Thursday, March 25, 2010

White Collar and Securities: Madoff Aide Indicted

A federal grand jury in the Southern District of New York has indicted former Bernard Madoff aide, Daniel Bonventre, on charges related to the operation of Madoff's $65 billion Ponzi scheme fraud. The indictment alleges that Bonventre facilitated the operation of the investment fraud by using $750 million in investment funds to hide the existence of the scheme.

Bonventre was the director of operations of Bernard L. Madoff Investment Securities, LLC, from at least 1978 until its collapse in December 2008. The investment fund ended when its fraudulent nature came to light with the arrest of Madoff on securities and other fraud charges. Bonventre began his employment with Madoff in 1968.

For a Ponzi scheme to continue in its operation the earlier investors must receive payment attributed to their investments. In the Madoff scheme the government believes that Bonventre was responsible for diverting $750 million of new investor money to earlier investors to keep the scheme operating and to prevent its discovery. Moreover, the government believes that the defendant concealed the scope of the fraud.

The indictment alleges nine counts against Bonventre. The specific crimes alleged are the following: 1) one count of securities fraud, 2) two counts of falsifying records, 3) one count of making a false filing to the Securities and Exchange Commission, 4) four counts of filing false tax returns, and 5) one count of conspiracy.

Bonventre is the sixth person charged in the Madoff fraud. Madoff, former chief financial officer Frank DiPascuali, and former accountant David Friehling have all pleaded guilty. According to prosecutors, DiPascuali's cooperation has been instrumental in unraveling the fraud. Consequently, they have petitioned the court for extraordinary leniency in his sentencing. Jerome O'Hara and George Perez have been indicted for falsifying records.

The court joined the charges against O'Hara and Perez with those against Bonventre and the three await trial. Joinder of counts is appropriate when common issues of fact and law predominate in the charges brought. Joinder streamlines the trial process thus saving judicial time and resources without prejudicing the parties.

For more about the charges, please see Reuters, "Ex-Madoff Aide Indicted for Fraud, Conspiracy," March 24, 2010,

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