Madoff Back In The News: Two Former Employees Face $5 Million Forfeiture Claim

The federal government has filed two complaints seeking the civil forfeiture of approximately $5 million in assets controlled by Annette Bongiorno and Joann Crupi. Don’t know who they are? Well, as alleged in the complaints, they both spent more than 25 years working for Bernard L. Madoff Investment Securities LLC (“BLMIS”), the fraudulent investment advisory business owned and operated by Madoff. The $5 million allegedly constitutes property traceable to proceeds of Madoff’s fraud. 

According to the complaints: BLMIS was operated from at least the early 1980s as a massive Ponzi scheme, defrauding investors of billions of dollars. Rather than use client funds to invest in securities, as promised, BLMIS diverted those funds to pay other clients' redemption requests; fund transactions to disguise BLMIS’s fraud; and enrich Madoff, his family, and his associates. To support the lie that BLMIS was operating a legitimate investment advisory business, BLMIS created and disseminated fictitious account statements that, among other things, showed trades that never actually took place.
 
The government further alleges that: The defendants, both members of Madoff’s back office staff, knowingly participated in this fraud. Bongiorno was a supervisor of the back office staff and was responsible for responding to questions BLMIS clients asked about their purported investments; overseeing the fabrication of account statements, trade confirmations, and other documents; and distributing such documents and information to clients. But as she knew, the securities transactions purportedly reflected in such documents were not being conducted, and client redemption requests were, in fact, paid with other clients' money.
 
In addition, according to the government: Crupi handled the receipt of funds sent to BLMIS by its clients for investment; transferred clients' funds between and among various BLMIS bank accounts; handled requests for redemptions sent to BLMIS by clients; monitored, on a daily basis, funds transferred into and out of the BLMIS bank account that was principally used to perpetrate the fraud; and prepared and assisted in the preparation of fabricated documents designed to deceive regulators and outside auditors. Among other things, by keeping track of BLMIS's daily cash balance, she became aware that client redemption requests bore no relationship to BLMIS's cash on hand, which by late 2008 was woefully insufficient to meet those requests.
 
The complaints seek to forfeit property traceable, directly or indirectly, to funds obtained from defrauded investors of the BLMIS investment advisory operation. The assets identified in the complaints are:
 
With Respect to Bongiorno:
 
-           Approximately $1.1 million currently or formerly held in accounts at Citibank, Morgan Stanley Smith Barney, and HSBC;
- A 2005 Bentley Continental, for which she paid approximately $182,605;
- A 2007 Mercedes Benz, for which she paid approximately $90,000; and
- Approximately $1.3 million paid towards a luxury condominium.
 
With Respect to Crupi:
 
- A house in Mantoloking, New Jersey, for which she paid $2,225,000 cash; and
- Approximately $26,500 in rental income from the Mantoloking house, currently held at Commerce Bank.
 
The government indicated that it will ask that property forfeited in these civil cases be liquidated and used to compensate victims of the BLMIS fraud. Also, the government declared, no criminal charges have been filed against either Bongiorno or Crupi.