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Forensic investigation uncovered scale of Ponzi fraud

Member: Nifa

Three of Bernard Madoff’s aides were given prison sentences this week for their part in helping the Ponzi scheme fraudster steal as much as $20bn from investors.  Daniel Bonventre, who ran Madoff’s broker-dealer unit for almost 40 years, was sentenced to 10 years behind bars earlier this week for helping to run the fraud but was given a much more lenient penalty than his erstwhile employer, who was given a 150-year sentence

Meanwhile, Annette Bongiorno, Madoff’s long-standing assistant, who became a multimillionaire by obeying her boss, was sentenced to six years for what the US District Court judge called her decision to obey Madoff rather than recognise the fraud happening “right in front of her”.  In addition, a former computer programmer for the firm was sentenced to two-and-a-half years in jail, as the judge ruled that his actions “kept in place the essential backbone of the infrastructure” that perpetuated the fraud.

The trio were three of five former Madoff employees convicted earlier this year on conspiracy and fraud charges to receive prison sentences.  At that time, a jury convicted all five on charges that they knowingly helped Madoff fabricate and backdate financial records and purported stock trades to fool investment clients, auditors, regulators and investigators.

Serious concerns over how Madoff ran his investments started when a financial analyst spent four hours in 2000 trying and failing to replicate the consistently high but not spectacular returns he was making. He concluded that the figures just didn’t add up but no one in authority took him seriously.

However, the scam came to light in 2008 when Madoff’s own sons, concerned that their father was asking them to pay out over $170m in bonuses when they couldn’t pay their investors, reported him to the authorities.  At that point, forensic investigators were given access to all the financial information and computers and the breathtaking scale of the fraud and the fact that he could not have perpetrated it without help was discovered.  

This then led to the trials and sentencing and without it, it is likely that only the tip of the iceberg that was the biggest Ponzi scheme in history would have been uncovered.

Author: Roger Isaacs, 15 December 2014

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