BUSINESS 12/31/2014 @ 11:48PM 21,561 views
At first blush, they seem like ordinary people who simply had the misfortune to work for a man responsible for the greatest fraud ever. But in a complex trial, prosecutors convinced jurors that these five were the ones who made the Ponzi scheme work, winning guilty verdicts on all 59 counts.
THE MADOFF FIVE: History’s Greatest Fraud Yields One Of The Greatest Legal Slugfests Of Our Time
“What?! For Annette? How the hell did that happen?! Oh my God, I can’t believe Annette got only six years. Don’t tell me it’s gonna be like two months for [co-defendants] Jerry and George. That pisses me off, I’m sorry. I thought she was more guilty than all of them. The prosecutors must have been devastated. It’s kind of like a slap in the face to everybody who worked so hard getting these guys convicted, and for the jury who had to listen to the evidence for nearly six months.”
— Juror Sheila Amato, on sentence imposed on Annette Bongiorno, a former top manager at Madoff Securities
“Richard, these five loyal and dedicated employees were following the instructions of their immediate supervisor. They were not SEC-registered brokers and therefore had no reason to believe that they were violating any SEC regulations. They were always led to believe that the trades and the client assets were effected and held in Europe, as was common in our industry for this type of transaction. I alone am responsible for any wrongdoing on their part and will always suffer for the pain I caused my clients, my employees and their families.”
— Bernard L. Madoff, to author
When the first prison sentence was announced on December 8th, FBI agent Paul Takla spat out a breath of air in disgust. My eyes did a split-strike conversion, a Madoff trading method that the feds called a now-you-see-it-now-you-don’t fiction. Prosecutors sat stunned. So did defense lawyers, including a no-longer-frowning Larry Krantz, who rejoiced to a colleague: “This judge knows justice.” And by the time it was over, with the fifth and final defendant sentenced on the 15th, a New York federal judge named Laura Taylor Swain had upended her reputation as a harsh bequeather of punishments.
The clock is ticking for the Madoff Five. In just a few minutes, it will be 2015—the year that the only employees of Bernard L. Madoff who have been convicted of crimes at trial will begin serving out their prison terms. These defendants weren’t ‘masters of the universe’ who could bring a nation’s currency down with the wave of their hands; they weren’t hedge fund managers straight out of Yale or derivatives managers with multiple degrees from MIT. They were the unseen trolls of Wall Street, the workers in the underworld that is the Metropolis of finance. They are the ones who make the Street work. These five, very much that world in microcosm, were on trial for making the Madoff Ponzi scheme work.
At first blush, they seem like ordinary people you’d meet in a subway who simply had the misfortune to have worked for a man who was responsible for the greatest fraud ever. He is serving a 150-year term in a prison in North Carolina, but hovered over the Manhattan courtroom for years like an all-knowing apparition. Most of them started with him right out of college or high school and knew nothing about the financial world, except for what Madoff would teach them. The company’s offices were an insulated universe, where the boss stovepiped his 200-odd employees on a need-to-know basis—trying to keep them encased in separate cocoons. Many employees were told not to even discuss their job duties with colleagues.
“After Bernie’s arrest [December 2008], the first term that came to me to describe this is that I’m living in The Matrix,” a longtime arbitrage trader at the company, who requested anonymity, told me several years ago. “But you can also view it like a Potemkin village. He manipulated everybody.”
While that trader was engaged in real transactions on the broker-dealer’s proprietary-trading desk, the world now knows that no trades had been transacted for at least two decades for the thousands of the firm’s customers (on the investment advisory side of the business).
Exactly when that Ponzi began is still a matter of dispute. Even Madoff’s deputy, Frank DiPascali, the government’s chief turncoat in this case, couldn’t seem to get his story straight on when he knew it was all a fraud. But the devastation the crime created is not open to argument: It was, put simply, the 9-11 of the financial world. It will reverberate through generations. Accordingly, the victorious prosecutors, while unable to bag the punition they sought, have earned a place in Wall Street history. Two of them—Matthew Schwartz and John Zach—are now heading off as a team into the private sector to take advantage of their big win.
Defendants in this trial were convicted last March of a swath of crimes that boil down to helping fool investors. Specific charges for each are listed in the tables below. They range from the creation and backdating of fake trades, to ginning up the company’s financial ledgers; from feeding the Securities and Exchange Commission and the firm’s outside auditors (KPMG) with false information, to creating intricate computer programs that randomized numbers for regulators and customers; from tax evasion and conspiracy to the commission of bank fraud. At their sentencings, they were ordered (well, at least technically) to forfeit a total of $384 billion.
I’ve long been at work on a book about Madoff, to be published by Simon & Schuster. And for five years I’ve watched the Madoff Five case slowly disgorge itself in a federal courthouse in lower Manhattan—hearings after hearings after hearings. It was capped by a nearly six-month trial, the only one to date for 15 individuals who have either pled or been convicted of crimes connected to enterprise. As such, it is the first case to shed light on the $65 billion fraud—what the judge called “the biggest Ponzi scheme known to man.” (That figure includes imaginary money that investors believed they had at the firm at the time of its collapse; loss of principal was roughly $20 billion.)
Unfortunately, watching Judge Swain make a decision is like watching clothes go round and round in a washing machine—thus the five-year slog. I lost count of the number of scheduled sessions that she permitted to be postponed, as well as sidebar conferences that Swain invited both sides to partake in (with or without her) outside of the earshot of jurors. (Virtually every other judge in that courthouse takes seconds to rule “sustained” or “overruled” after a defense lawyer or prosecutor objects.) That said, you’d be hard-pressed to find a jurist there who is fairer and more gracious to both sides. The jurors loved her. She was kind to, and often greeted, the press.
Fair for sure, but once convicted by that jury, crushing prison terms seemed all but certain, as Swain is known for ‘coming in hard’ for the government after criminal defense lawyers lose. Yet to the surprise of just about everyone closely following the case— including four of the five jurors who agreed to be interviewed by me (of the 11 who deliberated)— that didn’t happen here.
Bottom line: The prosecutors won 5-0 (or 59-0, as the jury gave the defendants a thumbs down on every count they faced.) The defense lawyers then scored a coup of their own after Swain showed extraordinary compassion for a whole slew of reasons—from the short stature of one defendant (Annette Bongiorno, at 4’ 7”) that Swain said could create extra problems for her in prison, to the high-reaching final address to the jurors by the prosecution, which she slammed afterwards as overly aggressive. But the biggest reason seemed to be her conclusion that, while each of them benefitted financially by either knowing or willfully blinding themselves to the fraud, none were the architects of it. One defendant was even granted a prison sentence lower than what her attorney had requested. Now that’s mercy.
BRING IT ON: “I shall eagerly await the newspaper reports of those proceedings on appeal,” federal judge Laura Taylor Swain told the Madoff Five prosecutors [photo courtesy of Judge Swain’s chambers]
At nearly six months, the Madoff Five showdown is believed to be the lengthiest white-collar case in the history of the federal court for the Southern District of New York—sometimes called the nation’s “Mother Court.” It was held in the rarely-used “Ceremonial Courtroom,” which can hold hundreds of spectactors. It was brought by the most prestigious prosecutorial corps in the world: the United States Attorney’s Office for New York’s Southern District. Given the notoriety of the fraud, it required, Judge Swain concluded, a jury pool of 400 people to try and ensure impartiality. It produced more than 40 witnesses, 12,000+ pages of transcripts, more than 1,242 filings to date in the court’s docket system, and 500 gigabytes of government exhibits. (Millions of documents were kept in thousands of large banker boxes in a warehouse that was made available to the defense.)
It would not be a stretch to say that it was arguably one of the most important and complicated Wall Street cases since 1792, when two dozen leading merchants met quietly under a buttonwood tree to give birth to the stock market. But while the daily press naturally focused on the defendants and their fates, it was a case as much about the brutal legal shootouts between both sides.
Indeed, given the five years of slugging it out, defense lawyers became so close to their clients that it often seemed like they were the ones on trial. Little surprise then that two of the attorneys fell into long and deep funks following the jury verdicts. Their faith in the justice system, they say, was gravely shaken.
More on the jury later. First, a list of the defendants, their photos, their finances, plus some facts about their convictions, their sentences, what was predicted (based on a pre-sentencing survey by me of many key players and observers), as well as how the prosecution and defense portrayed the five:
TEN YEARS FOR BONVENTRE: “I’m surprised that he only got that,” says juror Gloria Wynn. “He was a shaker and a mover and he benefitted an awful lot from the whole thing—more so than a lot of them.” [photo of Daniel Bonventre from REUTERS/Brendan McDermid]
DANIEL (DANNY) BONVENTRE, age 68
Began working for Madoff Securities: 1968
Portrayed by prosecution as: Director of Operations who cooked the books, on a par with Frank DiPascali (who was Madoff’s right-hand man and the government’s chief rat)
Portrayed by defense as: An unwitting participant in the fraud, manipulated and lied to for decades by Madoff and DiPascali.
Convicted of: Multiple counts of conspiracy; securities/bank/accounting fraud; falsifying records of a broker dealer and investment advisor; false SEC filings; obstructing the IRS; filing false tax returns
Money: Final salary $1.3m. (More than $15m from 1992-2008). Investment advisory account had $578K when he closed it 2006
Took the stand: Yes
Maximum faced: 220 years (70 years longer than Madoff’s sentence)
Offer he rejected: No plea offer was ever made
Prosecution wanted: Any sentence above what probation office recommends
Probation office recommended: 20 years
His attorney, Andrew Frisch, requested: “home confinement and community service or, alternatively, a short term of incarceration”
Initial courtroom polls predicted: 13-17
Sentence: Ten years (plus judge to recommend that Bureau of Prisons allow him to serve the last year in home confinement)
Could be home in: 7 and a half years (assuming good behavior)
Must forfeit: $155,645,703,200
TRACKED THE BANKBOOK: Nevertheless, Judge Swain said there’s no proof that Joann Crupi knew it was a Ponzi scheme. “She was a nice person, basically,” concluded juror Sheila Amato. “Crupi was the most redeeming one.” [photo of Crupi from Reuters/Jessica Rinaldi]
JOANN (JODI) CRUPI, age 53
Began working for Madoff: 1983
Portrayed by prosecution as: Co-manager of the investment advisory business who directly lied to customers, played a key role in deceiving the SEC and outside auditors, and kept meticulous track of the Ponzi bank account.
