Testifying in a trial in New York on Wednesday, the former aide,
Frank DiPascali, said an estate lawyer wrote Madoff's firm a letter
in 1995 seeking the account balances for the late Jacques Amsellem,
who had been a Madoff client since the 1970s.
Madoff typically decided how much money each account should earn in
a given year, and Amsellem's account showed too high a balance at
the time of his death, DiPascali said.
So two of his employees, Joann Crupi and Annette Bongiorno, wrote up
false statements for a new account with losses to counterbalance the
"It's like musical chairs," DiPascali told jurors in U.S. District
Court in Manhattan.
DiPascali, who has pleaded guilty and is cooperating with the
government, was testifying in the trial of Bongiorno, Crupi, and
three other former employees who are charged with helping Madoff
pull off the fraud.
The five defendants, who also include back office director Daniel
Bonventre and computer programmers Jerome O'Hara and George Perez,
have said they were duped by Madoff into believing that his business
was legitimate. Madoff, who is serving a 150-year prison sentence,
claimed he acted alone in masterminding the scheme, which unraveled
in 2008 and cost customers an estimated $17 billion.
In his second full day of testimony, DiPascali described various
ways in which the five defendants participated in the scheme,
revealing a staggering level of detail required to keep the scheme
hidden from outsiders.
For instance, he said, Bonventre and O'Hara spent months creating
forged copies of documents from a securities clearinghouse, the
Depository Trust Co. The false records showed that Madoff's firm
held billions of dollars in stocks and bonds that did not actually
exist, in order to give credence to fake trades that propped up his
Madoff insisted on using a specific type of paper to match that used
by the clearinghouse, while O'Hara worked hard to imitate the
precise font and layout on the real documents, DiPascali said.
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DiPascali recalled a meeting in which Madoff stood by a window,
holding up a document and its forged counterpart to the sunlight, as
Bonventre and other staffers looked on.
"He was remarking how great it was," DiPascali said.
DiPascali also described how Bongiorno and others altered statements
to avoid inconsistencies when the Securities and Exchange Commission
(SEC) was investigating two accountants who ran a fund that fed
investments to Madoff.
Madoff was relieved when the SEC did not extend that investigation
to his firm, DiPascali said.
And when The Wall Street Journal reported that SEC regulators were,
as DiPascali described it, "pleasantly surprised" to learn that the
accountants had not been running a Ponzi scheme but had instead
invested their customers' money with Madoff, his only complaint
concerned a sketch accompanying the article.
"His main concern was that the sketch made his cheeks look too big,"
Defense lawyers have not yet questioned DiPascali but they have
accused him of being a liar.
The case is USA v. O'Hara et al, U.S. District Court, Southern
District of New York, No. 10-cr-0228.
[By Joseph Ax © 2013 Thomson Reuters. All
(Editing by Bob Burgdorfer)
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