Tags: madoff | bonaventre | convicted | fraud | sentencing

Madoff Aide Hired in 1960s Will Be First to Learn Prison Fate

Saturday, 06 December 2014 08:12 AM

Daniel Bonventre, one of five former Bernard Madoff employees convicted for aiding his $17.5 billion fraud, will be first to learn his fate at a sentencing hearing almost exactly six years after his ex-boss's arrest.

The punishment will be handed down in Manhattan Dec. 8 by U.S. District Judge Laura Taylor Swain, who oversaw a five-month trial that ended in a total victory for prosecutors in March.

Jurors agreed that the five ex-colleagues used a web of fake account documents, phony regulatory filings and bogus computer programs to keep the biggest U.S. Ponzi scheme afloat. The decades-long scam finally collapsed during the financial crisis with Madoff's confession and arrest on Dec. 11, 2008.

"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 have been free on bail since a federal jury found them guilty of securities fraud and related counts. The group continues to deny wrongdoing.

Bonventre, 67, was Madoff's director of operations and ran the firm's broker-dealer business for almost 40 years. He was one of two defendants in the case who took the witness stand during the trial, a move later criticized by jurors who said he came off as a liar in denial about his actions.

Swain 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.

Madoff Five

The four other defendants are Annette Bongiorno, 67, who ran the investment advisory unit at the center of the fraud; Joann Crupi, 54, who managed large accounts; 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 prosecutorial misconduct during the trial.

'Symbolic' Terms

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, North Carolina.

"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 the 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.

Celebrities, Charities

The fraud, hatched in the 1970s, targeted thousands of wealthy investors, celebrities, retirees and Jewish charities. It unraveled in 2008 when the economic crisis triggered 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, leading to criticism of regulators who repeatedly overlooked the scam. Madoff, 76, pleaded guilty in 2009 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.

'Stunning' Acts

The five 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.

Others Guilty

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 due to be sentenced 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.

Prosecutors have said longer sentences are needed in the Madoff case to deter fraud in the securities industry. That doesn't always work, according to Alfredo Mendez, a former state and federal prosecutor who now defends white-collar criminals in New York and isn't involved in the case.

"In a case of this magnitude, victims want restitution and they also want to see the people involved in the scheme be punished -- that's human nature," he said.

Long sentences "might have a deterrent effect on certain people, but is it going to stop the Bernie Madoffs of this world from doing it? I don't think so," Mendez said. "There's an aspect of human nature called greed and it will remain as long as we're on this earth."

The case is U.S. v. O'Hara, 10-cr-00228, U.S. District Court, Southern District of New York (Manhattan).


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Daniel Bonventre, one of five former Bernard Madoff employees convicted for aiding his $17.5 billion fraud, will be first to learn his fate at a sentencing hearing almost exactly six years after his ex-boss's arrest.The punishment will be handed down in Manhattan Dec. 8 by...
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Saturday, 06 December 2014 08:12 AM
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