Five Madoff abettors set to learn sentences

U.S. wants long terms for inner circle

Bernard Madoff ’s inner circle got millions of dollars in pay and perks by aiding the con man’s $17.5 billion fraud, bilking thousands of investors in the largest Ponzi scheme in U.S. history.

Now their efforts will earn them time behind bars.

Five former Madoff colleagues face sentencing beginning Monday for using a web of fake account documents, phony regulatory filings and bogus computer programs to keep the scheme afloat for decades.

“I hope the sentences will provide an outlet for some of the rage, pain and desire for justice so many of the victims have been clamoring for,” said Julian Moore, a former prosecutor who worked on the Madoff case from 2010 to 2013 and is now a senior managing director at K2 Intelligence, a risk analytics firm in New York. “For many, their lives as they knew them were destroyed.”

The three men and two women who joined Madoff’s New York-based investment advisory firm as early as the 1960s have been free on bond since a federal jury in March found them guilty of securities fraud and related counts. It was a total victory for prosecutors in the first criminal trial over the scam.

U.S. District Judge Laura Taylor Swain, who oversaw the five-month trial in Manhattan, will hand down sentences over a week-long period. She repeatedly delayed the hearings as lawyers squabbled over details of the case, including how much money the former staffers

should be ordered to forfeit.

The former workers are Annette Bongiorno, 67, who ran the investment advisory unit at the center of the fraud; Joann Crupi, 54, who managed large accounts; Daniel Bonventre, 67, the exoperations chief of Madoff’s broker-dealer; and computer programmers George Perez, 48, and Jerome O’Hara, 51, who automated the scam as it grew rapidly in the 1990s.

In court filings, the U.S. Probation Office said the crimes warranted 20-year terms for Bongiorno and Bonventre; 14 years for Crupi; and eight years each for Perez and O’Hara.

The government has urged Swain to issue harsher sentences, arguing the defendants remain unapologetic and refuse to come to terms with their complicity in Madoff’s scam.

Defense lawyers, in separate court filings, have asked for leniency, arguing their clients were found guilty by association with Madoff and were brought down by a tainted jury process and prosecutor misconduct during the trial.

The proposed sentences are already longer than normal for white-collar crimes, and for some of the defendants they amount to “symbolic” life sentences, said Samuel Buell, a former federal prosecutor who is now a professor at Duke University School of Law in Durham, N.C.

“Most people would not think a life sentence or the equivalent should be routine in a white-collar case,” Buell said in a phone interview. “If so, what’s left for the murderers, the mafia and the terrorists?”

Jurors who spoke after issuing their verdict said they believed the defendants were lying to the court and themselves when they argued they were duped by Madoff and didn’t have enough education in the industry to recognize the fraud.

One juror described the group as Madoff’s willing “soldiers” and the con man as their “commander.”

Prosecutors showed the jury extensive evidence of the defendants receiving millions of dollars in compensation and unusual bonuses, as well as unlimited use of company credit cards for personal expenses, including tropical cruises, wine collections, Manhattan apartments and family vacations.

The fraud, hatched in the 1970s, targeted thousands of wealthy investors, celebrities, retirees and Jewish charities. It unraveled in 2008 when the economic crisis led to more withdrawals than Madoff could pay.

In addition to $17.5 billion in principal, the collapse erased about $47 billion in fake profit that customers thought was being held in their accounts.

Some clients learned they lost their life savings after Madoff’s confession and arrest by federal agents on Dec. 11, 2008, leading to criticism of regulators who repeatedly overlooked the scam. Madoff, 76, pleaded guilty the next year and is serving 150 years in a North Carolina prison.

“There’s a severity to this kind of victimization that makes it feel more like a theft or a violent crime than your typical fraud case,” Buell said.

The five ex-colleagues worked in concert, the jury found, to create millions of fake trade confirmations and account statements for thousands of clients, and fashioned an extensive, phony paper trail that repeatedly duped outside auditors and the U.S. Securities and Exchange Commission.

“The trial revealed stunning illegal acts by each of the defendants to ensure the fraud continued and thrived,” said Moore, the former prosecutor.

As of November, the cost of liquidating Madoff’s company in bankruptcy court topped $1 billion for six years of work by hundreds of lawyers and forensic accountants.

The fees and expenses are being paid by the industry financed Securities Investor Protection Corp., which has also pitched in hundreds of millions of dollars to help repay victims.

The trustee overseeing the process, Irving Picard, surpassed $10 billion in recoveries for victims last month, mostly through settlements with Madoff ’s biggest customers who withdrew more money from their accounts than they put in. Picard also reached a $325 million accord with Madoff’s bank, JPMorgan Chase & Co., which he accused of negligence for failing to recognize the fraud and profiting from the con man’s business.

The sentencing hearings for the five ex-workers won’t be the last in the case. Former employees who pleaded guilty, some of whom cooperated with prosecutors, are scheduled for sentencing next year.

They include Madoff’s former accountant, Paul Konigsberg; Madoff’s ex-controller, Enrica Cotellessa-Pitz; and Frank DiPascali, his former finance chief.

Madoff ’s brother, Peter Madoff, who also worked for the company, pleaded guilty in the case and is serving a 10-year term.