Saturday, 26 July 2014
Last updated 17 hours ago
Dec 5 2013 | 11:30am ET
Bernard Madoff's top lieutenants were artists when it came to forging documents, the con-man's former finance chief said yesterday.
Testifying at the trial of five former Madoff employees, former CFO Frank DiPascali gave the jury a view into how the $65 billion Ponzi scheme worked, and how the defendants helped him produce decades worth of phony records.
DiPascali is the government's star witness against the former employees, Daniel Bonventre, Annette Bongiorno, Joann Crupi, Jerome O'Hara and George Perez, all of whom have pleaded not guilty. He said the five worked hard to create bogus reports from the Depository Trust Co., "covered with fake Treasury bills." Prosecutors showed some of the alleged forgeries to the jury.
Madoff himself was thrilled with the artistry of the forgeries. DiPascali testified that Madoff once held one "up to the daylight, eight inches from the window on the Citibank side of our building. He remarked how great it was."
The forgeries weren't always made to show phony gains. In at least one case, DiPascali said, the firm doctored up trading losses to cut the amount owed to the estate of a dead investor.
Madoff was annoyed that lawyers for longtime customer Jacques Amsellem did not notify him of Amsellem's death for months. "When someone dies, that's a problem," DiPascali said. "When you find out from his lawyer 60 days later, it's too late."
"He died with the account too far over what Bernie wanted it to be."
Madoff frequently complained when "market conditions" would cause an account to gain more than he wanted it to, requiring procedures to keep gains in check. Someone "fell asleep at the switch" with the Amsellem account, he said.
DiPascali, in his second day on the stand, also discussed one major close call, when a feeder fund run by Avellino & Bienes caught the attention of the Securities and Exchange Commission. To pay the fund back, Madoff convinced one of his largest investors, Jeffrey Picower, to move some securities he owned that were held by Goldman Sachs to Madoff's firm. Madoff then used the securities as collateral for a loan to pay Avellino.
"Did you feel like you dodged a bullet?" prosecutor John Zach asked.
"Most certainly," DiPascali responded.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…