October 17, 2013 / 12:21 AM / 6 years ago

Prosecutors appeal to common sense in trial of Madoff employees

NEW YORK (Reuters) - A federal prosecutor urged jurors on Wednesday to use their common sense to find five former employees of Bernard Madoff guilty of helping him carry out a massive fraud on his investors.

“For more than 30 years, Bernard Madoff ran a multibillion- dollar fraud that turned out to be the biggest Ponzi scheme in history,” Assistant U.S. Attorney Matthew Schwartz said.

The defendants - a director of operations of Madoff’s office, two computer programmers and two portfolio managers - are accused of creating false records and transactions to fool investors and regulators. They have pleaded not guilty to dozens of charges, including securities fraud and conspiracy to defraud Madoff’s clients.

“These are the people who helped him do it,” Schwartz said as he made opening arguments for the prosecution in a packed ceremonial courtroom, used for major trials.

Investors lost about $19 billion in the scheme, which Madoff’s firm valued as high as $65 billion, Schwartz said. Madoff, 75, is serving a 150-year prison sentence after pleading guilty in 2009.

Arguments started after U.S. District Judge Laura Taylor Swain spent more than a week selecting the jury for the trial, which is expected to take five months.

The eight women and four men making up the 12-person jury were selected from 400 candidates, an unusually large pool. Among them are two teachers in the Bronx, a part-time art teacher and mother of three from Rockland County and an employee of New York’s Human Resources Administration.

Schwartz described allegations specific to the five defendants, noting that “each of them got rich.”

The two portfolio managers, Annette Bongiorno and Joann Crupi, spent much of their time scouring newspapers for stock prices as they “thought up lies to tell investors,” Schwartz said. Crupi used $2.7 million from the scheme to buy a beach house, while Annette Bongiorno took more than $58 million for herself just before the firm’s 2008 implosion, Schwartz said.

The two computer programmers, Jerome O’Hara and George Perez, created complex computer programs to fool investors, auditors and regulators, Schwartz said. They demanded Madoff give them substantial raises in 2006, requesting part of it to be paid in diamonds so as not to leave a paper trail, Schwartz said.

And Daniel Bonventre, the director of operations for the firm who started working for Madoff in 1968, oversaw the firm’s accounting and “cooked the books” for Madoff, Schwartz said. Bonventre helped save the firm from two scares, Schwartz said, when he posted funds procured from Boston philanthropist Carl Shapiro as collateral to get loans from banks.

“He treated that company like it was his personal piggy bank,” indulging a taste for fine wine and cigars, Schwartz said of Bonventre.

None of the defendants presented arguments on Wednesday. Andrew Frisch, a lawyer for Bonventre, will start arguments on Thursday.

Schwartz spent much of his opening argument explaining the intricacies of Madoff’s firm to the jurors, often directing them to graphics on monitors.

Schwartz also previewed witnesses, some of whom have pleaded guilty to helping to support the fraud. These include Madoff’s deputy and chief financial officer, Frank DiPascali, who worked for Madoff for 33 years.

“These cooperating witnesses were the defendants’ partners in crime,” Schwartz said.

Schwartz also sought to head off a likely argument from defense lawyers that Madoff lied to their clients. In a pretrial document, lawyers for O’Hara and Perez, for example, said the programmers were “lied to and misled for years” by DiPascali and Madoff.

Schwartz acknowledged that Madoff “sometimes lied to these defendants.” But, over the course of almost two hours, Schwartz repeatedly appealed to their common sense. While the fraud sounds complicated, Schwartz said, the evidence is straight-forward.

“Please apply your everyday common sense to the facts of this case,” Schwartz said.

A short, scrawled note appeared on monitors before jurors toward the end of Schwartz’s argument, which he said was from O’Hara’s personal notes after he and Perez had demanded Madoff increase their salaries.

“I won’t lie any longer,” it said.

“These five defendants, they knew exactly what they were doing,” Schwartz said.

The case is USA v. O’Hara et al, U.S. District Court, Southern District of New York, No. 10-cr-0228.

Reporting by Bernard Vaughan; Editing by Eddie Evans and Eric Walsh

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