Portrayed by defense as: Gullible employee under the sway of Madoff and DiPascali who was not aware of the fraud in which she participated.
Convicted of: Conspiracy; securities and bank fraud; falsifying books and records of a broker-dealer and an investment advisor, and tax fraud offenses
Money: Final salary $290K; bought $2.2m beach house 2008 with company funds (approved by Madoff)
Took the stand: No
Maximum faced: 175 years
Offer she rejected: 10 years
Prosecution wanted: Anything higher than what probation office recommends.
Probation office recommended: 14
Her attorney, Eric Breslin, requested: “Mercy” and “a sentence that will allow Ms. Crupi at least some opportunity to be part of her children’s lives before they are children no longer”
Initial courtroom polls predicted: 10-12
Sentence: 6 years (with the judge’s recommendation that the last year be served in home confinement), plus 2 additional years of home confinement.
Could be home in: 4 years, several months
Must forfeit: $33,850,967,139
DEVOTED TO THE BOSS: Annette Bongiorno testified that she loved and idolized Madoff, and didn’t think she was doing anything wrong by backdating stock trades as he directed her to do. Madoff concurs. [photo courtesy of Annette Bongiorno]
ANNETTE BONGIORNO, age 67
Began working for Madoff: 1968
Portrayed by prosecution as: Co-manager of the investment advisory business and essential player in the fraud. Knowingly engaged in fake-trading scheme since 1970s and used that knowledge to take millions of dollars from the fraud for herself.
Portrayed by defense lawyer Roland Riopelle as: Longtime, unsophisticated employee—“naïve” and “foolish”— who idolized and was loyal to Madoff, who betrayed her trust and used her as a puppet.
Convicted of: Conspiracy, securities fraud, falsifying books and records of a broker-dealer and an investment advisor, obstructing IRS, and filing false tax returns
Money: Final salary $334K ($18.5m total up til 2008); withdrew $3.7m from investment advisory account 2008; account statements showed more than $50m when firm collapsed.
Took the stand: Yes
Maximum faced: 78 years
Offer she rejected: No plea offer made, although Riopelle says the prosecution offered to try to convince their bosses to authorize 15 years.
Prosecution wanted: Anything higher than what probation office recommends
Probation office recommended: 20.
Her attorney, Roland Riopelle, requested: 8-10
Early courtroom polls predicted: 12-15
Sentence: 6 (plus judge to request the last year to be served at home)
Could be home in: 4 years, 1 month.
Must forfeit: $155,158,703,200
JEROME (JERRY) O’HARA, age 51
Began working for Madoff: 1990
Portrayed by prosecution as: Same as George Perez [see below]—a knowing participant in the fraud since he began at Madoff Securities; computer programmer whose skills were limited to the use of a nearly obsolete programming language and who wrote hundreds of programs to create blatantly fraudulent books and records. Essential player in deceiving the SEC, outside accountants, and IRS.
Portrayed by defense as: Diligent but inexperienced worker who was deceived by his bosses, Madoff and DiPascali, and who joined the firm long after computer system’s basic architecture had already been designed and implemented.
Convicted of: Multiple counts of conspiracy, securities fraud, falsifying the books and records of a broker-dealer and investment advisor.
Money: Final salary $312K; closed investment advisory account 2006 (final balance: $578K); also closed three family accounts totaling $976K
Took the stand: No
Maximum faced: 100 years
Offer he rejected: A maximum of 5 years
Prosecution requested: Anything higher than what probation office recommends.
Probation office recommended: 8
His attorney, Gordon Mehler, requested: “Home confinement with community service, or, alternatively, a brief period of imprisonment.”
Initial courtroom polls predicted: 7-8
Sentence: 2.5 (plus, as with Perez, judge will request the Bureau of Prisons place him in an alcohol treatment program that could trim 6 months off sentence)
Could be home in: A year and 7.5 months
Must forfeit: $19,707,987,337
COURTROOM CLIFFHANGERS: Computer programmers Jerome O’Hara (left) and George Perez could be home from prison by October 2016 after judge decided their roles in the fraud were less than what prosecutors concluded. The government sought a sentence of anything higher than the eight years that the Probation office had recommended. [photo: © Richard Behar]
GEORGE PEREZ, age 49
Began working for Madoff: 1991
Portrayed by prosecution as: Like O’Hara, a knowing participant in the fraud since he began at Madoff Securities; a computer programmer whose skills were limited to the use of a nearly obsolete programming language and who wrote hundreds of programs to create blatantly fraudulent books and records. Essential player in deceiving the SEC and outside accountants, as well as the IRS.
Portrayed by defense as: As with O’Hara, a diligent but inexperienced worker who was deceived by his bosses, Madoff and DiPascali, and who joined the firm long after computer system’s basic architecture had already been designed and implemented.
Convicted of: Creating computer programs that were used to defraud clients and regulators. (Specifically: Multiple counts of conspiracy, securities fraud, falsifying the books and records of a broker-dealer and an investment advisor)
Money: Final salary $315K; closed investment advisory account 2006 (final balance: $289K, includes $120K deposit of his own funds).
Took the stand: No
Maximum faced: 100 years
Offer he rejected: A maximum of 5 years.
Prosecution wanted: Anything more than what Probation office recommends
Probation office recommended: 8
His attorney, Larry Krantz, requested: “Home confinement or a period of brief incarceration followed by home confinement.”
Initial courtroom polls predicted: 7-8
Sentence: 2.5 (plus judge will request the same alcohol program as O’Hara, which could trim off 6 months)
Could be home in: A year and 7.5 months
Must forfeit: $19,707,987,337
The three lead prosecutors—Schwartz, Zach and Randall Jackson— worked some of the biggest headline-generating cases of recent years: ‘London Whale’ (prosecution of traders who lost $6.2 billion for JPMorgan Chase); SAC Capital ($1.8 billion recovery after hedge fund’s insider-trading guilty plea); Mark Dreier ($400 million Ponzi); and GM’s bankruptcy (government-sponsored rescue of country’s largest automaker).
Madoff-related cases, too: JPMorgan Chase (bank agreed to pay $1.7 billion to the defrauded investors in largest-ever anti-money laundering penalty); and the Jeffry Picower settlement. In that matter, a $7.2 billion retrieval from the estate of one of Madoff’s biggest clients (who drowned in his pool ten months after Bernie’s arrest) was the largest-ever civil forfeiture. It was achieved in coordination with a court-appointed bankruptcy trustee tasked with recovering funds for investors, with $2.2 billion going to the Justice Department’s “Madoff Victim Fund” and $5 billion going to the trustee’s fund for customers.
Finally, the prosecutors worked a number of colorful non-financial cases, such as “The Cannibal Cop” (ex-policeman accused of conspiring to kidnap, cook and eat women); politician Larry Seabrook (corruption); FARC (leaders of the Columbian narco-terrorist guerilla group; Times Square Bomber (attempted car bomb by Islamist terrorist); and Christopher Coke (drug lord whose ouster caused a minor civil war in Jamaica).
The lead defense lawyers, among the most eminent in New York’s criminal bar, brought a combined 150 years of experience into ‘the well’— the combat zone in front of the judge’s bench. Andrew Frisch, the lead attorney for Dan Bonventre, has practiced criminal law for almost 30 years—eleven of them as a federal prosecutor. (On the defense side, he obtained acquittals in his first two trials and won five of his first appeals—four of them in the Second Circuit, where reversals are rare.) Also with three decades (and two dozen trials) under his belt is George Perez’s lawyer, Larry Krantz—who as a prosecutor scored big wins in fraud, bribery and mafia cases. (He’s also repped many criminals in cooperation deals with feds, like turncoat DiPascali secured here.)
Yet another three-decade practitioner, Roland Riopelle (client: Annette Bongiorno) spent seven years prosecuting cases in the same U.S. Attorney’s office that tried the Madoff Five, ranging from large commodity frauds to major drug cases. “Roland has an uninhibited style of argument, and a big heart for his clients that gives him rare abilities as an advocate,” says George Canellos, a former head of the SEC’s New York Regional Office, who worked with Riopelle in their years as federal prosecutors. (His chemistry with clients was clear enough on the morning of Bongiorno’s sentencing. “I love him,” she told me in a hallway outside the courtroom. “I called him last night to say that I was going to bake him cookies for today, but that I felt too stressed to do it.”)
TURNCOAT: Madoff’s right-hand man, Frank DiPascali, fingered the Madoff Five. He’s not done yet. [photo: © Richard Behar]
Gordon Mehler, also with 30 years in the ring, is a former prosecutor who served as a Deputy Assistant Attorney General in the Clinton Administration. He is the lead author of a well-respected annual treatise on federal criminal law that, at 1,300 pages, is not at all recommended for lay readers.
Last but never least, Crupi attorney Eric Breslin clerked in the early 1980s for a chief justice of New Jersey’s supreme court and has since worked hundreds of cases. Among his many wins was a trial in Miami where his client was charged with conspiracy and money laundering. He once told a reporter that hearing the jury foreman say “not guilty” over 70 times (for five defendants, as with the Madoff case) was one of those instances where “time really stood still and my decision to become a lawyer seemed the best decision I had ever made.”
In this current contest, it was a boomerang for Breslin, as the jury foreman recited “guilty” 59 times for the five individuals. The defense lawyers all felt they had a good shot at acquittals. I kept shuffling between guilt and innocence so many times (jurors didn’t) that I felt like a juggling clown—and surely sounded like one to a Newsdayreporter sitting next to me in the gallery, when I kept whispering my ever-changing guesses into his ear.
I’ve long felt that seasoned investigative journalists shouldn’t be on juries—in the old days they were routinely dismissed from service—and this case confirmed it for me bigtime. We look at cases differently. When we accuse people of wrongdoing in our stories, the bar we set is often higher than a juror’s, especially as we ponder any potential libel suits.
