Madoff says Wall Street fraud impossible in video at trial

March 3, 2014 06:58 AM

Jurors in the trial of five former Bernard Madoff employees were shown video clips of the con man telling participants at a conference in 2007 that fraud on Wall Street was “virtually impossible.”

The clips, played today in federal court in Manhattan, are intended to show the jury Madoff’s skills as a liar and back the defense claim that Madoff had the ability to dupe his former inner circle into aiding his $17.5 billion Ponzi scheme. Prosecutors had sought to keep the jury from seeing the videos.

The criminal trial, now in its fifth month, is the first stemming from the scheme, which collapsed after Madoff’s arrest in December 2008 revealed his investment unit hoarded customer cash instead of using it to buy securities.

In the first clip, shown by Eric Breslin, a lawyer for Joann Crupi, who managed large accounts in the investment advisory business, Madoff compares regulators to children who “roll their eyes” when being told what they need to do. In the second clip, Madoff says that in the current regulatory environment, fraud on Wall Street is “virtually impossible.”

Madoff said in the third video clip that regulatory problems can potentially be solved if you “take the human being out of the equation,” though he said later that computers could also be manipulated.

Public Discussions

The video was made in New York in October 2007 at the Philoctetes Center for the Multidisciplinary Study of the Imagination, a now-defunct organization that arranged public discussions and exhibits on a variety of topics, including finance. The center’s benefactor foundation invested with Madoff, and the group’s website says it’s been discontinued due to “insurmountable budget shortfalls.”

At the time, Madoff’s Ponzi scheme had been running for about three decades and would collapse 14 months later.

The other defendants are Daniel Bonventre, Madoff’s former operations director who ran the broker-dealer unit; Annette Bongiorno, who ran the investment advisory business, and computer programmers Jerome O’Hara and George Perez, accused of writing code to automate the creation of fake account statements and other false documents. All five people have denied wrongdoing.

Single Account

Prosecutors say the group conspired for decades to trick thousands of victims into believing their deposits were used to buy securities. Instead, the money was placed in a single bank account that paid withdrawals, financed operations and enriched employees, the U.S. says.

Lawyers for O’Hara and Perez today questioned three Federal Bureau of Investigation agents who interviewed government witnesses who pleaded guilty in the case and agreed to testify against their five ex-colleagues.

The defense lawyers said in court papers that the testimony would show discrepancies between what the former Madoff employees who pleaded guilty said in FBI interviews over the past several years and their testimony at the trial. The defense says the alleged inconsistencies are proof the witnesses are lying, appease the U.S. and secure less time behind bars when they’re sentenced.

Madoff, 75, is serving a 150-year prison sentence in North Carolina after pleading guilty in 2009.

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

About the Author