Four Employees Of Bernard L. Madoff’s Fraudulent Investment Advisory Business Sentenced In Manhattan Federal Court For Their Roles In The Massive Fraud
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ANNETTE BONGIORNO, the manager of the fraudulent investment advisory business at Bernard L. Madoff Investment Securities LLC, JOANN CRUPI, a/k/a “Jodi,” who managed hundreds of millions of dollars in fictitious investments, and JEROME O’HARA and GEORGE PEREZ, who worked as computer programmers designing and maintaining the proprietary software that enabled the fraud, were sentenced in Manhattan federal court. BONGIORNO was sentenced last Tuesday to six years in prison, and ordered to forfeit more than $155 billion. O’HARA, who was sentenced last Tuesday, and PEREZ, who was sentenced on Wednesday, were each sentenced to two-and-a-half years in prison, and ordered to forfeit more than $19 billion. CRUPI, who was sentenced today, was sentenced to six years in prison, and ordered to forfeit more than $33 billion. After a nearly six-month trial before U.S. District Judge Laura Taylor Swain, BONGIORNO, CRUPI, O’HARA, and PEREZ were convicted in March 2014 of, respectively, ten, thirteen, eight, and eight counts of securities fraud, falsifying the books and records of Madoff Securities, and conspiracy; BONGIORNO and CRUPI were also convicted of tax fraud, and CRUPI was convicted of bank fraud.
Manhattan U.S. Attorney Preet Bharara said: “Earlier this year, a jury unanimously found Annette Bongiorno, Joann Crupi, Jerome O’Hara, and George Perez guilty of every crime with which they were charged as a result of their willful participation in Bernard Madoff’s historic Ponzi scheme. As the Court acknowledged today and last week, each of them knowingly agreed to defraud thousands of victims, leading to billions of dollars in losses and unspeakable hardship. Although the sentences imposed by the Court cannot adequately compensate their many, many victims, time in prison for Bongiorno, Crupi, O’Hara, and Perez is a measure of justice.”
According to the allegations in the Superseding Indictment filed in Manhattan federal court, other court documents, and the evidence presented at trial:
BONGIORNO, an employee in the investment advisory business for 40 years, managed hundreds of investment advisory accounts purportedly having a cumulative balance of approximately $8.5 billion as of November 30, 2008. BONGIORNO also supervised employees who worked for the investment advisory business, and was for many years the head of the fraudulent investment business.
CRUPI, an employee in the investment advisory business for 25 years, managed several Madoff Securities investment advisory accounts purportedly having a cumulative balance of approximately $900 million as of November 30, 2008. CRUPI also, like BONGIORNO before her, tracked the daily activity of the bank account into which billions of dollars of investment advisory client money was deposited, and from which investment advisory client redemptions were paid.
During the course of managing investment advisory accounts, BONGIORNO and CRUPI “executed” trades in the investment advisory clients’ accounts only on paper, based on historically reported prices of securities that they researched in the Wall Street Journal and Bloomberg. Those trades achieved annual rates of return that had been pre-determined by Madoff. BONGIORNO and CRUPI also backdated the purchase dates of purported trades so that they could control the amount of gains reflected in the investment advisory accounts. For example, on at least one occasion, BONGIORNO back-dated a trade by more than twelve years in the account of her co-defendant, Daniel Bonventre (who was sentenced last Monday to 10 years in prison). On another occasion, in the fall of 2008, BONGIORNO back-dated sales of Lehman Brothers shares in her own investment advisory account, after Lehman Brothers had in reality filed for bankruptcy. Similarly, CRUPI caused backdated, losing trades to be placed in her own investment account for tax purposes.
Further, BONGIORNO processed exceptional gains in certain investment advisory accounts that purportedly occurred months before the investment advisory accounts had been established. BONGIORNO also asked certain investment advisory clients to return previously issued Madoff Securities account statements so that she could alter them, and often include additional backdated trades.
