Oct. 24 (Bloomberg) -- A former employee of Bernard Madoff on trial for allegedly aiding the con man’s $17 billion fraud said he wrote corporate checks to himself for tens of thousands of dollars as a secret “bonus” from his boss, a jury was told.
Daniel Bonventre, who oversaw Madoff’s broker-dealer and proprietary trading units, told investigators after Madoff’s arrest on Dec. 11, 2008, that Madoff permitted him to write such “vendor” checks to himself to hide his total annual compensation from other employees, Meaghan Schmidt, a consultant who helped unravel the fraud after its discovery, told jurors yesterday in Manhattan federal court.
Starting in 1998, Bonventre signed similar checks to himself about once a year, ranging from about $45,000 to $60,000, said Schmidt, a director at the consulting firm AlixPartners LLP, whose employees took over Madoff’s offices in Midtown Manhattan to secure documents and ascertain where the business stood. One of the last such payments was a $50,000 check written the previous month, Schmidt said.
Bonventre said Madoff approved the payments “because his salary was already so high he didn’t want his bonus to be scrutinized by other employees,” Schmidt said under questioning from U.S. prosecutors.
Assistant U.S. Attorney Matthew Schwartz said in court yesterday that Bonventre’s annual salary was more than $1 million and his last annual bonus was about $200,000, citing payroll records that were displayed for the jury.
“He wanted to hide an extra $50,000?” the prosecutor asked Schmidt, prompting an objection from defense lawyers.
Bonventre and four other former Madoff employees are accused of conspiring for decades to hide Madoff’s fraud by creating millions of fake documents to trick customers and regulators.
Also on trial are computer programmers George Perez and Jerome O’Hara, Joann Crupi, who managed large accounts, and Annette Bongiorno, who worked for Madoff for 40 years, including as his personal secretary. Bongiorno helped run the company’s investment advisory business.
Bonventre’s lawyers argue he had no reason to believe the check-writing practice was wrong because Madoff had approved it. They also argue Bonventre didn’t know about the fraud at Madoff’s securities company and was duped by his boss. He has pleaded not guilty in the case.
Schmidt told the jury she found discrepancies in the company’s list of employees and its payroll documents, which revealed people who received paychecks and didn’t do work for the company. One such person was Bonventure’s son, who was away at college at the time, she said.
“I wasn’t able to understand his role,” Schmidt said in her testimony. Schmidt said she “was met with little resistance” when she told the elder Bonventre she was taking his son off the payroll.
AlixPartners had been hired by a court-appointed receiver through the U.S. Securities and Exchange Commission, she said. At the time, Bonventre hadn’t been accused of any crime.
Schmidt was the fourth witness to testify in the first criminal trial stemming from the world’s biggest Ponzi scheme, which deprived investors of $17 billion in principal and billions more in fake profit. U.S. District Judge Laura Taylor Swain said the trial may last as long as five months.
Winnie Jackson, who started working for Madoff’s firm in 1983, testified yesterday that her job included collecting historical trade data and prices for specific stocks over past weeks or months, and sometimes as long as a year, so that customer account statements could include backdated trades to reach specific profit requests sought by Bongiorno.
Jackson told the jury she also helped execute withdrawal requests for Bongiorno directly from her account, usually amounting to $2,500 in cash once or twice a month that she would personally deliver to her then-boss.
Randall Jackson, one of the prosecutors on the case, used a cart to roll four large cardboard boxes to the witness stand and set them down one-by-one in front of the former clerical worker, opened them, and asked her to identify what was inside. Each box contained Bongiorno’s seized files that she used to track monthly data for customer accounts, she said.
The boxes were entered into evidence and one of the files inside was passed among the members of the jury for examination. The prosecutor also supplied large expandable folders containing numerous plastic bags holding small stacks of paper. The witness, Jackson, identified the papers as account-balancing forms for the investment advisory business’s account at JPMorgan Chase & Co., the so-called “703” account at the center of the fraud.
Madoff, 75, admitted to federal agents in December 2008 that his company was a sham. He pleaded guilty to 11 counts and was sentenced to 150 years in prison, though he claimed all along that he worked alone and refused to implicate anyone else.
The case is U.S. v. O’Hara, 10-cr-00228, U.S. District Court, Southern District of New York (Manhattan).
--Editors: Peter Blumberg, Glenn Holdcraft