The Five Stooges Defense presented by the first Madoff employees to stand trial was doomed from the start. Expecting to find a jury stupid enough to believe the assertion that Bernie Madoff alone knew he was committing massive fraud was comic.
As the unanimous guilty verdicts on all 31 counts of the indictment indicated, no rational juror – after hearing five months of testimony from other insiders who aided and abetted Bernie and repeatedly implicated the five defendants – could possibly have acquitted this greedy crew.
And, as if nearly a month of testimony from star witness Frank DiPascali Jr., Bernie’s chief financial officer and right-hand fraud enabler, was not enough, the prosecutors presented hundreds of documents proving how the co-conspirators falsified records for decades to trick investors and bamboozle Securities & Exchange Commission investigators who should have found the fraud in 1992.
The jurors never bought the absurd defense claims that since the defendants were young, innocent and unschooled in the ways of Wall Street when they started to work for Bernie, they could not possibly have grasped that they were doing anything wrong or that they were being paid far more than they would have received at other firms for honest work.
(Not to be outdone as the jury reckoning of the Five Stooges approached, Bernie Madoff, in an “exclusive” jail house interview with Politico posted March 20, once again fed a reporter his fictional version of the story. Squaring perfectly with the defense, Madoff insisted that he alone knew he was running a Ponzi scheme. The jurors almost certainly did not see the story, so maybe Bernie was just trying to burnish his image among his fellow inmates in Butner, N.C. as a “stand-up” guy who would never “rat” anybody out during his 150-year-prison term.)
After DiPascali and eight other defendants pleaded guilty and agreed to co-operate with prosecutors, going to trial seemed like a surefire way to guarantee longer prison sentences.
The tactic made sense only as a stall for defendants each facing 20 years or more in prison. By insisting on a jury trial, the lawyers managed to keep the five defendants out of jail for five years after Madoff pleaded guilty March 12, 2009 to the biggest Ponzi scheme ever – a fraud that approached $18 billion in real money. All five remain free on bail, at least until U.S. District Judge Laura Taylor Swain sentences them in late July.
Thanks in large part to the five defendants, over the decades, Madoff’s falsified assets appeared on paper statements mailed to investors to reach net values exceeding $65 billion.
What a full house the five co-defendants made, especially the two who made the rare “Hail Mary” move of testifying in their own defenses.
There was Daniel Bonventre, now 67, ex-director of operations for Bernard L. Madoff Investment Securities who blithely fabricated financial statements and told the jury with a straight face that since he did not trade stocks, it never occurred to him that something was amiss during the four decades he worked for Madoff. The jury was laughing by the time Assistant U.S. Attorney Randall Jackson got around to cross-examining Bonventre about his relationships with the other defendants. Bonventre could not recall whether he was a “close friend” of co-defendant and colleague Annette Bongiorno, who had started as Bernie’s secretary in 1968, the same year Bonventre joined the firm.
The prosecutors showed how Bongiorno, now 66, had graduated to executive assistant in charge of faking statements for the firm’s biggest individual customers and collected millions of dollars in pay. She also had Madoff accounts that claimed she and her family had $50 million in stock there. She began her testimony by describing how naïve she was and told the jury about how she kept a photo of Bernie inscribed “My Hero” on her desk. Her doctoring the books – she said repeatedly – was all done at Madoff’s instruction and she was clueless that it might have been wrong, let alone a federal crime.
Cross-examined by Assistant U.S. Attorney John Zack, Bongiorno said she could not “remember” whether she failed to disclose to SEC investigators in 1992 that she had fabricated three years worth of investors’ account statements and cooked up thousands of fake trades to support them. No doubt Bongiorno’s claim of a modest life suffered as she admitted during cross-examination that among her luxury cars she had a Bentley and that her idea of downsizing her second home meant moving from a Florida mansion to a $6.2 million apartment.
JoAnn Crupi, now 53, a Bongiorno protégé who started with Madoff in 1983 was also found guilty. She helped falsify accounts and keep track of which clients were depositing or withdrawing money, but she did not testify. Still, prosecutors painted her as the beneficiary of back-dated trades; extravagant compensation that enabled her to buy a house worth $2.5 million at the Jersey shore and company credit cards that she used for thousands of dollars of personal expenses.
The other two, who were convicted without testifying, were computer programmers, Jerome O’Hara, 51, and George Perez, 48, who went to work for Madoff in the early 1990s and spent much of their time programming proprietary software to produce falsified records that misled investors, regulators and even Madoff’s auditors. While they did not speak, prosecutors laid out a pattern of events that suggested the two balked at Madoff’s repeated requests for fabrications until he agreed to boost their pay. DiPascali testified that in 2006 the two programmers realized that their work was crucial to sustaining and automating the fraud and demanded that Madoff pay them big raises in diamonds.
Jurors, commenting to news organizations after the verdict, made it clear that the defendants were buried by prosecutors under a mountain of evidence linking them to the biggest fraud of all time.
As U.S. Attorney Preet Bharara put it in a statement: “These convictions…demonstrate what we have believed from the earliest stages of the investigation: this largest ever Ponzi scheme could not have been the work of one person. The trial established that the Madoff fraud began at least as far back as the early 1970s, decades before it came to light. The defendants each played an important role in carrying out the charade, propping it up, and concealing it from regulators, auditors, taxing authorities, lenders and investors.”
For DiPascali, who was brought into the Madoff firm as a teenager by Bongiorno, the guilty verdicts must be a relief. He learned of the Ponzi collapse from Madoff before the fraudster was arrested December 11, 2008 and rushed to the prosecutor’s office with his lawyer to seek a deal. Facing as much as a 125-year sentence on 10 felonies, DiPascali, now 57, can only hope that his extensive co-operation will prompt a judge to reduce his time in prison significantly, so he has a shot to get out as an old man. How he fares compared with the sentences that the Five Stooges receive after electing not to co-operate will be the real test of whether going to trial when conviction was almost certain was worth the great risk.