CRUPI handled the receipt of funds sent to Madoff Securities by its clients for investment; transferred clients’ funds between and among various Madoff Securities bank accounts; handled client requests for redemptions sent to Madoff Securities by clients; monitored, on a daily basis, funds transferred into and out of the Madoff Securities bank account that was principally used to perpetrate the fraud; and prepared and assisted in the preparation of fabricated documents designed to deceive regulators and outside auditors. Further, CRUPI provided banks with false information in connection with mortgage loans for other Madoff Securities employees.
BONGIORNO and CRUPI also filed false Income Tax Returns on their own behalf, in which they failed to report income that they received from Madoff Securities. Specifically, BONGIORNO was convicted for failing to report thousands of dollars in cash that she withdrew from two “Bernard L. Madoff Special” accounts over a period of many years. Similarly, CRUPI was convicted for failing to report thousands of dollars in personal expenditures on a corporate credit card, including for food, wine, personal travel, and home improvement projects.
O’HARA and PEREZ were employed as computer programmers at Madoff Securities beginning in 1990 and 1991, respectively. They were responsible for developing and maintaining computer programs that supported the operation of the Madoff Securities investment advisory business. For example, O’HARA and PEREZ created special programs that, among other things: created books and records for a small subset of Madoff Securities investment advisory clients to help hide the scope and nature of the investment advisory business; changed the names of account holders to help explain why the SEC would not find investment advisory client securities at the Depository Trust Company (“DTC”); altered details about the number of shares, execution times, and transaction numbers for trades reported on Madoff Securities trade blotters, by employing algorithms that produced false and random results; created false and fraudulent order entry and execution reports that included fictitious times at which orders for equities transactions purportedly were placed; generated fraudulent commission reports; and created fraudulent investment advisory client account statements in a format different from those sent to clients.
Between 2004 and 2008, Madoff Securities was subject to at least five reviews by the United States Securities and Exchange Commission (“SEC”) and a European accounting firm that was conducting a review of Madoff Securities’ operations on behalf of investment advisory clients. As part of a concerted effort overseen by Madoff to deceive both the SEC and the European accounting firm, CRUPI, O’HARA, and PEREZ participated in creating numerous false and fraudulent books and records. O’HARA and PEREZ knew that the special programs they developed contained fraudulent information and that they were used in connection with the SEC and European accounting firm reviews. Similarly, O’HARA created false books and records – including by inserting fictitious securities positions – for the Madoff Securities market making and proprietary trading businesses, in order to deceive auditors from the Internal Revenue Service and New York State taxing authorities.
In imposing the sentences, Judge Swain observed that BONGIORNO’s “work was integral to the success of the unspeakable fraud perpetrated by Bernard Madoff,” and thereby “destroyed or at least chipped away at the foundation of innocent investors’ dreams.” Similarly, Judge Swain noted that O’HARA and PEREZ’s “work kept in place the essential backbone of the infrastructure through which the  fraud was perpetrated,” and that through their conduct, “so many innocent lives were irreversibly upended.” Judge Swain observed that CRUPI was “the reassuring voice of Madoff Securities to at least one victim” (who had written a letter to the Court) and that she caused “staggering and continuing harm.”
In addition to the six-year prison term, BONGIORNO, 66, was also ordered to forfeit more than $155 billion, including specific bank accounts and real estate, representing property traceable to the massive Ponzi scheme. Judge Swain also imposed a term of two years of supervised release following BONGIORNO’s completion of this sentence. O’HARA, 51, and PEREZ, 48, were each ordered to forfeit more than $19 billion, and each was sentenced to three years of supervised release following the completion of his sentence. In addition to her prison sentence, CRUPI, 53, was ordered to forfeit $33.9 billion, and to serve four years of supervised release.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the U.S. Securities and Exchange Commission, the Internal Revenue Service, and the U.S. Department of Labor for their assistance.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
Assistant United States Attorneys Matthew L. Schwartz, John T. Zach, and Randall W. Jackson are in charge of the prosecution. Assistant United States Attorneys Matthew L. Schwartz and Paul M. Monteleoni are in charge of the forfeiture aspects of the case.