Two former employees of Bernard Madoff arrested

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Two former employees of Bernard Madoff arrested

2010-11-19 00:43:42 GMT+7 (ICT)

NEW YORK (BNO NEWS) -- Two former employees of Bernard Madoff were arrested on Thursday for their participation in Madoff's fraud scheme, the largest financial fraud in history, prosecutors said.

Annette Bongiorno, 62, and Joann Crupi, 49, were employees at Bernard L. Madoff Investment Securities (BLMIS) for 40 years and 25 years respectively. Both are charged in a Superseding Indictment with conspiracy, securities fraud, falsifying books and records of a broker-dealer, falsifying books and records of an investment adviser, and committing tax evasion.

"As everyone knows, Bernard Madoff perpetrated the largest financial fraud in history, but others criminally assisted his epic crime,†said Preet Bharara, U.S. Attorney for the Southern District of New York. "Year after year, Annette Bongiorno and Joann Crupi protected and perpetuated the Madoff mirage, while putting very real money in their own pockets."

BLMIS provided investment advisory for decades but in fact Madoff defrauded thousands of clients out of billions of dollars through an elaborate Ponzi scheme. Bongiorno managed hundreds of accounts purportedly having a cumulative balance of approximately $8.5 billion dollars as of 2008. She also supervised employees working for the investment advisory business.

Crupi managed several accounts as well, which reportedly had a cumulative balance of $900 million in the same period. She also tracked the daily activity of the bank account into which billions of dollars from clients were deposited, and from which client redemptions were paid.

Bongiorno and Crupi executed trades in the clients' accounts only on paper, based on historically reported prices of securities they researched in the Wall Street Journal and Bloomberg, and achieving annual rates of return pre-determined by Madoff.

The co-defendants also backdated the purchase dates of purported trades so they could control the amount of gains reflected in the accounts. In addition, Bongiorno processed exceptional gains in the accounts that occurred months before the establishment of the clients’ accounts. She received specific instructions from clients about the amount of appreciation and gains they wanted to be reflected in the accounts.

On the other hand, Crupi handled the receipt of funds from clients an transferred them among various BLMIS bank accounts. She also monitored, on a daily basis, funds transferred into and out of the BLMIS bank account used primarily to perpetrate the fraud scheme. Thus, Crupi became aware that the client redemption requests had no relationship to BLMIS' cash on hand which was insufficient to meet those requests.

Between 2004 and 2008, BLMIS was subjected to at least five reviews by the U.S. Securities and Exchange Commission (SEC) and an European accounting firm on regards to BLMIS’s operations on behalf of an European client. Madoff plotted a scheme to deceive the reviewers by creating many false and fraudulent books and records in which Crupi participated.

Bongiorno and Crupi benefited from the fraud. Bongiorno created various backdated trades in her own accounts. From 1975 to 2008, she deposited only $920,000 but she withdrew over $$14 million. She also received more than $325,000 in off the books income from BLMIS.

In 2008, Crupi received payments of more than $2.7 million from Madoff directly out of the bank account that held the investor funds. She also received more than $270,000 in off the books income from BLMIS.

Bongiorno faces a statutory maximum sentenced of a total of 75 years in prison for the 14 counts against her. Crupi faces a statutory maximum sentence totaling 65 years of imprisonment for the seventeen counts against her. Prosecutors are also seeking the forfeiture of a combined $154.5 billion from the defendants.

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