Madoff Lieutenant Describes Firm's Final Day

Dec 12 2013 | 12:00pm ET

As if it had been so scripted, prosecutors at the trial of five former Bernard Madoff employees arrived at the day of his arrest on the fifth anniversary of that event.

Under questioning, Madoff finance chief Frank DiPascali described Dec. 11, 2008. Earlier, he told the jury that Madoff had alerted him a week earlier that the decades-long fraud was about to collapse. But five years ago yesterday, he said, Madoff woke him up at home.

"He said, 'Frank, the FBI is in the office with my brother,'" DiPascali testified yesterday. "I said, 'Why are you calling me?' And I threw my phone across the room." DiPascali, who worked for Madoff for 30 years and who has said it was "impossible" not to know that something was amiss at the firm, previously testified that when Madoff tearily confessed to him on Dec. 3, 2008, he knew he'd be going to jail.

Prosecutors showed the jury DiPascali's diary entry from the fateful day, Dec. 11: "Madoff Implodes."

While DiPascali has said it was "obvious" that the Madoff operation was a sham, the five employees—Daniel Bonventre, Annette Bongiorno, Joann Crupi, Jerome O'Hara and George Perez—have denied knowledge of the fraud. And during his days on the stand, DiPascali has said that he sought to shield the five from knowing about at least parts of the fraud. But he insisted that the five each knew that no trading of any kind was going on, and that each did their part to hide that fact from investors and regulators.

DiPascali said he went to the office later on the 11th to find it crawling with "all sorts of regulators and federal authorities," to whom he lied. He also testified that he heard someone in the office "scream out" when word of Madoff's arrest that day appeared on television.

Perez's lawyer, Larry Krantz, had the first crack at cross-examining DiPascali, the government's star witness. Krantz pointed to several inconsistencies between DiPascali's current testimony and previous sworn statements, suggesting that he lied even at his 2009 plea hearing.

"Is it fair to say you became very good at conning people?" Krantz asked.

"I never took a survey," DiPascali responded.

At one point, Krantz asked, "How did it feel to commit perjury before the SEC?" DiPascali conceded that it "did not feel wonderful."

DiPascali also sought to explain the difference between his earlier statement that Madoff's business had been legitimate for the first 10 years or so after he began working there, and his testimony at trial that bogus trading went on "for as long as I could remember." He said that his views about how Madoff's Ponzi scheme worked have evolved since he pleaded guilty.

DiPascali also said that he had a "moral transformation" since the scheme fell apart, and that, "As I sit here today, I undoubtedly consider myself to be an honest man."

In Depth

Related-Company Fees: Normal Industry Practice or Conflicted Compensation?

Nov 11 2015 | 4:23pm ET

Regulatory agencies as well as investors are increasingly exploring whether certain...


Ferrari Roars in Wall Street Debut

Oct 21 2015 | 4:28pm ET

Shares of supercar maker Ferrari jumped as much as 15 percent to a high of nearly...

Guest Contributor

Private Debt - What is the Opportunity?

Nov 11 2015 | 3:28pm ET

In this contributed article, Rob Allard, founding partner of Firebreak Capital...


Editor's Note

    Oct 21 2015 | 10:41am ET

    One of the most unique charity benefits in the hedge fund industry, A Leg To Stand On's (ALTSO's) Hedge Fund Rocktoberfest - NYC, raised nearly $500,000 last Thursday thanks to the generous support of major sponsors and nearly 1,400 attendees from the Tri-State finance, business and hedge fund communities. Read more…