Madoff Employees Were Master Forgers, Ex-CFO Says

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.


In Depth

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Griffin Donates $1M To Rauner's Illinois Gov. Campaign

Sep 22 2014 | 9:29am ET

Hedge fund billionaire Kenneth Griffin definitely has a dog in this race. The Citadel...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

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

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

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.