A former JPMorgan Chase banker who managed Bernard Madoffs account said the con man was on track to receive a $200 million loan less than a month before his arrest if the request hadnt been dropped.
Daniel Bonventre, one of five ex-Madoff employees on trial for allegedly aiding the fraud, asked JPMorgan in November 2008 to borrow twice Madoffs credit limit of $100 million, with U.S. Treasuries as collateral, Mark Doctoroff, who left the bank last year, testified yesterday in federal court in Manhattan.
They are doing well financially, Doctoroff said of Madoffs securities firm in an e-mail to JPMorgans credit department on Nov. 17, 2008. They are looking at the current market as an opportunity to make investments, true to their value investing style.
The five former employees are accused of helping Madoff hide his fraud from customers, banks and regulators for years, and getting rich in the process. Its the first criminal trial stemming from the scheme, which prosecutors say started in the early 1970s and imploded at the peak of the financial crisis.
The loan was part of a last-ditch attempt by Madoff to secure cash as his Ponzi scheme was collapsing and Bonventres role in the application process was one of the many examples of his involvement in the fraud, prosecutors have said.
Doctoroff, who was Madoffs relationship manager at the bank from about February 2008 until Madoffs arrest in December that year, said he didnt know at the time Madoff had a formal investment advisory unit -- the center of the Ponzi scheme involving fake trades -- or that Madoffs JPMorgan account was used for that business. He said he never met Madoff.
Told Dan you would call him back if a problem, or let me know and I will -- but think we should process, Doctoroff said in the e-mail, a copy of which was displayed on flat-screen monitors for the jury. While the loan never went through, Doctoroff said yesterday he thought it would have been granted, and that he didnt know why the loan process stopped.
Bonventre, who oversaw the broker-dealer and proprietary trading operations of Madoffs company, where real trading took place, pleaded not guilty and has denied involvement in the fraud, saying he was duped like thousands of others.
Doctoroff said Bonventre told him during the loan request that Madoffs company had $676 million in capital and no losses. The loan wasnt suspicious, he said.
Bonventres lawyer, Andrew Frisch, asked if the loan request and the fraudulent capital figures given by Bonventre could have come from Madoff himself. Doctoroff agreed Madoff could have given the fake figures to Bonventre.
The other defendants in the case, all accused of helping make fake documents for decades, are Annette Bongiorno, who worked for Madoff for 40 years and ran the investment advisory business; Joann Crupi, who managed large accounts; and computer programmers George Perez and Jerome OHara. All five have pleaded not guilty.
Joseph Evangelisti, a JPMorgan spokesman, declined to comment on the testimony.
The office of U.S. Attorney Preet Bharara in Manhattan is investigating how JPMorgan handled Madoffs funds and whether it turned a blind eye to the fraud. Bharara is weighing a deferred prosecution agreement or fine to resolve the probe, a person familiar with the matter said last month.
IrvIng Picard, the trustee liquidating Madoffs firm in bankruptcy court to help repay victims, is also seeking about $1 billion in lawsuits against JPMorgan, which has denied the claims in court filings. Picard had sought as much as $19 billion in damages against the bank before losing a series of court rulings in the banks favor.
Another witness, William Nasi, who was a messenger for Madoffs company starting in 1968, testified yesterday that the securities firm would regularly issue checks in his name for thousands of dollars, which he would then cash and give directly to Bongiorno or Madoff. A copy of one such check to Nasi, from Oct. 4, 2004, for $3,000, was displayed for the jury.
Bongiorno would usually receive about $2,500 in that way every 10 days, and she preferred payment in $100 bills, said Nasi, whose duties included picking up six large bags of the firms U.S. mail every day and running errands at banks.
Bongiorno would say, Bring me back Ben Franklins, Nasi said. When Nasi would return and hand the cash to Bongiorno, she just said thank you and dropped it in her purse.
Eventually Madoff stopped using Nasis name for legal reasons and because the amounts he was supposedly receiving were too astronomical to be realistic, Nasi said.
Madoffs former secretary also testified yesterday, telling the jury she heard the con man shout at his brother Peter Madoff, in an argument about Bonventre, that he knows how everything works.
The conversation ended with Madoff telling his brother to mind his own business, using an expletive, Eleanor Squillari testified. Squillari was Madoffs receptionist and personal assistant from 1984 until his 2008 arrest.
Frisch asked Squillari during cross-examination if she knew exactly what Bernard Madoff and his brother were discussing when they argued about Bonventre. She said no. She agreed the fight could have been about trading operations or something else related to the job.
In a ruling outside the presence of the jury, U.S. District Judge Laura Taylor Swain this week granted the defenses request that Squillari be barred from testifying that OHara and Perez looked smug when they left a private meeting with Madoff around 2006. Defense lawyers said it was unfair speculation, while prosecutors said it was central to their case alleging the men extorted Madoff to assist his fraud.
OHara and Perez, who joined Madoffs firm in the 1990s, acknowledged that a dramatic meeting with Madoff took place in 2006, according to their lawyers Oct. 17 opening statements to the jury. The men claim that they arranged the encounter to challenge Madoffs request for computer code they believed might be abused, and that they were extremely nervous about confronting him and being fired.
The case is U.S. v. OHara, 10-cr-00228, U.S. District Court, Southern District of New York (Manhattan).