MEDIA ORGY: The scenery outside the courthouse on June 29, 2009, the day Madoff was sentenced. Inside, a second (overflow) room had to be set up for spectators to watch the proceeding by closed-circuit TV. [photo: © Richard Behar]
On the other hand, we’re often deeply suspicious of those who don’t respond to us (or testify on their own behalf, as three defendants here chose not to do.) I’ve told subjects of my probes that readers may assume they are hiding something if they don’t comment. Jurors are instructed by judges not to consider that silence in their decisions on guilt or innocence.“It was heartbreaking [the verdict] and, in retrospect, with the severe pre-existing prejudice from anything associated with Bernie Madoff, I’m not sure we even had a chance with this jury,” says defense lawyer Mehler. “But even after more than 30 years of being on both sides of the prosecution-defense divide, it was the best-tried case that I was ever a part of, and you had great defense lawyers. It was humbling for me to see how good everybody else was. Each of us made the other better.”
Given the extraordinary length and acrimony of the Madoff Five case, strong bonds were forged, as passengers shipwrecked on a desert island must forge to endure the surreality. Indeed, the prosecutors were physically separated for almost a year from their other colleagues at the U.S. Attorney’s office, with no rescue boats in sight.
On the defense side, 35-year-old Kimberly Yuhas, co-counsel for Perez, struck up a close friendship with defendant Bongiorno, even though she didn’t represent her. Since last Christmas, they’ve gotten together roughly once a month, on some occasions for Broadway shows. (Matinees only, as Bongiorno has a court-imposed curfew, and has often been required to wear an ankle bracelet that monitors her movements.) They also gather at Annette’s soon-to-be-forfeited mansion, where she’s taught Kim her recipe for meatballs. They’ve formed “a mother-daughter-type relationship,” says the young attorney. “The way that Annette shows love is to cook for people.” (In fact, on many occasions she brought homemade goodies into the courthouse for lawyers, co-defendants, their families, and a spectator or two.)
Bongiorno’s own lawyer, opera fan Roland Riopelle, now shares a Metropolitan Opera subscription with Crupi’s lawyer, Eric Breslin, whose father was Luciano Pavarotti’s manager. (They didn’t know one another before this case.)
And as stated earlier, prosecutors Schwartz and Zach are off to conduct a performance of their own, as they prepare to practice law together, bringing their experience nailing some of history’s biggest financial crimes to the private sector. Destination unknown, and it’s the topic of much speculation inside the U.S. Attorney’s office.
In reflecting on the case, some high points or ‘gotcha’ moments stand out.
IF THE GLOVES FIT, YOU MUST RIDICULE IT
Assistant U.S. Attorneys in the Southern District typically have a five-year run, at which point they jump to prestigious criminal-defense law firms. Not so the 37-year-old Schwartz, who became the lead investigative prosecutor of the Madoff Five case. He’s spent nearly twice that amount of time honing his skills there, on cases such as the JP. Morgan Chase/Madoff anti-money laundering prosecution, and a lengthy tug-of-war with Madoff customer Jeffry Picower’s estate. He’s a graduate of Columbia Law School, which is typically ranked among the top five law colleges in the U.S. He also clerked for two top judges, including late Connecticut governor Thomas (“Tough Tommy”) Meskill, who was known for rarely walking away from a good fight.
Throughout this trial, Matt himself was a buttoned-up assassin in the courtroom—deadpan, sardonic, not prone to displays of exuberance—and rarely swearing, except strategically. He doesn’t telegraph his jokes. “That’s because I don’t care if you laugh,” he once said, according to a colleague.
The dry wit was on display when he cross-examined a former FBI agent who had been retained by computer programmers’ O’Hara and Perez. The defendants had sent letters to themselves in 2006 stating that they were uncomfortable with certain tasks they were asked to do and feared the consequences of refusing to do them. Their defense lawyers turned over those letters to prosecutors, a highly risky gamble (as we’ll see below) that backfired with jurors.
On a dramatic afternoon, the defense lawyers played a video for the jury that showed the ex-FBI agent using (purple) gloves—so as not to contaminate those sealed letters with his fingerprints— to open them up in 2012. (Picture the accountants at Price Waterhouse, during their annual guarding of the envelopes of Oscar winners until that dramatic night.)
During his cross of the former G-Man (his name was Craig Dotlo), the granite-faced Schwartz made his move to mock the show. He handed him the original letters—they were inside Ziplocs, courtesy of the defense lawyers—to validate their authenticity.
Q: …You were wearing gloves in the video; is that right?
Q: And that’s so the evidence isn’t contaminated in any way?
Q: Yes, my fingerprints wouldn’t be on the documents.
A: Right. And were you able to confirm that Mr. O’Hara’s fingerprints were the only fingerprints on the letter that purports to be from him?
KRANTZ: Objection, your Honor, scope.
A: I have no idea about his fingerprints.
Q: Okay. Did you do any fingerprint testing?
Q: DNA testing?
Q: Handwriting analysis?
Q: Okay. So I’m going to ask you to look at the originals. We should probably then preserve their evidentiary value. I brought some gloves [they were purple, just like what Dotlo wore in the video] so you can open them up.
Anyone over the age of 35 might now be recalling the everlasting moment during the 1994 murder trial of O.J. Simpson, when his attorney handed the football legend a leather glove and told jurors: “If the glove doesn’t fit, you must acquit.”
But Krantz was in no mood for laughter. He leapt from his chair, fuming and looking perplexed. After all, the prosecutors had stipulated to the authenticity of the lettersbefore the trial even began. He felt the questions by Schwartz violated the spirit of that stipulation. On the other hand, the prosecutors themselves had already put the letters into evidence, as support for their case. So maybe they thought there was no need to even bring a former FBI agent (with the credibility such a title brings for jurors) into the courtroom—let alone have the elaborate video display—to try and give heft to their case.
KRANTZ: Your honor, there is no need for the gloves, it’s not – they’re no longer in any state that needs to be preserved. They’re here! The jury can see and touch them. There’s no need for gloves.
COURT: Well, since there’s no objection to the handling of them without the gloves, you needn’t put the gloves on.
It was too late. The joke went off without a hitch. Krantz hadn’t seen the gloves coming. Nobody did.
CRIME SCENE: Madoff’s Ponzi scheme has made the landmark Lipstick Building—created by architects Philip Johnson and John Burgee— even more famous than it was when it was completed in 1986. His operation took up three floors, including the now-infamous 17th, where the books were cooked, and the fake and backdated trades were done. Perhaps contagiously, in 2010, two years after Madoff Securities went bust, the company that owned the building filed for bankruptcy after having overpaid for it. [photo: Madoff company brochure]
Like his father, a cardiologist, Schwartz has learned to cut straight to the muscle of a case. “He just gets it,” says Danya Perry, who served until recently as the chief investigator of the state’s anti-corruption commission, and who worked on big cases with Schwartz. “Obviously, in a case like Madoff, which is massive and involves staggering numbers of documents and witnesses, you need someone who won’t be distracted by all the sideshows. Matt has a laser-like focus and precision.” His reputation in the office, she
says, is possessing a consistent ability to take knowtty issues and distilling them to their essence.
Schwartz slithered deep into Schwartz into the intestines of cyberspace with an IBM expert who laid out how the two computer-programmer defendants utilized special software code on an outdated IBM computer system to create false data that was used on client statements, and that tricked auditors and SEC regulators. Jurors were papered with more geekspeak by Schwartz and the IBMer than you can shake a mouse at— a replicating litany of concepts and terms such as “linear congruential generators,” plus dozens of programs and data files with names as comprehensible as TRDENT, BKCS48, CASH1702, TRADE17, BTS007, DFC021, DTC021, S.NAME7, M1, M2, M3, M4. And so on.
Through it all, one juror nodded off at times (in fairness, she fell asleep often), but the rest of the jury sat transfixed. “He explained and proved that many of the computer programs and reports were artificial and consciously created,” recalls juror Craig Parise, a fifth-grade schoolteacher. “At the least, he proved Jerry and George had their names all over them—it wasn’t a line of mistakes unknowingly designed.”
No humor would have worked in IBM-land. But one of the worst moments for defendant Joann (Jodi) Crupi—a top manager whose core duties for years included tracking the bank account Madoff used for his Ponzi—was when Schwartz poked fun at her expense (and expenses).
Prosecutors displayed her Madoff Securities corporate American Express card statements on screens throughout the courthouse. They included charges such as $126,113 for travel (including cruises and trips to Disney World); $13,591 at an Italian restaurant near her home in New Jersey; $5,473 at Best Friends Pet Care; even $40,371 spent at one wine store (plus another $4,905 on bottles of alcohol elsewhere). “Very telling,” says juror Nancy Goldberg, who works as an instructor for at-risk students. “It was just mind-boggling. Mind-boggling. I’d like the wine list from Jodi. I’d like to know her favorite wine.”
Prosecutor Schwartz made sure that the jurors never forgot about it. Crupi’s attorney, Eric Breslin, put only two witnesses on the stand for his client’s case. One of them, a close friend of Crupi’s for 15 years, was crossed by the prosecutor for barely one minute.
Q: …You like her and think well of her?
A: I adore her. I think she is great. We will be friends forever.
Q: You go to her house, she comes to your house?
Q: She’s a good host, is that right?
A: I like to think we both are, but yes.
Q: She has a great wine collection?
Some jurors quietly giggled.
COURT: Sustained [Translation: The jury is to disregard that question that they will not be able to disregard.]
SCHWARTZ: No further questions.
Similarly, a longtime friend of Crupi’s attested to her honesty, trustworthiness, and their experiences as mothers. In this instance, Schwartz’s cross took well under a minute:
Q: …You have gone on vacations together?
A: Yes we have.
Q: She goes on vacations without you?
A: I suppose.
Q: She took her kids to Disney World, do you remember that?
SCHWARTZ: Nothing further.
HAPPIER TIMES: The trading room at Madoff Securities, circa 1990s, where real trades were being conducted for the broker-dealer side of the business. A younger Danny Bonventre is standing in the far back, in left half of the photo, just to the left of the gentleman in red suspenders who is talking on the phone. Madoff’s son, Andrew, is holding the phone in the middle of the right half of the photo. Charlie Wiener, the son of Madoff’s sister (Sonnie), is in the white shirt on the far right of the photo, peering over the shoulder of the woman with long, dark hair. Bernie Madoff is barely visible, but watching the scene from afar—way in the back of the right half of the photo—phone in hand, arm bent at his waist.
