cooperation to authorities, and served as the prosecution's star witness as he testified at trial and implicated each of the five defendants in Madoff's fraud.  This testimony apparently proved persuasive, as each defendant was convicted of all charges levied by prosecutors.

The trial featured many interesting twists and turns, including the unusual decisions by Bonventre and Crupi to testify in their own defense that they had no idea of the true nature of Madoff's business.  Additionally, one juror was eventually removed from deliberations after falling seriously ill - resulting in an 11-member jury left to deliberate the fate of the five defendants.  

The Court rejected prosecutors' request to immediately detain the five defendants, instead allowing them to remain free until sentencing.  Each of the five was convicted of at least eight criminal counts, and potentially face decades in federal prison.  

The convictions are the culmination of prosecutors' quest to hold those accountable who may have participated in or aided Madoff's fraud, with prosecutors now having obtained fourteen guilty pleas or convictions.  That leaves Madoff's ex-accountant, Paul Konisberg, as the only remaining defendant fighting criminal charges.  Konisberg was arrested and pleaded not guilty in September 2013 just before the five defendants were scheduled to begin trial.  The successful prosecution of the 'Madoff Five' will certainly raise serious questions as to Konisberg's choice of whether or not to proceed to trial.  Depending on Konisberg's decision, it may also finally result in DiPascali learning his sentencing after originally pleading guilty in August 2009.  

 For more news and analysis of Ponzi schemes, visit Ponzitracker, a blog by Jordan Maglich, an attorney at Wiand Guerra King P.L.

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