Prosecutors say Madoff scheme goes back to 1970’s

Posted at 7:05 AM, Oct 02, 2012
and last updated 2012-10-02 07:05:08-04

By Charles Riley

HONG KONG (CNNMoney) — Federal prosecutors filed additional charges Monday against five former employees of Bernie Madoff, saying that his massive scheme to defraud investors started in the 1970s, much earlier than previously alleged.

Prosecutors said that the five long-time Madoff employees — Daniel Bonventre, Annette Bongiorno, Joann Crupi, Jerome O’Hara and George Perez — were all involved in operational aspects of Madoff’s scheme. Previously indicted on other charges, they now face a total of 33 counts on charges ranging from bank fraud to tax offenses.

The new charges come after Madoff’s brother Peter, who worked at the firm with him, was recently sentenced to 10 years for participating in the fraud.

Bonventre, who served as director of operations, allegedly concealed the fraud through manipulation of the firm’s general ledger, financial statements and stock record. Prosecutors say Bonventre also created false records related to Madoff’s individual tax returns with the intent of fooling auditors.

O’Hara and Perez worked as computer programmers starting in the early 1990s. Prosecutors say they helped cook the books by writing algorithms to change account names, the number of shares and transaction numbers.

The new indictment charges Bonventre with 22 counts, while Bongiorno now faces 10 counts and Crupi stands accused of 13 counts. O’Hara and Perez were charged with eight counts each. The defendants will be arraigned Tuesday in New York federal court.

The original indictment in the case, filed in Nov. 2010, indicated that the Madoff fraud started in 1992. The new indictment filed Monday dates the conspiracy back decades earlier, to at least the early 1970s.

“This largest-ever Ponzi scheme was not the work of one person,” FBI Acting Assistant Director-in-Charge Mary Galligan said in a written statement.

“Each of the defendants in his or her way allegedly played a key role in designing, building or maintaining the house of cards. The habitual doctoring of books and records, the fictitious trades, the phantom accounts, were the core of the charade,” Galligan said.

For decades, Madoff ran a Manhattan-based investment firm that served as a front for his Ponzi scheme. His victims believed he was investing their money, but he was actually using it to fund a lavish lifestyle for himselfand his wife Ruth.

They lived in a Manhattan penthouse and had extravagant homes in Montauk, N.Y.; Palm Beach, Fla.; and the French coast. Their possessions included diamond-studded jewelry, a satin Mets jacket emblazoned with “Madoff” and a yacht named “The Bull.”

Madoff’s scheme finally came crashing down with his arrest on Dec. 11, 2008. He pleaded guilty three months later and was sentenced to 150 years in prison.

Madoff resides at the Butner Federal Correctional Complex in North Carolina. His scheduled release date is in 2139.

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