NEW YORK — NEW YORK (AP) — Five former employees of imprisoned financier Bernard Madoff enriched themselves and helped "perpetuate Madoff's elaborate fiction" by weaving an elaborate web of lies that for decades duped investors and government regulators, a prosecutor said Wednesday as the workers' criminal trial began.
"These are the people who helped him do it," said Assistant U.S. Attorney Matthew Schwartz, pointing at each defendant in federal court in Manhattan. "Bernie Madoff needed help to fool so many people for so long. ... A fraud of this scope and duration could not have been carried out alone."
Later, he added: "For year after year after year, they lied for the most simple reason — greed."
The remarks came during opening statements at a trial that's expected to last five months and showcase testimony of Frank DiPascali, Madoff's former finance chief, and five other insiders who pleaded guilty and agreed to cooperate in the case. Defense attorneys were expected to give their opening statements Thursday.
The defendants — Annette Bongiorno, Madoff's longtime secretary; Daniel Bonventre, his director of operations for investments; JoAnn Crupi, an account manager; and computer programmers Jerome O'Hara and George Perez — all have pleaded not guilty. They have claimed they were led astray by Madoff and in the dark about his epic fraud.
The trial is the first to result from the 2008 collapse of Madoff's private investment business, which cost clients nearly $20 billion. A court-appointed trustee has recovered much of the money by forcing those customers who received big payouts from Madoff to return the funds. When the fraud was revealed, Madoff admitted the nearly $68 billion he claimed existed in accounts was actually only a few hundred million dollars.
Schwartz described the defendants as "necessary players" in Madoff's fraud, saying Bongiorno, hired in 1968, and Crupi, hired in 1983, used old stock tables to fabricate account statements and other fake records — "millions of pages of lies" — that kept the Securities and Exchange Commission at bay. They also rewarded themselves with tens of millions of dollars in salary and bonuses from a "slush fund" of stolen money, including $2.5 million for a beach house for Crupi as the Ponzi scheme was falling apart, he said.
"In various and related ways, these five defendants helped perpetuate Madoff's elaborate fiction of investing client money in stocks and bonds that in reality simply did not exist," Schwartz said.
O'Hara and Perez developed a software program that automated the fraud, generating "information out of thin air," the prosecutor said. In 2006, when the men told Madoff they were tired of lying, he agreed to keep them quiet by paying them off, partly in diamonds so there was no paper trail, he said.
Bonventre was in charge of keeping three separate of books on the business, "each one designed to fool whoever was looking at it," Schwartz said.
The Ponzi scheme nearly ran out of money at least twice since the early 1990s before finally collapsing during the 2008 financial crisis. At the time, investors were seeking to withdraw $1.4 billion when the firm only had $300 million left, the prosecutor said.
Madoff told DiPascali he wanted to distribute the $300 million to longtime clients and loyal employees before turning himself in, the prosecutor said. When Bongiorno learned she would get $58 million, she complained she would have to pay taxes on it, he said.
The prosecutor made no mention of the sexual and romantic relationships the government said in pretrial papers occurred regularly among Madoff's employees and some customers. Madoff himself, it said, was involved in a love triangle with one of the defendants.
During jury selection, prospective jurors were told that they might hear references to big names like Steven Spielberg, Sandy Koufax, Kevin Bacon and Zsa Zsa Gabor.
Also likely to be mentioned are Madoff's relatives, including his brother, wife and two sons. One son committed suicide two years after the fraud was revealed.
Madoff, 75, is serving his sentence at a North Carolina federal lockup.