THE BENTLEY TAKES THE STAND
As stated before, the government’s main witness in the case was Frank DiPascali, Madoff’s right hand, who joined the company in 1975. If the jury needed a lifeline in this complex and interminable case, Frankie was it, as he fingered each of the defendants. If the jury believed he was telling the truth, they’d convict all five, perhaps quickly. If they thought he was a liar, as the defense went to great pains to try and show, then they might be deliberating a very long time. The five jurors I interviewed all say they found him credible, although Judge Swain—more on this below—had some problems believing him.
“I felt that what he [DiPascali] was saying was true,” says Antwane Joseph, a disability rehabilitation counselor who served as the jury foreman (and who says he “assumed” the sentences would be harsher than they were.) “I thought what he was describing, the different conversations he was having with people, seemed as if those things were taking place. It didn’t seem like he was creating them.” Credibility aside, jurors found Frank charismatic. “Like him, I’m a fisherman, and I happen to be a hockey fan of the team he’s a fan of, as well,” says juror Parise. (Frank owned expensive sport-fishing boats, paid for by Madoff—the last one a 61-footer that cost $2.2 million—and spent $25,000 per year on New Jersey Devils tickets on his corporate Amex card.) “I related to that guy immediately. I was like, I would love to have dinner with him and listen to his stories. But if he was on trial, I would have found him guilty too.”
DiPascali worked for Madoff Securities for three decades, not long after graduating from high school in the same Queens neighborhood where Bongiorno was raised and where the families were friends. He admitted to FBI agents that he lied to customers at Madoff Securities for most of those decades. The agents spent hundreds of hours debriefing Frank, as did prosecutor John Zach, who spent months holed up with the witness in a shabby government “war room” going over the case detail by detail. He then put Frank on the stand for roughly 30 hours of direct testimony, during which they took the jurors on a vivid and intricate journey through virtually the entire life of Madoff Securities.
Defense lawyer Riopelle likens Frankie to Sammy (“The Bull”) Gravano, who admitted to involvement in 19 killings before ratting on mafia don John Gotti in the early 1990s—and who received only a five-year sentence for those crimes. [Ironically, he was represented by Larry Krantz in that case.] “Frank was equally important to his boss’s success, and, like Sammy, he testified against a lot of people less blameworthy than he,” says Riopelle. “He’s also short, like Sammy. Diminutive, even.” Similarly, juror Gloria Wynn, while finding Frank credible, exploded in heavy laughter as she recalled him testifying. “I think I kept writing in my notes, ‘Goodfellas, Goodfellas, Goodfellas,” says Wynn. “It was just like watching Goodfellas. But I think he was very much himself. I don’t think he put on any airs. He was just who he was.”
But murders are not Ponzis, and white-collar cases are almost always more complex to present to juries. The 39-year-old Zach, born and raised in the customarily-affable Midwest, had lots of prior experience getting criminal witnesses (often gangsters) to bond with him. An amiable, laidback personality also wins over juries. As Frank was the biggest factor that won the case for the government, much rested on Zach’s shoulders, and he delivered.
“John is a skilled advocate, with an easy-going manner and a lot of jury appeal—not many people can claim that when you’re in court,” says Antonia Apps, a former top prosecutor who worked cases with Zach, including the corrupt SAC Capital affair. “He’s one of the most experienced trial lawyers (14 trials) to come out of the office in a long time.”
BAGGING THE BIG ONE : Following a tug-of-war with the estate of Jeffry Picower, one of Madoff’s biggest customers, U.S. Attorney Preet Bharara took the podium in December 2010 to announce a mammoth $7.2 billion settlement. It was achieved in coordination with court-appointed bankruptcy trustee Irving Picard (left), who is tasked with recovering funds for investors. On the right side (wearing glasses) is David Sheehan, the trustee’s chief counsel; their fund for defrauded customers reaped $5 billion of the loot— and the Justice Dept.’s Madoff Victim Fund received $2.2 billion. It was the largest single civil forfeiture recovery in U.S. history. Sweet. [photo: © Richard Behar]
Very early in the trial, Zach set the table for the jury by calling Bruce Dubinsky into the witness box. Dubinsky wore four hats for the occasion—he’s an accountant, a certified fraud examiner, a computer forensics expert and a former registered investment advisor. He worked for years analyzing some 50 million transactions inside Madoff Securities for the trustee who was appointed by a court to liquidate the firm and recover funds for defrauded customers. For the Madoff Five case, over the course of four days he laid out his findings on the nuts and bolts of the Ponzi. Although not permitted to opine on wrongdoing by the five defendants, defense lawyers couldn’t lay a fingerprint on him. “My antennas were up,” says Sheila Amato, a schoolteacher who served on the jury, who remembers feeling that some of the defendants were guilty after Dubinsky’s presentation. “But at that point, I wasn’t sure if they all were.”
Finally, for the trial’s Perry Mason moment, Zach’s cross of Bongiorno was not to be missed. While I thought she handled herself well under her lawyer’s questioning (jurors disagree with me), it was painful to watch her face off against the prosecutor.
Annette’s attorney, Riopelle, spoke of his client’s “naivete” and “foolishness.” At sentencing the judge went further, noting her “borderline competence to do the complex clerical work that she had agreed to do” for Madoff. On the stand, Bongiorno portrayed herself as a simple Italian woman from the outer boroughs of New York, who enjoys family, friends and cooking; who loved and idolized the CEO; who was loyal to a fault, and who wanted only to be his secretary despite his insistence on promoting her to manage the department that produced account statements for many of Madoff’s long term investors.
Frank grew up in the house next door to Annette, who testified that she landed him an interview with Madoff after she discovered Frank’s mother crying on her stoop about her son’s future. Annette says she told Madoff, “He’s a very smart young man, and he’s pumping gas and he needs a job….I know him for many, many years. He’s a good kid.”
Her attorney Riopelle is dumbfounded. “I mean, Jesus, that’s one of the best, most ironic tidbits in the whole story,” he says. “Her [Frank’s mother] ne’er-do-well son was failing in school. My client gets the guy a job where he earns and steals millions, and then he turns on her and tries to dig himself out of the hole he got himself into by testifying against her. As far as I am concerned, Mr. DiPascali is a disgrace to the Italian people.”
[DiPascali declines to be interviewed—he wouldn’t even take my business card outside the courtroom, and FBI agent Takla threw up his arms to prevent me from getting close to him. Frank’s reluctance to talk to a reporter is understandable, as he is still a cooperating witness for the government.]
Annette also told the jury that she’s not a big spender on luxuries like clothes and holidays.
Q: You said you didn’t spend money on shoes and pocketbooks and vacations. Do you recall saying that?
A: I said I didn’t buy, you know, top of the line. I didn’t go overboard with those things. I wasn’t like really spending a fortune on them.
Zach moved to put an exhibit into evidence for the jury, as Riopelle stood and protested. All of the prosecutors and lawyers and many of their deputies retreated to the judge’s robing robe, where she quickly overruled the objection. A late-model silver Bentley owned by Bongiorno soon appeared on the screens, and the adjudicators next learned that she also owned two Mercedes Benz’s. After that, they were handed copies of a brochure for Annette’s planned condo in Boca Raton.
Jurors had previously been treated to the fact that Bongiorno had more than $50 million (in largely fictional money, as it turned out) in various investment accounts with Madoff Securities on the day the firm collapsed. She had also withdrawn more than $10 million over the years. Considering her thin resumé (high school only), jurors wondered how she could not have ever asked herself whether a fortune in the mid-eight figures was possible without it all being a huge fraud. Moreover, the $50 million exceeded the combined accounts, on the day of the company’s meltdown, of Madoff’s brother (Peter), two sons (Andrew and Mark), and niece (Shana)—all of whom held bigger positions at the firm. To be fair, they withdrew tens of millions prior to Bernie’s arrest.
It got worse for Annette.
Zach displayed documents showing that in October of 2008 she had backdated one of her own account statements to reflect that she’d sold Lehman Brothers stock in August, two months earlier. There was just one problem: Lehman had imploded in September and was bankrupt before she backdated the phony stock sale. John’s goal was to persuade jurors that everyone working on Wall Street knew that Lehman no longer existed, but that in the anything-goes Willy Wonka wonderland of Madoff Securities, a manager like Bongiorno could simply decide that she won’t have to take a loss in Lehman if she can simply revise reality to show she had gotten out of the stock in the nick of time.
Q: Do you know what happened to Lehman Brothers in the month of September?
A: I guess you’re going to tell me. I don’t know.
Q: Ms. Bongiorno, do you recall that in 2008 the United States had the greatest financial disaster since the Great Depression?
Q: It was all over the news?
Zach then displayed headlines from various major newspapers, in September 2008, highlighting Lehman’s filing of the largest bankruptcy case in American history.
Q: You see on the left [of an article] it shows Lehman Brothers has just suffered a 94.4 percent collapse, right?
Q: It was at this time that Lehman Brothers, one of the oldest investment banks in the United States, went bankrupt, didn’t it?
Q: You, in your account as of August 31, 2008, had Lehman Brothers stock, right?
Q: After it went bankrupt, in the beginning of October of 2008, you went back and backdated a sale of Lehman Brothers shares to August 2008, before it went bankrupt?
A: If I was told to do it, I did it, right.
Q: That didn’t raise any red flags in your mind?
A: Everything was backdated.
Q: Ms. Bongiorno, that company was bankrupt.
A: Well, it didn’t raise a red flag.
Q: It was on every newspaper in the country.
A: It didn’t raise a red flag.
Q: You went back and backdated a sale before it went bankrupt?
A: I don’t know. I guess so.
Annette, chef extraordinaire, was cooked.
ACTION JACKSON KILLS IT
The most exciting part of most wars is the climax. So it was with the closing rebuttal by the third prosecutor, Randall Jackson, who colleagues have aptly nicknamed “Action Jackson.” Like an elephant with a propensity for china shops, he rampaged through his summation—sometimes upsetting the judge, and almost always infuriating defense lawyers, who rose and objected 42 times. That’s approximately 40 times more than what’s typical in a federal criminal rebuttal—as there’s long been an unspoken code among defense lawyers and prosecutors to do their best to not interrupt closing statements. When it was all over, the courtroom had the pleasant atmosphere of a stalled subway train.
