NEW YORK (Reuters) - Ponzi scheme. Treasury bond. The Standard & Poor’s 500 index. The collapse of Lehman Brothers.
Those were among the subjects that Annette Bongiorno said on Thursday she did not understand, despite spending more than 40 years as one of the key employees at Bernard Madoff’s investment firm.
Bongiorno is one of five former Madoff workers on trial in federal court in Manhattan for abetting his fraud, which fell apart in December 2008, costing investors an estimated $17 billion in principal losses.
Facing questions from a government prosecutor about her alleged role in concealing Madoff’s multibillion-dollar fraud, Bongiorno did not deny that she entered thousands of backdated trades in customers’ accounts, sometimes years after they had purportedly occurred.
But she said, again and again, that she was simply following Madoff’s orders, knew next to nothing about Wall Street and had “no clue” that anything she had done was illegal.
“All the trades were backdated,” she said. “I did what I was told.”
Also on trial are former director of operations Daniel Bonventre, portfolio manager Joann Crupi and computer programmers Jerome O’Hara and George Perez.
Bonventre and Bongiorno have taken the witness stand in their own defense, betting that the jury will accept their claims that they were duped by Madoff into believing the business was legitimate. All five defendants have said they were unaware that Madoff, who pleaded guilty and is serving a 150-year prison sentence, was running a Ponzi scheme.
During her testimony, Bongiorno said she believed Madoff was trading stock in bulk and then deciding later how to divvy up the transactions among his customers, a practice she thought was permissible.
Assistant U.S. Attorney John Zach repeatedly showed Bongiorno documents on which she had plotted out backdated trades to enter into customer accounts, though no trading actually happened.
“You were the one who wrote all these trades in?” Zach asked.
“Yes,” Bongiorno replied.
“And your testimony is that for every single one of these trades, Mr. Madoff told you what to do?” he asked, sounding a skeptical note.
“Yes,” she answered.
Upon Madoff’s arrest, Bongiorno said, she had to ask another employee what a Ponzi scheme was. And under questioning from Zach, she said she couldn’t explain the difference between a stock and a bond and struggled to define the S&P 500.
At one point, Zach showed Bongiorno documents indicating that sales of Lehman Brothers stock were entered into her account in October 2008, a month after the investment bank collapsed, but backdated to August.
“Do you remember what happened to Lehman Brothers in September 2008?” Zach asked.
“No, but I guess you’re going to tell me,” she said.
Zach then showed Bongiorno several front-page newspaper articles from that month about the financial crisis and questioned her about the timing of the backdated trades.
“That didn’t raise a red flag for you?” he asked.
“If I was told to do it, I did it,” she said.
Zach also sought to demonstrate that Bongiorno used proceeds from the fraud to finance a luxurious lifestyle, showing the jury photographs of her Bentley sedan and the high-end condominium in Boca Raton, Florida, where she planned to purchase a $6.5 million home.
The trial, which began more than four months ago, will resume on Monday and is expected to end in March.
The case is USA v. O’Hara et al, U.S. District Court, Southern District of New York, No. 10-cr-0228.
Reporting by Joseph Ax; Editing by Eddie Evans and Douglas Royalty