5 Former Madoff Employees On Trial In Connection With Massive Ponzi Scheme

NEW YORK (CBSNewYork/AP) – The prosecution’s star witness in the fraud trial of five of Bernard Madoff’s former employees took the stand again Wednesday.

As WCBS 880’s Irene Cornell reported, Frank DiPascali described the tangled web of deceit woven by Madoff as he juggled investors’ money and tried to keep investigators away.

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DiPascali testified that ego and adrenaline ran high around Madoff and the operation of his elaborate Ponzi scheme.

In one particular incident, DiPascali testified, Madoff was ranting and raving. It involved investments by a firm connected to Madoff’s father-in-law, which had failed to follow the SEC rules and had drawn some unwanted attention to Madoff.

DiPascali testified that Madoff said he couldn’t afford to have the feds digging any deeper because his entire fraud would be disclosed.

“So we circled the wagon,” said DiPascali, “creating phony books to throw them off the trail.”

When a story about that incident appeared in the Wall Street Journal, DiPascali said the one thing that bothered Madoff was a little cartoon caricature of him that he thought made his cheeks look too chubby.

DiPascali first took the stand Monday to give an inside look at one of history’s biggest securities frauds while testifying against five of his former co-workers at Bernard L. Madoff Investment Securities.

DiPascali testified he learned to commit all manner of securities fraud under Madoff as a 19-year-old fresh out of high school.

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He decided to cooperate with the government within days of getting a call from Madoff five years ago that the Ponzi scheme had collapsed.

DiPascali, 57, who is out on bail but facing substantial prison time, carries his own baggage as the beneficiary of a bank account filled with investors’ money that amounted to a slush fund for Madoff’s family and top employees. Authorities say he withdrew more than $5 million from the account between 2002 and 2008 to fund personal expenses, including the purchase of a new boat.

DiPascali testified he is hoping for a sentence of substantially less than 125 years in prison in return for his cooperation.

In a guilty plea in 2009, DiPascali described himself as unsophisticated “kid from Queens” who began working for Madoff in 1975 and stayed until the bitter end.

Prosecutors have accused Madoff’s secretary, Annette Bongiorno, and JoAnn Crupi, an account manager, of using old stock tables to fabricate account statements so they would show steady returns even during economic downturns. They say Daniel Bonventre, his director for operations, cooked the books to throw off regulators.

According to the FBI reports, when Bongiorno first began working at the firm, DiPascali heard Madoff feed her his cover story “about deals he had going on Europe.” He believed Crupi had likewise “convinced herself over the years that Madoff had a vast array of assets all over the world.” He also “surmised that Madoff was probably telling Bonventre the same lies” as the others.

While others kept quiet, the remaining defendants – computer programmers Jerome O’Hara and George Perez – grew increasingly restless during the mid-2000s after they were tasked with maintaining programs that helped conceal the fraud, DiPascali told the FBI. During a boozy dinner at a Greek restaurant in Manhattan, the pair asked him whether Madoff’s business was legitimate – a suggestion he laughed off but privately wondered why it took them so long to ask, the reports say.

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