Jackson talked about Santa Claus, and how kids eventually start asking questions until they figure out that he’s a lie—that nobody can “fit enough toys in his sleigh to cover all of the billions of transactions he claims to be completed each night… that these individuals could have engaged in all of the activities that you heard about over the months of this trial in connection with fraudulent activity, and still somehow believed in Bernie Claus… that notion is an absurdity.”
He invoked The Godfather and The Sopranos [two defendants, it turns out, are Italian, and defense lawyers boiled after the references], and analogized aspects of the defendants’ criminal conduct to that of drug dealers and bank robbers. He concluded his rebuttal with statements that the defense argues was an unfair injection of race into the case.
How so? By pointing out that the jury assembly room in the courthouse is named for the late Constance Baker Motley, a courageous civil rights litigator from the South who persevered despite death threats, “during the years when a lot of people did not believe a woman even belonged in a courtroom.”
Motley had “actual courage,” stated Jackson, “real courage to do that because of her belief in the rule of law—the fact that it applies equally to all people, whether they are rich, whether they are poor, no matter their background—that that was a principle that was worth fighting for. She survived that and she became the chief judge of this court, the first woman, the first black woman, chief judge of this court.”
Jackson is black, Judge Swain is black, and seven members of the jury were black. (Of those seven, six were women.) While the jurors may not have known it, Motley was also Swain’s mentor.
“I believe that racism and classism played a role in this case, as they do—I am sorry to say—far too often in our culture,” says Bongiorno’s attorney, Riopelle. “The prosecution made a point of emphasizing these issues, because it knew that was the surest way to obtain a conviction. They focused on issues like Mrs. Bongiorno’s wealth because the direct evidence that she knew of the fraud was weak, and the prosecution made a direct appeal to the jury’s racial identity in its rebuttal argument to appeal to the jury’s prejudice against persons unlike themselves. Judge Swain, who is a fundamentally decent person, found the prosecution’s behavior irritating, and she, unlike the jury, was able to consider the case rationally and sympathetically. When she imposed sentence on the defendants, the judge clearly understood and appreciated the nuances in the evidence a lot more than the jury did. She really showed courage in doing what she did. The temptation in a situation like this is to give ‘em all 20 years and let God sort ‘em out on the back end. The judge was not gonna do that. God bless her.”
Riopelle continues: “As far as I am concerned, anybody who questions the judge’s sentence wasn’t listening to the evidence with an open mind and an open heart. I question the defense’s decision to select these jurors every bit as much as I question the prosecution’s tactics in trying the case. I will always wonder what the result of this trial might have been with another jury in another forum less infected by issues of class and race.”
I raised the matter with juror Gloria Wynn, a black Baptist pastor who spent 27 years working as an administrative chaplain for the state’s Department of Corrections. In her view, she didn’t think that prosecutor Jackson was appealing to race in some of his rebuttal comments. “Nah,” she says. “I didn’t see race playing a part in the trial at all.”
The prosecutors won’t comment, as per U.S. Attorney’s Office rules.
ALL IN THE FAMILY: Circa 1990s, Madoff Securities trading desk. David Kugel, longtime trader since the 1970s, is in the back, wearing glasses—and with his left hand on top of a computer screen. In 2011, he pled guilty to creating fake, backdated trades, and was a government witness in the recent Madoff Five trial. (A year later, his son, Craig, pled guilty to a scheme that provided salaries and benefits to ghost employees.) The man on the far left in the photo is Robert Cardile, the brother-in-law of Frank DiPascali, who was accused (by Frank himself) of helping prepare falsified reports that were given to SEC auditors. Cardile has not been charged. [photo: company brochure]
Last summer, although she denied defense requests to overturn the verdicts, Judge Swain blasted Action Jackson. While not identifying him by name, she administered a tongue-lashing with words that are unusual from judges in that courthouse.
“Many of the remarks made in the rebuttal summation were ill-conceived and unworthy of the institutional stature of the United States Attorney’s Office,” the judge wrote in a 48-page opinion. “The government would certainly have done better had it chosen to focus on arguing the specific evidence rather than spend most of its argument repeating derogatory generalizations and wandering into peculiar similes… [and] lapses in judgment…” She called Jackson’s reference to the late Judge Motley “at best ambiguous and at worst unfathomable.”
During his rebuttal, Randall had made four factual errors that the judge corrected before the jury. While I thought this could damage the prosecution’s case, jurors felt otherwise (perhaps yet another reason investigative reporters shouldn’t serve on juries.) “Not at all,” says juror Goldberg, when asked if the flubs bothered her. I personally wanted it [the rebuttal] to go on because I was enjoying it.”
As for the 42 objections, I also thought this could hurt the prosecutors, by perhaps raising doubts in the adjudicators’ minds about Jackson’s fairness. The opposite was true. “I felt it was like the defense’s last ditch effort to throw him off his game,” says juror Amato. “I wanted to push their heads down, like that game Whack-A-Mole.”
During the sentencings, Judge Swain hurled some arrows at the government’s key witness, DiPascali—finding him credible on some things but not on others. Armed with the judge’s skepticism about DiPascali and Jackson’s ball-of-fire rebuttal, the defense lawyers will be filing requests to the appeals court to overturn the verdicts and order a new trial.
Could it happen? One can never tell, but not likely. Does U.S. Attorney Preet Bharara, share the judge’s view of Jackson’s speech? Also unlikely. I raised the topic with criminal defense lawyer, Sean O’Shea, a former head of the white-collar crimes unit for the U.S. Attorney’s Eastern District. As a prosecutor, O’Shea was known for being a killer in the courtroom, just like Jackson is today. “Trial lawyers are not little wilting-flower consensus types,” he says. “And their bosses want them to win. I would think that Bharara is patting Jackson on the back and saying, ‘Dude, you brought it home.’ It’s Madoff—the biggest crime of the century. Everybody’s gotta go.”
Although barely 36 years old, Jackson is revered in the office as one of the best trial lawyers for rebuttals in big cases —brought in like baseball’s Mariano Rivera in the 9th inning to preserve the lead. The Harvard Law School grad is the son of a Detroit cop. He’s said to have a photographic memory and so never writes out his rebuttals. Juries adore him. If his rebuttal in this case was delivered at a ballgame, I wouldn’t have been overly surprised if the jurors bobbed up and down in a stadium wave. “Yeah, God, he’s just that guy!” says Eric Snyder, who served 16 years as a prosecutor, and who once holed up in a hotel with Jackson for four months as they executed a dangerous drug-terrorism assignment (the FARC case, cited earlier). The U.S. Attorney General called it the largest narcotics prosecution in American history.
“He’s brilliant but he doesn’t talk like he’s brilliant,” Snyder adds. “He comes off as the dude who you wanna go shoot the sh-t with on the street. He moves from prosecuting a violent terrorist organization to what is arguably one of the more complex financial cases brought— and he has that amazing ability to break it down like he’s talking to a six-year-old. And that’s his true gift.”
Enrica Cotellessa-Pitz is the former controller (chief accounting officer) of Madoff Securities. She worked 30 years for the company, and earned a $450,000+ salary the year the firm collapsed. She pled guilty and is cooperating with prosecutors, although her value to them is debatable.
While working at the company, she reported to Bonventre, the director of operations, who is Andrew Frisch’s client. On the witness stand, she testified against her former boss on a whole host of things, such as using bonds belonging to customers to obtain bank loans for the company; altering records to bamboozle the SEC; and phonying up the firm’s financials. Thus, Andy had to tear her apart in the courtroom. And he did.
It’s Frisch’s contention that Enrica is innocent, yet was pressured to plead guilty because prosecutors needed her. (Thus, he believes she lied on the stand about Bonventre to try and lessen her own sentence when she’s ultimately sent to the clink.) The jury didn’t buy the idea that she was strong-armed; however, there’s no disputing the fact that Frisch helped eliminate her as a credible source for the government.
Here’s how: In grilling her, the witness appeared to have little grasp on what the truth was, and couldn’t remember many things she’d told prosecutors and FBI agents during her 14 meetings with them—after which they decided to charge her. She recalled FBI agents holding pens but couldn’t recall them writing anything. She had no memory of having written letters to prominent individuals just a few years earlier.
FRISCH ON FRANK: “DiPascali couldn’t care less about victims,” Bonventre’s attorney Andrew Frisch (pictured) said about the stool pigeon’s claim to want to help defrauded investors. “He is completely out for himself. [photo: © Richard Behar]
It was hard to watch Cotellessa-Pitz squirm. She sometimes sat silently for agonizing lengths of time when asked a question. Worst of all, she once wrote a letter to the prosecutors begging them not to indict her. In it, she accused them of forcing her to plead guilty even though she didn’t know that anything she was doing was wrong. But when asked on the stand if her allegation against the U.S. Attorney’s office was true, she admitted she’d lied in that letter. “I felt no pity,” says juror Goldberg, recalling Cotellessa-Pitz’s undertaking as a government cooperator.
With the ex-controller out of the way, Frisch could do his best to take down DiPascali. He couldn’t (nobody could), but he scored some points. DiPascali had told the jury that one reason he decided to cooperate with prosecutors was to help the government “provide some remedy for victims” of the fraud.
Perhaps. But Frisch read a portion of a transcript from a civil suit brought by defrauded investors, who were trying to recover money. Instead of telling the lawyers for those investors what happened at Madoff Securities, he took the Fifth (as his own lawyer, Marc Mukasey, advised him to do).
Prosecutors argued to Judge Swain that Frisch shouldn’t be permitted to do it, as the theatrics might confuse the jury into thinking he was not being forthright with his answers in the current case. But the judge allowed Frisch to fire away. Did it matter in the end to jurors? No, but it made Frank look bad at the time.
