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.

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