No Legitimate Side To Madoff Biz, Accountant Says

Oct 30 2013 | 12:23pm ET

In the years since he began serving a 150-year prison sentence, Bernard Madoff has insisted that much of his business was legitimate. Like much else about Madoff, however, the claim is a lie, according to a forensic accountant.

Bruce Dubinsky has pored over the Madoff firm's books at the behest of Madoff liquidator Irving Picard, and told the jury in the trial of five Madoff lieutenants that the whole of Bernard L. Madoff Investment Securities was a scam, kept afloat by Madoff's $65 billion Ponzi scheme.

Madoff's broker-deal and proprietary-trading business, known at the firm as the "House of Five," "was losing a lot of money and could not stand on its own two feet," Dubinsky testified yesterday. "'House of Five' was not a legitimate business either," surviving on transfers from the investment-advisory unit, the seat of the Ponzi scheme. Dubinsky added that the other units' records were falsified to cover up those transfers.

"That's customer money—the most sacred account in an investment-advisory business," Dubinsky said. "You can't stick your hand in the piggy bank and use it for other means."

Five Madoff employees—Annette Bongiorno, Daniel Bonventre, Joann Crupi, Jerome O'Hara and George Perez—are accused of aiding and abetting the Ponzi scheme, which unraveled in late 2008. All five—the first of the 15 people accused in the case to stand trial—deny knowing that their boss was running a scam.

Dubinsky's testimony began last week, when he testified that trades "magically" moved and that "things would appear and disappear—it was smoke and mirrors with account statements."

Dubinsky will be back on the stand today for further cross-examination. During yesterday's testimony, a lawyer for one of the accused, Andrew Frisch, sought to show that the "House of Five" was a legitimate business, with "a Chinese wall" separating it from the Ponzi scheme.

Another, Eric Breslin, pointed out that Dubinsky had testified in a deposition that Madoff used inexperience workers "to continue the scheme." The defendants have said that Madoff hid much of his criminal activity from them, and hired them when they were young and inexperienced.


In Depth

Will Liquid Alts’ Performance Sustain Future Asset Flows?

Aug 25 2014 | 10:34am ET

Liquid alternative investment funds saw the highest percentage of capital inflows...

Lifestyle

Och Funds Women In Finance Initiative At U-M

Aug 28 2014 | 3:01pm ET

Och-Ziff Capital founder Daniel Och and his wife have made a "generous donation"...

Guest Contributor

Looking Ahead: What’s In Store For Managed Futures?

Aug 22 2014 | 12:52pm ET

The last five years were phenomenal for investors in equity indices. Will the next...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

July/August 2014 Cover

The time was right

Commodities/Futures magazine launched at the precipice of a revolution in the futures industry—really a revolution in the idea of risk management—that would move it from a small niche industry to ...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.