“We now know that in 2012, three years after DiPascali signed his cooperation agreement and just a year before this trial started, DiPascali invoked his Fifth Amendment rights when he was questioned under oath in a case brought by victims of the Madoff fraud, a case brought by retired police officers, firemen, and employees of Fairfield, Connecticut,” Frisch told the jury in his closing summation. “First, DiPascali says that helping victims was a major reason why he agreed to cooperate… Later he’s asked, since signing his cooperation agreement in 2009, whether he ever met with any victims or representatives of victims, and he said ‘I have not met with any victims or representatives of victims other than my mother and people that were victims that in the normal course of my life I have run into.’
“DiPascali could have answered the question ‘no. But he brings his mother into it. That’s how despicable he is. To give you an answer designed to lure you in, to make it believable, he brings his mother into it. And he mentions not just his mom but volunteers this piece about people that in the normal course of my life I have run into. Even if you completely distrust DiPascali at the moment you hear his testimony, this answer seems plausible and believable.
“Later I asked him if he’d given testimony in any lawsuit brought by a victim. He said yes. Then at the bottom he says, I took a conference call and I was deposed. At this point it all seems plausible. Even though you were already skeptical of DiPascali, it all seems plausible. But then it turns out that every one of these statements on this issue was either a flat-out lie or a half truth. DiPascali in fact met with representatives of victims other than his mother and people he ran into in the normal course, and not three years ago, but 2012, the year before this trial started. And DiPascali did not really testify. He asserted his Fifth Amendment rights even to simple questions, like whether he worked for Madoff…. DiPascali couldn’t care less about victims. He couldn’t care less about the retired policemen and firemen of Fairfield County. He is completely out for himself.”
The prosecutors may have taken some flesh off of Eric Breslin’s client, Crupi, in terms of her expenditures on the company’s Amex card. But the attorney had his revenge on DiPascali, the key witness against his client.
DiPascali had testified about his lifestyle, which included million-dollar boats (and full-time boat captains) paid for by Madoff. At first, Frank said he didn’t know if the word “lavish” described his home—five bedrooms on seven acres; a pool, cascading waterfall, and a pond for winter ice-skating; a theatre and pinball arcade; even an outdoor sports court under construction— but then agreed that “lavish” was an acceptable word to characterize it.
What attorney Breslin did masterfully was to show that DiPascali, like a sailor on a perpetual leave, couldn’t stop spending investor money—not even in early December of 2008, after he says Madoff told him the enterprise was broke and that he was preparing to turn himself in. In short, Eric exploited Frank’s greed in a palpable way to jurors.
“He [Frank] had an epiphany on Dec 3rd ,” Breslin scoffed the other day. “He realized that all the money was stolen—‘oh my god, he didn’t know’— the customers have all been deprived and cheated—‘oh my god.’ But notwithstanding his great epiphany and sorrow for the fact that he’d been stealing from people for 30 years, notwithstanding his realization that it was a Ponzi scheme—‘oh my god’—it didn’t mean he stopped stealing.”
During that week of December 3rd, until Madoff’s arrest on the 12th, DiPascali spent nearly $500 for cigars (mostly for his eldest son for Christmas, he said); more than $1,000 for limousines; nearly $600 at a tea shop; plus fancy restaurant dinners. Meanwhile, about $40 million of new investor money poured into the company during that short time period (with far more flowing out to other investors, as the company was hemorrhaging to death.)
BRESLIN: I see a charge to Ticketmaster on 12/2/08 for Britney Spears, do you see that for $688?
A: I do.
Q: I’m hoping that wasn’t for you.
A: It wasn’t.
Breslin suspects that prosecutors didn’t prepare DiPascali for the credit card pummeling. “I think they had put in the Amex bills thinking they would only be used against Crupi,” says Breslin, “and not ever thinking that anyone would take the time to sit down and plot out the chronology of Frank’s bullsh-t and see what he had bought during those days.” Madoff’s alleged December 3rd confession to DiPascali “was supposedly Frank’s come-to-Jesus moment,” he adds. “How can you have a come-to-Jesus moment when you’re charging it to the company—because who are you reallycharging it to? It just shows what an unredeemed and unredeemable liar he is.”
The U.S. Attorney won’t allow the prosecutors to respond, as per office rules.
BRESLIN’S BEEF: Crupi lawyer Eric Breslin (pictured) had a picnic with the Madoff corporate credit card statements of the government’s key witness, Frank DiPascali. Soon after Madoff told him the company was out of money, he wracked up more than $2,000 in charges for cigars, tea, limos and fancy dinners—all of it with the funds of investors. [photo: © Richard Behar]
ROLLIE’S RABBIT TRICK
I wasn’t the only person in the courtroom who thought Annette Bongiorno was going to prison after the government put up Exhibit 105-B22. There it was, one of the trial’s most nakedly-incriminating documents, the words “fake sales” at the top of the stock record of multi-billionaire Jeffry Picower, one of Bernie’s top-drawer customers. A former employee named Winifred (Wini) Jackson—no relation to prosecutor Jackson— was in the box at the time. She identified the handwriting as belonging to Bongiorno, her immediate boss. It was a startling moment, and one that stuck with jurors throughout the trial. When Bongiorno’s attorney, Roland (“Rollie”) Riopelle, stood up to cross the witness, however, he somehow pulled off a coup de théâtre.
It turned out that the smoking paper was actually part of a collection of hundreds of pages of documents. Deep inside the pile was a note that Bongiorno had written to herself. It read: “Use this run just to see what percentage new buys are up as of May 22, then cancel.” When Riopelle asked Wini Jackson if this meant the numbers are to be cancelled, she replied affirmatively. Moreover, there were additional handwritten notes by Bongiorno with the letters CXL, which Wini said meant cancel. What Riopelle did, in short, was take a toxic word (“fake”) and make it sound plausible that his client had been doing little more than a math exercise— and that, by cancelling the exercise, it was never a part of the firm’s record. It was artfully done, and he had the added advantage of this episode occurring very early in the trial, when both sides were still exchanging first-round jabs, trying to tell the jury the story. Fraud expert Dubinsky hadn’t even testified yet. Nor had DiPascali.
RIOPELLE: Having looked at all these various pieces of paper that we’ve looked at now, is it your belief, knowing what you know of Ms. Bongiorno and knowing what you’ve seen now on this paper, that there’s anything nefarious about the phrase ‘fake sales?’
PROSECUTOR: Objection [overruled]
WINI JACKSON: Can you repeat the question, please?
RIOPELLE: Is there anything, having looked now at all these numbers and the word cancel on the last page of this document, is it your belief that there was anything nefarious about the phrase ‘fake sales’ here?
A: In this particular document?
Q: Thank you. I have no further questions.
Great defense lawyers also know when to stop.
“This event [the Fake Sales evidence] perfectly illustrates what the case was really about from the defense perspective—that even something that looks as nefarious as this [document] really wasn’t,” says Riopelle today. “And the government had an army of people working on its investigation, bright lawyers reading these documents, analyzing them, and a raft of witnesses to explain things to them, and you know what? They didn’t understand the significance of the document. That’s exactly what happened to Mrs. Bongiorno, and right then and there at that moment you had the whole case in a nutshell.”
As noted earlier: The U.S. Attorney’s rules won’t allow the prosecutors to respond.
ROLAND’S ROAR: Annette Bongiorno’s attorney, Roland Riopelle (pictured) likens government top witness DiPascali to Sammy (The Bull) Gravano, who ratted on mafia boss John Gotti. After what DiPascali did to his own client— who he grew up with, and who helped him get hired by Madoff—the lawyer says, “As far as I’m concerned, [he] is a disgrace to the Italian people.” [photo: © Richard Behar]
THE REPAID LOAN
During Matt Schwartz’s opening statement to jurors, he said that “year after year after year, they [the five defendants] lied and stole and they lied again for the most simple reason of all: Greed.”
For many weeks, this grated on Gordon Mehler, the attorney for Jerry O’Hara, who in 2006 had expressed agitation and discomfort directly to Madoff and DiPascali about the computer programs he’d been writing for them. Recall that he and his colleague Perez had also written letters to themselves to memorialize their feelings. Additionally, O’Hara penned the following in a personal notebook, after a discussion with Madoff on the matter: “I won’t lie any longer. Next time I say, ‘Ask Frank.’”
(Worth noting: The case against the computer programmers is especially intriguing. For example, Mehler maintains that, while the government believes his client’s “I won’t lie any longer” statement is proof of his participation in the fraud, it really wasn’t. He says that O’Hara was simply making a record of the fact that he would no longer lie toMadoff about whether he [O’Hara] was doing the dirty work Madoff wanted him to do—and in the future would tell the CEO to just “ask Frank,” because Frank already knew he had refused to work on certain projects.
The computer programmers never earned anywhere near as much dough as DiPascali—who had told the jury that he had once coaxed the programmers (they were close friends) with bigger salaries to get them to continue creating devious software code for so-named “special programs.”
Mehler had his chance when he rose to the podium to confront the government’s top songbird on the notion that his client was greedy. “To cross-examine someone as wily as Frank was intimidating,” he says today. “He had been preparing to testify for years.” Gordon presented Frank with photocopies of bank checks and deposit slips that showed his client had in 2006 paid back a $687,000 bridge loan that Madoff gave him a few months earlier to purchase a house.
In contrast, DiPascali admitted that Madoff had lent him $800,000 for the construction of a house that he never repaid.
MEHLER: And you never repaid this $800,000, correct?
A: I did not.
Q: And Madoff told you that if the IRS questioned this $800,000 payment that he, Madoff, could always write it up as a loan, correct?
A: That is what he implied, yes.
Q: So there would be no tax consequences for you, right?
Q: And that Madoff did this sort of thing with his sons Andy and Mark, true?
A: He told me he did, yes.
Q: And again, giving them money but to avoid questioning, having it written up as a loan, correct?
A: That is what he explained to me that he had already done with the boys, correct.
The fact that Jerry repaid his loan to Madoff “just completely gutted the notion that Jerry was greedy and that Bernie could be extorted by Jerry, which is what prosecutors suggested,” says Mehler. “If you’re shakin’ him down, why doesn’t Jerry say to Bernie, ‘Hey, let’s just forget about that loan?’”
