Madoff Employee Insists Activities Raised No ‘Red Flags’

Feb 28 2014 | 10:14am ET

A federal prosecutor yesterday hammered away at one of Bernard Madoff’s top lieutenants, questioning her claims that she had no inkling that a massive Ponzi scheme was ongoing—and that she was a key cog in it.

Bongiorno testified that, in spite of four decades at Madoff’s firm, she had no idea what the Standard & Poor’s 500 Index or a Treasury bond were—to say nothing of a Ponzi scheme, which she also said she had not heard of prior to Madoff’s arrest in 2008. Bongiorno, who helped run Madoff’s investment advisory business, continued to insist, as she had during her previous days on the stand, that none of the practices she was taught by Madoff led to any suspicions on her part.

Asked about why she backdated a sale of Lehman Brothers stock in her own account—which totaled $50 million when Madoff’s fraud collapsed—to before the bank’s filing for bankruptcy, Bongiorno said, “if I was told to do it, I did it. It didn’t raise any red flags.”

Earlier this week, Bongiorno testified that backdating trades was standard operating procedure at Madoff’s firm, and was approved of by clients even when they were being saddled with losing trades.

One of Madoff’s oldest investors, Stanley Chais, “wasn’t annoyed” by the backdating, because he knew “what his return would be.” Madoff “has an agreement with everybody,” she testified.

Sometimes, clients would even ask to have trades backdated. “They would make suggestions, and Bernie would say, “yes, we will do it,’ or, ‘no, we won’t. But it was never a mystery that they were backdated. They knew it,” Bongiorno said, and she didn’t know that the practice was illegal.

“I just believed him, and I believed what he told me,” she said. “I never even thought of the word ‘illegal.’”

Bongiorno and four other former Madoff employees—Daniel Bonventre, Joann Crupi, Jerome O’Hara and George Perez—are on trial for aiding Madoff’s $65 billion fraud. The trial began in October and will stretch into next month, at least.

Bongiorno is the second of the four defendants to testify, following Bonventre, Madoff’s former operations director.

Prosecutor John Zach also attacked Bongiorno’s claim that she had lived frugally, asking her about her luxury condominium in Boca Raton, Fla., and her fleet of high-end cars. Of the $6.5 million condo, Bongiorno said she was “downsizing,” noting that it was “smaller than” her previous Florida house. Asked about whether her Bentley fit the mold of someone who didn’t “splurge” on luxuries, Bongiorno admitted that she “did not include” it in that accounting—or the two Mercedes-Benzes she owned.

Bongiorno noted that all of them have been “confiscated by the government.”

The trial—and Bongiorno’s testimony—will continue next week.


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