NEW YORK – Bernard Madoff’s finance chief, who pleaded guilty to aiding his $17 billion fraud, said he could tell right away that fake trades were being used in customer accounts in 1975 when he joined the firm after high school.
The fraudulent trading went on “for as long as I could remember,” Frank DiPascali, 57, told a jury in Manhattan federal court Monday at the trial of five former colleagues. “It was virtually impossible not to know what was happening.”
DiPascali, who at 19 started working for Madoff as a researcher, is the highest-ranking former Madoff executive to testify in the first criminal trial stemming from the Ponzi scheme, which the U.S. has said began in the early 1970s and collapsed at the peak of the financial crisis.
DiPascali, who faces as long as 125 years in prison when he’s sentenced, is seeking leniency by testifying against the people, all of whom claim they were duped by Madoff into believing his investment advisory business was legitimate.
The defendants have pleaded not guilty. DiPascali is among about six former Madoff employees who have pleaded guilty and are testifying in the case.
DiPascali told jurors Monday there was no way employees at Madoff’s investment advisory could have confused fake trades for real ones, because the real trading taking place at Madoff’s broker-dealer involved counterparties, current trading prices and the coordination of several people making simultaneous phone calls “in a very noisy environment.”
But the fake trading in the investment advisory unit was based on historical prices taken out of newspapers and given to secretary Annette Bongiorno on index cards in a small, metal box about once a month, he said.
“Did you see Ms. Bongiorno looking at real-time prices for stocks?” Assistant U.S. Attorney John Zach asked DiPascali. “No,” DiPascali said. “Can you buy stock looking at yesterday’s prices in the Wall Street Journal?” Zach asked. “No,” DiPascali said.
DiPascali pleaded guilty in August 2009 to 10 counts, including conspiracy, fraud and money laundering. He told U.S. agents that company employees asked him if the business was a “scam” before the world learned the truth, according to documents filed in the case.
In February 2010, a judge granted DiPascali’s bid to be released from jail on $10 million bail after federal agents said the former executive was providing invaluable assistance to the case against his former colleagues.
Madoff, 75, is serving a 150-year sentence in a federal prison in North Carolina.