Former Madoff operations director arrested, accused of helping swindler cook the books
Bernard Madoff’s claim to have pulled off his multibillion dollar swindle without assistance fell apart further Thursday, as one of his longtime aides was charged with helping him cook the books.
Daniel Bonventre, an accountant who worked for Madoff since the late 1960s, was arrested early Thursday morning at his home in Manhattan, authorities said. He faces conspiracy, securities fraud and tax charges.
The 63-year-old was also sued Thursday by the Securities and Exchange Commission. The SEC accused Bonventre of falsifying records both to disguise Madoff’s fraud and illegally enrich himself.
Bonventre said nothing to reporters after making his initial court appearance on the charges in the afternoon. A judge freed him on a $5 million bond, secured by $2 million in assets. His attorney, Andrew Frisch, declined to comment.
As they announced the charges, authorities said their investigation has shown that Madoff needed a team of enablers to carry out his massive crime, including people working on the purportedly “legitimate” side of the family business, which processed stock trades.
Prosecutors said that, with Bonventre’s knowledge, hundreds of millions of dollars were siphoned out of accounts belonging to Madoff’s clients and used to support those other operations at Bernard Madoff Investment Securities. In some cases, he used client money as collateral to obtain loans.
“A fraud of this magnitude requires a coordinated effort. Bonventre played an essential part by creating bogus financial records to give BMIS the appearance of legitimacy, when in fact the firm lost money and could not have survived without the fraud,” said George S. Canellos, director of the SEC’s New York regional office.
Investigators didn’t say how many other people on the supposedly legitimate side of the operation, which was overseen by Madoff’s sons and brother, might have been aware of the fraud. No members of Madoff’s family have been charged.
In a criminal complaint, however, prosecutors said Bonventre helped arrange millions of dollars in illegal payments and loans to certain unidentified employees and Madoff relatives, some of which were used to buy luxury homes.
Madoff, 71, is serving a 150-year prison sentence after admitting that he operated a Ponzi scheme for at least two decades, cheating thousands of individuals, charities, celebrities and institutional investors out of billions of dollars.
A number of people affiliated with the business have already pleaded guilty, including his Madoff’s chief lieutenant, Frank DiPascali, who has been cooperating with authorities.
BMIS’s market-making business and proprietary trading desk have been portrayed by the family as independent and unrelated to the fraud, but the SEC said records show it operated at a “significant loss,” and only an infusion of $750 million in funds stolen from investors allowed the business to report positive revenue and income.
Prosecutors said that for at least 30 years, Bonventre’s role at the company was to run the back office and oversee the firm’s securities clearing functions.
The SEC said Bonventre knew that the billions of dollars Madoff was collecting from investors were not being used to purchase securities, and doctored the books to hide the scheme. Bonventre cashed in on the fraud by taking $1.9 million in profit from bogus backdated trades that hadn’t actually taken place, the SEC said.
A criminal complaint also accused him of failing to report hundreds of thousands of dollars in income to the IRS.
Other people charged in the case include Madoff’s auditor, who has pleaded guilty, and two computer programmers accused of helping cover up the scheme.