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 With prosecutors expected to wrap up their case on Monday, the
defendants' lawyers will try to convince a federal jury that their
clients were completely in the dark, unaware that they were propping
up an unprecedented fraud.
The defense's task is twofold: to persuade jurors that cooperating
witnesses are lying to secure lighter sentences, and that whatever
improper acts the defendants may have committed were done
unwittingly.
"In white-collar cases, the issue often is not who did what," said
Robert Anello, a partner at Morvillo Abramovitz Grand Iason &
Anello, who is not tied to the case. "It is often whether what you
did, based on your knowledge, is a crime."
The five defendants are the firm's director of back office
operations, Daniel Bonventre; portfolio managers Annette Bongiorno
and Joann Crupi; and computer programmers Jerome O'Hara and George
Perez.
The case in Manhattan federal court is the first criminal trial to
stem from Madoff's fraud, which cost investors an estimated $17
billion in principal losses. Madoff pleaded guilty and is serving a
150-year prison sentence; he has not implicated the defendants.
In their opening statements in October, the lawyers painted Madoff
as a cult-like figure whose orders the defendants followed blindly.
"They thought he was almost a god," Eric Breslin, Crupi's lawyer,
told jurors at the start of the trial in October. "They did not want
to question anything he did."
But prosecutors have argued that the defendants knowingly committed
crimes like faking documents, deceiving regulators and filing false
tax returns, even if they were not fully aware of the extent of the
scheme.
"You don't have to know everything that's going on to be guilty of a
conspiracy," said Michael Shapiro, a white-collar defense lawyer
with Carter Ledyard & Milburn who is not involved in the case.
Prosecutors have introduced reams of documents and called
approximately three dozen witnesses, including several former Madoff
employees, some of whom pleaded guilty themselves and appeared as
government cooperators.
Chief among the latter was Madoff's top aide, Frank DiPascali, the
government's star witness, who pleaded guilty in 2009 and has not
yet been sentenced. He spent about a month on the witness stand
telling jurors that all five defendants were intimately involved in
every aspect of the fraud.
In one instance, DiPascali claimed Crupi, O'Hara and Perez helped
him print fake records for a KPMG auditor and then used a
refrigerator to cool them down, reasoning that the auditor might be
suspicious if the papers were still warm from the printer.
They then tossed the papers around "like a medicine ball" in order
to make them appear older, he testified.
Other former Madoff employees appearing as cooperating witnesses
have included trader David Kugel, who said he helped Bongiorno and
Crupi to fabricate trades in client accounts; his son, Craig, who
said he arranged for Bonventre's son to receive health benefits even
though he did not work at the firm; and controller Enrica
Cotellessa-Pitz.
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Like DiPascali, they testified for the government in hopes of
lessening their sentences.
Defense lawyers have sought to undermine their credibility by
arguing they are willing to lie for leniency.
"Is it fair to say that you got pretty good at conning people?"
Larry Krantz, Perez's lawyer, asked DiPascali, after making the
point that he had spent most of his career lying to customers,
regulators and fellow employees.
DiPascali appeared to change at least one part of his testimony
under grilling from defense lawyers. He initially claimed he knew
about the fraud since the 1970s, before saying he did not actually
learn the truth until the 1990s.
Throughout the trial, it has become clear that the web of deceit
girding Madoff's firm had many layers, with Madoff himself lying to
his top aides and those aides, in turn, lying to their subordinates.
Even DiPascali said he did not understand the full scope of the
fraud until a few days before Madoff's arrest, when the financier
tearfully confessed to him that the firm was bankrupt. Until then,
DiPascali said, he believed the money was safe in secret assets.
He also acknowledged under cross-examination that he fed false cover
stories to Bongiorno, Perez and O'Hara at times to convince them to
take actions they might not otherwise have done if they had known
the full truth, a point defense lawyers will likely emphasize to the
jury.
It remains unclear whether any of the defendants will take the
stand, though their lawyers have indicated it is unlikely.
"In a case like Madoff, where the jurors have been reading about it
for years, they are probably itching to hear from the folks who are
there to explain what was going on," Anello said. "That's a tough
decision."
Presentation of the defense case will likely last two or three
weeks.
The case is USA v. O'Hara et al, U.S. District Court, Southern
District of New York, No. 10-cr-0228.
(Reporting by Joseph Ax; editing by Dan Grebler)
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