HEARTBREAKER: The computer programmers Perez and O’Hara were represented by Larry Krantz and Gordon Mehler (left to right), respectively. The jury verdict was “heartbreaking,” says Mehler, “and in retrospect, with the severe pre-existing prejudice from anything associated with Bernie Madoff, I’m not sure we ever had a chance with this jury.” [photo: © Richard Behar]
It was a solid moment for Mehler and his client. But, alas, not enough. Recall the ‘purple gloves video.’ As stated earlier, client O’Hara had in 2006 mailed himself a letter [technically to his brother, who kept it sealed], stating that he was uncomfortable about what Madoff and DiPascali were having him do. [See O’Hara’s letter below.]Fellow programmer and co-defendant Perez sent himself a shorter letter that was identical in some of the language.
Their lawyers decided to turn over those missives to the government, in the hope that jurors would view the men as having sent themselves open-in-case-of-emergency envelopes. In other words, to be used for protection in case Madoff did anything to them in response to their refusal to work on certain things that were being used by the boss to trick clients and the SEC. The lawyers also argued in court that their clients had acted courageously in refusing to work on some shady stuff in 2006, told this to Bernie to his face, and deleted them from the computer system. (The government’s take: The guys deleted the programs simply to try and save their own hides and continued to work on the shady stuff without getting their fingerprints on them.)
The jurors I interviewed didn’t see any courage, as they accepted the government’s case that the programmers—following juicy salary hikes, plus six-figure bonuses in 2004 after an SEC audit— had nonetheless stayed the course in their deceit. As for the letters, they viewed them as confessions, and faulted the programmers for not having the good sense to find jobs elsewhere, or even contact law enforcement. “I wasn’t too sure about the computer guys for awhile, until that letter [of O’Hara’s] came out,” says juror Amato. But at that very moment, she says she wrote ‘He is guilty’ in her legal pad. “I remember writing that down because I didn’t want him to be guilty. I kind of felt sorry for him in some ways.”
In his rebuttal, prosecutor Action Jackson called the letters “the most boneheaded attempts to insulate one’s self from criminal liability possibly in history.” But here’s some irony: While the letters were a big factor in their jury convictions, the judge decided to use them as the benchmark for when (2006, not earlier) they knew that their work was being used to defraud all of the firm’s clients.
As noted in the tables above, they could possibly be out of prison in just over a year, after initially rejecting plea offers of a maximum of five. Not a bad outcome for the two gentlemen, all things considered.
Who took the most skin off of Frankie Di? It was probably Larry Krantz, the lawyer for Perez. Of all the defense attorneys in the case, he was the fieriest (although calm and mild-mannered outside the courtroom.) At one point, he grabbed the podium and yelled at a consultant to the bankruptcy trustee who claimed that Perez had once confessed his guilt to him. “Krantz scared me,” recalls juror Amato. “I thought he was going to strangle him [the witness].”
Larry downshifted his tone with DiPascali, who got tangled up in his answers about when he realized the company’s fake trading had begun. Fraud expert Dubinsky concludes that the Ponzi began in the 1970s. (If true, it’s an incomprehensible achievement; Charles Ponzi’s scheme in the early 1920s lasted only nine months.) At his sentencing, Madoff said that the fraud started in the early 1990s. Frank’s view of when the fraud started? It matured, just as his bank account did…
Q: At what approximate date did you learn for yourself that the trades were not real? When did that occur?
A: I can’t put a date on it. I can give you a time frame.
A: Early in my career.
Q: You started in 1975, if I am correct, is that right?
A: That is correct.
Q: When you say early, do you mean within the first few years?
Q: Somewhere can we approximate in the late ’70s?
Q: Do you recall that when you pled guilty in this matter, the federal judge asked you certain questions about what you did?
A: I do recall.
Q: Mr. DiPascali, isn’t it a fact that, under oath, at the time of your guilty plea, which was in August 2009, correct?
Q: You made the following statement: “From at least the early 1990s through December of 2008, there was one simple fact that Bernie Madoff knew that I knew and that other people knew, but we never told the clients, nor did we tell the regulators, like the SEC, no purchases or sales of securities were actually taking place in their accounts. It was all fake. It was all fictitious. It was wrong, and I knew it at the time, sir.” Do you recall making that statement? Why did you choose to tell the judge that it was from at least the early 1990s when, in fact, it was from the late ’70s, some ten to 15 years earlier than that?
A: Because at the time, that was my assessment of the situation and that was a truthful answer. I have subsequently come to realize, after four-and-a-half years of thinking of this massacre, that actually my crimes occurred in the late ’70s.
THE VANQUISHERS: Prosecutors Schwartz, Zach and Jackson won the case, but expected less mercy from the judge for the Madoff Five. Pictured are Jackson (left) and Zach. [photo © Richard Behar]
Krantz hit the facade of the New York Stock Exchange building with his next swing.
Q: Do you agree, Mr. DiPascali, that your track record for telling the truth is not so good?
A: I don’t understand what that question means.
Q: Do you know what a track record is? It’s a history. Do you understand that?
A: I do.
Q: Do you agree that your track record, meaning your history, on telling the truth is not so good?
Q: Would you agree that your track record, meaning your history, for trustworthiness not so good?
Q: Do you feel in your life you have generally been a trustworthy person, is that your testimony?
A: I have never done that evaluation.
Q: You have never thought about that question before today, is that right?
A: I don’t recall specifically thinking of that exact question.
Q: Would you agree with me, Mr. DiPascali, that during the course of your 30-plus years at Madoff Securities, many individuals placed their trust in you, as far as you could tell, correct?
A: That is correct.
Q: As to many of those individuals, would you agree that you violated that trust by not telling them the truth?
A: That is correct.
Q: In fact, you did that on virtually a daily basis for some 30-odd years, true?
Q: Do you now agree with me that your track record fortrustworthiness is not so good?
A: As it pertains to the clients, I will agree.
Q: The clients aren’t the only individuals whose trust you violated, are they? It’s just a yes-or-no question.
A: I can’t think of a situation where I did violate someone other than a client’s trust. Not sure.
Q: As you sit here today, you can’t think of another situation in your 30 years at Madoff Securities where you violated the trust of an individual other than a client, is that your testimony? It’s just a yes or no.
A: I’m not sure, sir.
Q: Just by way of example, when you committed perjury before the SEC, do you feel you violated the trust of the attorneys taking your testimony?
A: I do.
Q: When you lied to regulators on a regular basis in your capacity as a Madoff Securities employee, do you feel you violated their trust?
A: I do.
Q: When you lied to employees of Madoff Securities, do you feel you violated their trust?
A: I do.
Q: Are you familiar with the term “a con man”?
Q: Would you agree with me that that is a shorthand reference for a confidence man?”
A: I believe it is.
Q: Do you agree that that is a person who tricks someone else by gaining their confidence first?
A: I believe that’s the definition.
Q: In other words, a con man gets someone to trust them and then violates that trust in some way that is to the con man’s benefit, correct?
A: It is.
Q: Do you agree with me, Mr. DiPascali, that for most of your adult life as an employee at Madoff Securities, you were a con man?
A: I never thought of myself as one.
Q: As you sit here today and think about the definition that we just went through together, do you agree, looking back on it, that in fact during your career at Madoff Securities you were a con man?
A: I did indeed violate the trust of many people during my career at Madoff. I’m not in a position right now to grapple with that question and assign myself that title.
Q: But if we define “con man” as regularly gaining people’s confidence and then violating their trust for your own benefit, you would agree that that definition does describe your conduct at Madoff Securities, true?
Q: At times, yes.
Q: When you say at times, on practically a daily basis, true?
Q: That extends for some 30 or so years, right?
A: It does.
“HURRY, THERE’S A VICTIM!”: Before and following the sentencing of Bernard Madoff in 2009, media crews in front of the courthouse outraced each other when they found defrauded investors who came to watch the proceeding. [photo © Richard Behar]
Krantz’s cross also bolstered his and Mehler’s argument that the programmers had been hoodwinked by DiPascali at times. Consider the following:
Q: I would like to read your prior testimony in this court…
‘Now, when you enlisted the help of Mr. Perez and Mr. O’Hara in connection with these [trading] blotters, did you tell them the full truth about what you were doing?’
‘Now, with respect to the number of accounts that you needed to provide data for, what did you tell them needed to be provided?’
‘I told them it was standard practice in the industry that when the SEC asks for a group of specific questions about a specific group of clients, you basically give them what they’re asking for, and you don’t need to give them anything more.’
‘And you told them that the SEC only requested information for these specific clients?’
Q: Was that testimony true?
A: It was.
Q: Isn’t it correct, Mr. DiPascali, that you lied to them
about what the SEC had requested in the Swanson audit?
Q: You did that so that they would be comfortable doing the
- My intention was to make them be comfortable.
Q: …You were their friend, true?
- Isn’t it a fact, Mr. DiPascali, that you were manipulating them in order to have them participate in what you knew to be a massive fraud without them knowing it? Wasn’t that your intent? Yes or no.
Q: Didn’t you think that as a boss and a friend you owed them better than that?
A: During that short time frame when I had to make that decision, that did not cross my mind.
Q: As you sit here today and look back on that episode that we are discussing now, do you agree that as a boss and as a friend you owed them better than that?
- Yes, certainly.
Krantz calls his cross of DiPascali one of the most memorable moments of his years as a trial lawyer. But it didn’t bear fruit until sentencing. “The government was not a check in the system, and Judge Swain was,” he says. “They [prosecutors] just quoted his testimony as if they were quoting scripture. They overstated everything to the point where reality was distorted.”
Prosecutors: No comment.
JERRY AND ENRICA, PRE-CONVICTIONS: Circa 1990s. Computer programmer and Madoff Five defendant Jerry O’Hara (center, white shirt, dark tie). Seated near him is Enrica Cotellessa-Pitz, who pled guilty in 2011 to falsifying regulatory records and committing broker-dealer fraud. She testifed as a government witness in the current case. (photo: company brochure)
As the jurors sat behind closed doors to begin deliberating, they held hands and recited a prayer. “It needed prayer,” says juror Wynn, who works as a Baptist pastor, and who led the invocation. “We asked God to give us the strength to make the right decision.”
