| NEW YORK
NEW YORK Feb 10 Four months into a criminal
trial for five former employees of Bernard L. Madoff Investment
Securities, witnesses have made it clear that no one but Madoff
himself knew the whole truth about his massive Ponzi scheme,
from his top lieutenant on down.
With prosecutors expected to wrap up their case on Monday,
the defendants' lawyers will try to convince a federal jury that
their clients were completely in the dark, unaware that they
were propping up an unprecedented fraud.
The defense's task is twofold: to persuade jurors that
cooperating witnesses are lying to secure lighter sentences, and
that whatever improper acts the defendants may have committed
were done unwittingly.
"In white-collar cases, the issue often is not who did
what," said Robert Anello, a partner at Morvillo Abramovitz
Grand Iason & Anello, who is not tied to the case. "It is often
whether what you did, based on your knowledge, is a crime."
The five defendants are the firm's director of back office
operations, Daniel Bonventre; portfolio managers Annette
Bongiorno and Joann Crupi; and computer programmers Jerome
O'Hara and George Perez.
The case in Manhattan federal court is the first criminal
trial to stem from Madoff's fraud, which cost investors an
estimated $17 billion in principal losses. Madoff pleaded guilty
and is serving a 150-year prison sentence; he has not implicated
In their opening statements in October, the lawyers painted
Madoff as a cult-like figure whose orders the defendants
"They thought he was almost a god," Eric Breslin, Crupi's
lawyer, told jurors at the start of the trial in October. "They
did not want to question anything he did."
But prosecutors have argued that the defendants knowingly
committed crimes like faking documents, deceiving regulators and
filing false tax returns, even if they were not fully aware of
the extent of the scheme.
"You don't have to know everything that's going on to be
guilty of a conspiracy," said Michael Shapiro, a white-collar
defense lawyer with Carter Ledyard & Milburn who is not involved
in the case.
Prosecutors have introduced reams of documents and called
approximately three dozen witnesses, including several former
Madoff employees, some of whom pleaded guilty themselves and
appeared as government cooperators.
Chief among the latter was Madoff's top aide, Frank
DiPascali, the government's star witness, who pleaded guilty in
2009 and has not yet been sentenced. He spent about a month on
the witness stand telling jurors that all five defendants were
intimately involved in every aspect of the fraud.
In one instance, DiPascali claimed Crupi, O'Hara and Perez
helped him print fake records for a KPMG auditor and
then used a refrigerator to cool them down, reasoning that the
auditor might be suspicious if the papers were still warm from
They then tossed the papers around "like a medicine ball" in
order to make them appear older, he testified.
Other former Madoff employees appearing as cooperating
witnesses have included trader David Kugel, who said he helped
Bongiorno and Crupi to fabricate trades in client accounts; his
son, Craig, who said he arranged for Bonventre's son to receive
health benefits even though he did not work at the firm; and
controller Enrica Cotellessa-Pitz.
Like DiPascali, they testified for the government in hopes
of lessening their sentences.
Defense lawyers have sought to undermine their credibility
by arguing they are willing to lie for leniency.
"Is it fair to say that you got pretty good at conning
people?" Larry Krantz, Perez's lawyer, asked DiPascali, after
making the point that he had spent most of his career lying to
customers, regulators and fellow employees.
DiPascali appeared to change at least one part of his
testimony under grilling from defense lawyers. He initially
claimed he knew about the fraud since the 1970s, before saying
he did not actually learn the truth until the 1990s.
Throughout the trial, it has become clear that the web of
deceit girding Madoff's firm had many layers, with Madoff
himself lying to his top aides and those aides, in turn, lying
to their subordinates.
Even DiPascali said he did not understand the full scope of
the fraud until a few days before Madoff's arrest, when the
financier tearfully confessed to him that the firm was bankrupt.
Until then, DiPascali said, he believed the money was safe in
He also acknowledged under cross-examination that he fed
false cover stories to Bongiorno, Perez and O'Hara at times to
convince them to take actions they might not otherwise have done
if they had known the full truth, a point defense lawyers will
likely emphasize to the jury.
It remains unclear whether any of the defendants will take
the stand, though their lawyers have indicated it is unlikely.
"In a case like Madoff, where the jurors have been reading
about it for years, they are probably itching to hear from the
folks who are there to explain what was going on," Anello said.
"That's a tough decision."
Presentation of the defense case will likely last two or
The case is USA v. O'Hara et al, U.S. District Court,
Southern District of New York, No. 10-cr-0228.