Madoff Five Face September Sentences as U.S. Assails Denials

Jul 25, 2014 9:50 am ET

(Updates with postponement of sentencing hearings from next week to September in third paragraph.)

July 25 (Bloomberg) -- Five former aides to Bernard Madoff who prosecutors said have shown a “galling” lack of remorse since being convicted of fraud were set to be sentenced next week for propelling the biggest Ponzi scheme in U.S. history.

The three men and two women, who worked for Madoff for decades, deserve “significantly harsher” terms than the eight to 20 years recommended by the U.S. Probation Office, the government said in court filings this month. The defendants seek leniency, arguing jurors were misled by overzealous prosecutors.

U.S. District Judge Laura Taylor Swain, who oversaw the five-month trial in Manhattan, was scheduled to hand down sentences in separate hearings over three days beginning July 28. Swain, who rejected requests to set aside the March verdicts, this week postponed sentencing to the week of Sept. 15, citing “voluminous” paperwork.

“The devastation caused by these defendants and their co- conspirators is sweeping and, in many ways, unfixable,” Assistant U.S. Attorney Matthew Schwartz said in a July 18 memo. “That makes the defendants’ lack of contrition all the more galling.”

A federal jury on March 24 found the five guilty of securities fraud and related counts, handing the government a total victory in the first criminal trial over Madoff’s $17.5 billion fraud.

Madoff, 76, pleaded guilty in 2009 and is serving a 150- year sentence in a federal prison in North Carolina. Madoff didn’t cooperate in the government’s investigation. At least seven others pleaded guilty, including his brother Peter Madoff, who is serving a 10-year prison term.

‘Punished Severely’

“The prosecutors are trying to make the point that those who participate in fraud will be punished severely,” said Stuart Slotnick, a white-collar criminal defense lawyer with Buchanan Ingersoll & Rooney PC in New York, who isn’t involved in the case. “Having won, the prosecutors are completely invested in the outcome, which is the prison sentence.”

The five former employees worked in concert to create millions of fake trade confirmations and account statements for thousands of clients, and fashioned an extensive, phony paper trail that repeatedly duped outside auditors and the U.S. Securities and Exchange Commission, the jury found.

Annette Bongiorno, who ran the investment advisory unit at the center of the fraud, and Daniel Bonventre, the ex-operations chief of Madoff’s broker-dealer business, deserve 20 years each behind bars, the probation office said. Joann Crupi, who managed large accounts, should get 14 years, while computer programmers George Perez and Jerome O’Hara, convicted of automating the scam as it grew rapidly in the 1990s, deserve eight years each, according to probation officials.

‘Epic’ Fraud

Defense lawyers have continued to deny in pre-sentencing court filings that their clients were aware of the “epic” fraud, the U.S. said. The tactic “flies in the face” of the jury’s verdict and justifies longer sentences, the government said.

“Prosecutors are particularly offended when a criminal defendant takes the stand in their own defense and lies,” Slotnick said.

Prosecutors also argue stiff prison terms are warranted for Bongiorno and Bonventre because they lied when they testified in their own defense. They were the only defendants who took the stand. Jurors interviewed after the trial said the testimony was a mistake.

The group had faced prison terms ranging from 58 years to about 200 years based on the charges on which they were found guilty. The defendants are free on bail and were ordered by Swain after the trial to wear electronic monitors.

Appeals Court

Defense lawyers already have said they will seek to overturn the convictions on appeal.

Bonventre, 67, was a victim of Madoff’s sociopathic behavior, his lawyer, Andrew Frisch, said in pre-sentencing papers. The jury was “asleep at the wheel,” the defendant’s sister said in a letter to the judge, while one of his friends wrote to say the jury must have been “deaf and blind.”

Prosecutors called Bonventre’s claim to innocence “arrogant and disingenuous,” saying he was a core perpetrator of the fraud, as well as Madoff’s “close criminal confidant,” according to the government’s filing.

“Bonventre’s hubris should be factored into the sentence that the court imposes on him,” the U.S. said.

Probation Officials

Bongiorno, 65, was the only defendant to acknowledge in pre-sentencing papers to having a role in the fraud and asked for a term of eight to 10 years -- less than half the sentence recommended by probation officials. She claimed to have had very little discretion in how she did her job and that she was simply following orders.

“A just sentence should permit Mrs. Bongiorno a chance of release, given who she is, and the real nature of the role she played in the deplorable schemes at Madoff Securities,” her lawyer, Roland Riopelle, said in his filing. Even with the requested term, “she may not live long enough to complete such a sentence,” he said, citing health problems in her family.

The U.S. rejected Bongiorno’s overture.

“Of course, even now, Bongiorno has not accepted responsibility for her crimes” and wrongfully portrays herself as “some thoughtless robot that did Madoff’s bidding,” the U.S. said.

“The longevity of the fraud” demonstrates “just how good Bongiorno was at her job,” prosecutors said. “Of all of the defendants in this case, it was Bongiorno that profited the most from the fraud.”

Bongiorno made $18 million over her years at Madoff’s firm and had personal accounts with balances of about $60 million that included fake profit from the scheme, the government said.

‘Low Level’

Crupi was a “low level operative” with “ministerial” responsibilities, her lawyer, Eric Breslin, said in a sentencing submission. Crupi “may have, in some of these tasks, enabled the fraud,” he said.

The U.S. called Breslin’s claim “galling” and urged Swain to sentence Crupi to a term “significantly harsher” than 14 years.

Crupi “was an instrumental part of the fraud,” prosecutors said. “She did not blink when she learned that the firm was collapsing and documents were being shredded.”

Prosecutors also rejected claims by O’Hara and Perez, 48, that they didn’t know about the fraud, and that they were writing programs requested by their boss.

“Their continued denial shows a lack of remorse and disrespect for the seriousness of these proceedings,” the U.S. said.

Celebrities, Retirees

Madoff, who hatched the fraud in the 1970s, targeted thousands of wealthy investors, Jewish charities, celebrities and retirees. The scam unraveled in 2008 when the economic crisis led to more withdrawals than he could afford to pay.

Prosecutors also asked Swain to deny bail pending appeal and require the group to report to prison.

The defense in April asked Swain for an acquittal or a new trial, alleging misconduct by prosecutors and a lack of evidence. Jurors who deliberated for about three days were swayed by “inflammatory and improper remarks” by the government during opening and closing statements, the said.

The case is U.S. v. O’Hara, 10-cr-00228, U.S. District Court, Southern District of New York (Manhattan).