(Bloomberg) — Jurors in the trial of five former employees of Bernard L. Madoff were shown video clips of the con man telling participants at a conference in 2007 that fraud on Wall Street was virtually impossible.
The footage, played yesterday in federal court in Manhattan, was intended to show the ease with which Madoff could lie — a skill the defense argues Madoff used to dupe his inner circle into unwittingly aiding a $17.5 billion Ponzi scheme. Prosecutors had sought to keep jurors from seeing the video, arguing it was irrelevant and would confuse them.
The criminal trial, now in its fifth month, is the first stemming from the scheme, which collapsed after Madoffs arrest in December 2008 revealed his investment unit hoarded customer cash instead of using it to buy securities. Testimony in the case could end as soon as today.
Madoff, in the first clip shown yesterday, compares regulators to children who roll their eyes when being told what they need to do. In the second excerpt, Madoff says that in the current regulatory environment, fraud on Wall Street is virtually impossible.
Madoff, in the third clip, says 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. The video excerpts were shown by Eric Breslin, a lawyer for Joann Crupi, who managed large investment-advisory accounts at Madoffs firm.
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 topics including finance. The centers benefactor foundation invested with Madoff and, according to the groups website, has been discontinued due to insurmountable budget shortfalls.
At the time, Madoffs Ponzi scheme had been running for about three decades and would collapse 14 months later.
Camille Cerciello, a friend of Crupis who runs a school in New Jersey for children with developmental disabilities, was the first witness called by Breslin. Cerciello said she hired Crupi to help at the facility and became close friends with her. Their adopted children play together, she said.
Shes honest and has good moral character, Cerciello said of Crupi under questioning by Breslin. Crupi also has traditional American values, she said twice.
During her cross-examination by Assistant U.S. Attorney Matthew Schwartz, Cerciello said she had no first-hand knowledge of Crupis role at Madoffs company. She said she socialized with Crupi on a regular basis.
She has a great wine collection? Schwartz asked.
Breslin objected to the question before Cerciello answered. The 33-count indictment in the case includes allegations that Crupi spent thousands of dollars on wine using her corporate American Express card, without declaring the perk as income on her taxes.
The other defendants in the trial are Daniel Bonventre, Madoffs former operations director who ran the broker-dealer unit; Annette Bongiorno, who ran the investment advisory business; and computer programmers Jerome OHara and George Perez, accused of writing code to automate the creation of fake account statements and other false documents. All five defendants have denied wrongdoing.
Prosecutors accuse the group of conspiring 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 OHara and Perez yesterday 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 lawyers argue the alleged inconsistencies are proof the witnesses are lying to appease the U.S. and secure shorter prison terms when theyre sentenced.
FBI Special Agent M. Kathryn Scott, who in August 2009 helped interview Madoffs ex-finance chief, Frank DiPascali, under questioning yesterday by Perezs lawyer, Larry Krantz, said DiPascali told investigators he regularly took Perez and OHara to expensive restaurants for casual conversations. He was also carrying out Madoffs request that he take their temperature about what was happening at the firm, Scott testified.
DiPascali, who pleaded guilty in the case and testified as one of the key government witnesses in the trial, said during the 2009 interview that he arranged for hired cars to take Perez and OHara home so they could drink alcohol freely during the meals, Scott told the jury. The dinners tapered off after the programmers confronted Madoff in 2006 about coding that made them uncomfortable, Scott said.
When DiPascali testified in January, he denied using alcohol to get the men to talk, and said the dinners had nothing to do with Madoffs request. He also testified the dinners continued after the men confronted Madoff.
Madoff, 75, is serving a 150-year prison sentence in North Carolina after pleading guilty in 2009.
The case is U.S. v. OHara, 10-cr-00228, U.S. District Court, Southern District of New York (Manhattan).