Did all of the jurors feel the same way about the guilt of the defendants? All except one, but she left the courthouse a day and a half into the deliberations and never returned. According to several jurors, the holdout (her name is Michelle Forman) didn’t feel the prosecutors had met their burden of guilt beyond a reasonable doubt, but was unable to articulate hard reasons why she felt that way. She had temporary support from a second juror, until he was quickly swayed by the others.
“Where the hell have you been all these months,” one juror snapped at Forman, according to Wynn. “You’ve been sitting here like us and you don’t hear anything that’s been presented to us. You’ve seen everything we’ve seen and you heard everything we heard, how could you even think that these people were not guilty?”
Forman became ill on the second day of deliberations—several jurors say she vomited in a restroom—and went home early. Two days later, she contacted Judge Swain to say she’d broken a toe and had limited mobility for at least a few days. She asked Judge Swain not to provide any medical details to the public, and the judge honored the request. A decision was made to excuse her, and the jury resumed its deliberations with only 11 members. (The judge, prosecutors and defense lawyers did not know what her views of the case were, and I believe they still don’t.)
Had Forman remained on the panel, and had she stuck to her guns, it might have turned out to be a hung jury. Or, conceivably, though unlikely, a 12 Angry Men scenario—the 1957 drama in which a lone juror refused to believe the defendant is guilty, sparking a bizarre musical-chair scrimmage that leads to the twelve finding the defendant not guilty.
Forman did not respond to several requests for an interview.
So why the unexpectedly-light prison terms? As stated earlier, Judge Swain gave many reasons for the sentences, among them that none of the defendants were architects of the fraud, they did not know that it was a Ponzi scheme, nor are they fundamentally corrupt or evil. But the biggest factor may have been DiPascali.
During one of the sentencings, she hammered Frank, but used very few words to do so. She stated that she accepted his testimony regarding the “overall structure and methodology” of the Madoff fraud as “generally credible” and “widely corroborated.” However, she added, “his more salacious details… are not. Mr. DiPascali is a glib storyteller, and is an admitted and convicted perjurer.”
Aside from the fact that jurors felt differently, the problem with Swain’s analysis is that she never drilled down for public consumption into exactly what she had a problem with—and why. She simply left everyone with her gut feeling that some of the more colorful things that Frankie said simply didn’t have the ring of truth about them.
On the morning of the sentencing of Dan Bonventre—the first one on Judge Swain’s list—a group of smiling and upbeat FBI agents enjoyed an unexpected reunion in the back of the courtroom with two former prosecutors on the case who popped in to watch. One of them, Lisa Baroni, led the case for four years prior to the start of the trial, with the other ex-prosecutor who showed up that day—Julian Moore—partnering with her for three of them.
Before long, the current prosecutors strolled in confidently, one at a time, to take their seats in front. “And here they are, Team USA! – dah, dah, da-da-da-da-da,” saidNewsday reporter John Riley, humming NBC’s Olympics theme song. But midway through the sentencing, one could almost feel the wind changing direction from the prosecutors’ sails when the judge ripped DiPascali. In fact, it was the coldest day of the autumn, and, as if on cue, tropical storm Damien hit the next morning with all its power—thrashing the city with relentless rain and hurricane-like gusts.
“This billion-dollar fraud could not have survived but for their [the defendants] galling illegal acts,” says Moore, now a senior executive at K2 Intelligence, a risk analytics firm that has worked on the Madoff case for the court-appointed trustee. “The government understandably pressed for higher sentences because, as they ably demonstrated at trial, the defendants were an integral part of the fraud.” One factor in Swain’s thinking, says Moore: She may have viewed a ten-year plea deal given to Peter Madoff (Bernie’s brother and the firm’s chief compliance officer) as “the upper bar” for sentencing. If so, then the U.S. Attorney’s office may have shortchanged itself with that deal. On the other hand, prosecutors had argued that Peter was less culpable than these other defendants. However, the judge called that argument “disingenuous.”
CREDIT DUE: Prosecutors who helped recoup billions for defrauded investors from the estate of Madoff client Jeffry Picower, at 2010 press conference. From left: Matt Schwartz, Julian Moore, Lisa Baroni, and forfeiture expert Barbara Ward. [photo: © Richard Behar]
One day after Bonventre’s sentence, it was Bongiorno’s turn. She was given six years. O’Hara then got less than three—“a slap on the wrist, almost,” juror Goldberg told me that night—although the judge called all of the sentences “harsh” but just. It was now pretty transparent to everyone in the courtroom that fellow programmer Perez would receive the same sentence the following day. With that in mind, Team USA’s Schwartz rose to the podium. He stated that any finding that Perez’s participation in the conspiracies at the firm began only in 2006 would be “clearly erroneous” and that a sentence of just two or three years would “simply not be reasonable and it would not be just…and it would not be consistent with other sentences under the fraud guidelines or at large.
“And I think what is likely to happen going forward with the next fraud defendant,” he continued, “the next insider trading defendant, the next Ponzi scheme defendant, they are going to point to the sentences in this case and they are doing to say, ‘I didn’t participate in the Madoff fraud— my crime didn’t last years, my crime didn’t have thousands of victims, my crime did not expose someone to the risk of billions of dollars of losses—certainly I can’t be sentenced to more than George Perez or Jerome O’Hara or Annette Bongiorno or Daniel Bonventre. The judges in this district will either have to explain, and I’m not sure how they could, how small-time crooks in front of them were somehow worse than the defendants in this case, or they will have to sentence those defendants in a way that is at odds with your Honor’s sentences in this case. And that is contrary to the purposes of sentencing…”
It was a whopping reproach of Swain, and highly unusual for a prosecutor to do in that courthouse, as the arena of sentencing is normally something the feds don’t challenge the judges on. Even more pointedly for those in the know, Schwartz used loaded legalese (ie. clearly erroneous; not reasonable), indicating that the government was seriously considering an appeal of the sentences. That’s something that is also rarely done by the U.S. Attorney’s office. Swain didn’t expect the rebuke. Her response: Bring it on. “I’m sure you are looking forward to the 17th floor across the road [court of appeals], and I shall eagerly await the newspaper reports of those proceedings on appeal.”
Juror Parise was happy when he read some of Schwartz’s comments in a newspaper. “I think he hit it dead— head on,” he says. “All this time spent, the money, we found them guilty. I was shocked by the low sentences for all of them.”
Finally, Jodi Crupi was sentenced on the 15th. But before her punishment was announced prosecutor Zach took the microphone in a last-ditch effort to land a huge prison term. “She [Crupi] was daily confronted with a choice as that knowledge [of the fraud] increased,” he stated. “Each day with that knowledge she decided to go back to work and to continue to participate in that…To be confronted with that choice—do I do the right thing, walk away, tell somebody about it, or do I just continue on this path where I’m feeling good, where my life is getting better, where I can put my head in the sand, I can affirmatively lie, I can keep this going for myself?…
“That is something that is not unique to fraud, it is something that we all, I think, deal with in our lives,” he continued. “That is why the [sentence] needs to be substantial in this case. This is a position that lots of people find themselves in. It is a decision that may or may not be fair that a given person is put in. But society expects of them to do the right thing, to not contribute, to not participate in the fraud.”
Swain sentenced Crupi to an eight-year combination of prison and home confinement, far less than what just about everyone close to the case initially expected she’d get—butmore than what was anticipated given what her co-defendants secured. Was Swain moved by Zach? We’ll never know.
(Crupi, incidentally, was viewed by four of the five jurors I interviewed as the most likeable of the defendants; the fifth juror didn’t have feelings one way or another on the topic of likeability. She sometimes smiled at jurors when passing through the courthouse’s front doors at the end of each day. “I didn’t feel like the smile was a manipulation either,” says juror Amato. “It’s like, that was her personality, she was a nice person basically. Crupi was the most redeeming one.” Echoes Goldberg: “She looked less likely to be guilty.”)
Not every juror thinks all of the sentences were light. Wynn felt the punishments for Bongiorno and the computer programmers were “understandable,” but that Bonventre’s ten years was too low. “I’m surprised that he only got that,” she says. “He was a shaker and a mover and he benefitted an awful lot from the whole thing—more so than a lot of them.” Overall, however, she’s satisfied with the judge’s punishments. “I’m not surprised [at the sentences generally] because some of them were not completely totally unequivocally guilty guilty,” says Reverend Wynn. “Some of them didn’t start off guilty but got caught up and just stayed on the bandwagon.”
And what a bandwagon it was. Approximately $170 billion [yes, billion] moving in and out of one single J.P. Morgan Chase checking account that was used for the Ponzi. Some $20 billion ripped from customers. Roughly 50,000 customers sent to the cleaners (including investors in feeder funds), and put through the agony of the restitution process—a trial by fire that is likely to continue for many years to come. So, too, the physical and emotional trial of the 76-year-old Madoff, who says he’ll be in agony and will suffer torment for the rest of his life in prison over the harm he didn’t mean to cause people.
The bankruptcy trustee, Irving Picard, working under the Securities Investor Protection Act (SIPA), is leading a sortie of his own. He is recouping the money third parties owe back to others. To date, he and his army —at times numbering more than 200 lawyers and investigators—have recovered or entered agreements to recover roughly $10.5 billion of the estimated $20 billion in total losses. That far exceeds any prior restitution in a Ponzi scheme.
“The saga of the Madoff case continues six years later, with two disparate but related events having taken place over the last month,” notes David Sheehan, chief counsel to the trustee. “The convicted cohorts of Madoff are forced to forfeit stolen wealth he wrongfully gave to them. At the same time, our team continues its historic record of recoveries by settling two feeder fund cases for more than a half-billion dollars.”
A message from Sheehan to banks, feeder funds, and others who are still refusing to ante up their ill-gotten gains: “The trustee is far from finished.”
But for the Madoff Five, their own bandwagon has come to an end. They are going to prison in February. However, even if their appeals fail, they will not be spending as much time as they could have. As is often the case in protracted legal battles, the only ones resembling winners were the lawyers who prosecuted and defended them, who proved through their yeoman efforts that while the system is imperfect, and often groans under its own weight, the result sometimes is a rough semblance of justice that metes out pain to everyone in sight.
Richard Behar is at work on a book about Bernard Madoff, to be published by Simon & Schuster. He is the Contributing Editor of Investigations for Forbes magazine, and can be reached at firstname.lastname@example.org