Madoff lieutenants get lenient sentences

Investors lost are $US20b in Bernard Madoff's massive Ponzi scheme. Photo / Getty

Three of five former Bernard Madoff workers convicted of aiding his $17.5 billion fraud have escaped with sentences much lighter than prosecutors sought, as a judge placed most of the blame for the scheme on its mastermind.

The prison terms meted out by US District Judge Laura Taylor Swain at hearings this week moved some defendants and their lawyers to tears. Another attorney thanked her profusely for a sentence far less than even he suggested.

Madoff's former teenage secretary, who went on to run the investment-advisory business at the centre of the scam, got six years behind bars, less than half what the US wanted, at a hearing on Tuesday.

She was followed by former computer programmer Jerome O'Hara, who was given a 2 1/2-year term instead of the recommended eight.

On Monday, Daniel Bonventre, who ran the con man's broker-dealer unit for four decades, got 10 years, less than half the time sought by prosecutors, who have spent six years on the case.

"It's outrageous," Jerry Reisman, a lawyer for more than 30 victims who lost a total of about $50 million in principal, said in a phone call. "My victims are just shocked, because they believe each of these individuals were active participants in the fraud."

Watch: Fraud trial begins for ex-Madoff employees

The five ex-colleagues were convicted by a federal jury in March in the only criminal trial over the biggest Ponzi scheme in US history. While the five-month trial was a total victory for the government, several prosecutors frowned in court on Tuesday as the sentences were handed down by Swain, who has overseen the case for years.

Swain repeatedly said during the three separate hearings that she was sentencing individual ex-workers and not Madoff or his company. The terms are all fair, reasonable and based on the law, she said.

Madoff, arrested on December 11, 2008, pleaded guilty to masterminding the scheme and was sentenced to 150 years in a federal prison in North Carolina. His younger brother Peter got 10 years in prison after pleading guilty to fraud.

The three men and two women convicted at trial used a web of fake account documents, phony regulatory filings and bogus computer programs to dupe customers into believing they owned shares in the most successful US companies, jurors found. In reality, their cash was pooled in a slush fund and no shares were purchased.

The five were paid millions of dollars in salary and perks, including unlimited use of the company credit card.

Swain appears to have accepted a common defense argument - that Madoff "preyed upon unsophisticated and uneducated workers to help him further his fraud," said Julian Moore, a former prosecutor who worked on the case until 2013 and is now a senior managing director at K2 Intelligence, a risk analytics firm in New York.

"The government understandably pressed for higher sentences," Moore said in an email. "It seems Judge Swain was swayed by the defence's argument that, because the defendants were unlettered and unsophisticated, they deserved sentences lower" than prosecutors sought.

Jerika Richardson, a spokeswoman for US Attorney Preet Bharara in New York City, declined to comment on the sentences.

Lawyers for O'Hara and another defence attorney wiped tears from their faces and hugged each other after the hearing ended. His supporters in the gallery also wept.
Swain had said O'Hara's sentence was partially based on his good character and the kind way he has always treated his family and community members. She said she received more than 100 letters in support of leniency.

O'Hara's sentence is "serious and significant," while taking into account the 51-year-old's limited role in the fraud and the shorter amount of time he was a knowing participant, Swain said. The ex-programmer had willingly joined the fraud by 2006, Swain said, rejecting US claims he became part of the conspiracy much earlier.

"We were so impressed by the care, meticulousness and courage of judge Swain, who really got our defence," Gordon Mehler, O'Hara's lawyer, said in an email. The sentence was "far less time than the prosecution wanted and even far less time than the probation department recommended."

Annette Bongiorno, 66, who ran the investment advisory unit, was described by Swain as an "overcompensated clerical worker" who was groomed for decades to aid her "beloved boss" without asking questions. The judge noted Bongiorno had no education in the industry and still lived with her parents when she joined the con man in 1968.

Swain tempered her sentence by taking into account Bongiorno's age, health problems and the four years of home confinement she has already served. The judge even cited the former executive's short stature as another reason she may experience undo difficulty behind bars.

Bongiorno's lawyer, Roland Riopelle, had argued that a term of eight to 10 years would be sufficient punishment.

The six year sentence is "extraordinarily fair," Riopelle told Swain on Tuesday, appearing to choke up. The judge "showed greater mercy than I believed was possible," he said.

Swain sentenced Daniel Bonventre, who ran Madoff's broker- dealer unit for almost 40 years, to 10 years in prison. While he knowingly broke the law by filing false documents and misleading investors, Bonventre wasn't aware of Madoff's Ponzi scheme and didn't intend to steal from customers the way his "soulless" former boss did, Swain said at the December 8 hearing.

Swain also noted Bonventre's age - 67 - as a reason for imposing a shorter sentence, saying the equivalent of a life term would be unfair.

Bonventre's lawyer, Andrew Frisch, said, "These sentences might be relatively low by the standards of today, but they're really not. We've become so accustomed to putting people in prison as an answer to all our ills, that we've become desensitised to going to jail."

Joann Crupi, 54, who managed large accounts at the firm, and another former computer programmer, George Perez, 48, remain to be sentenced. Perez was to be sentenced on Wednesday, while Crupi will receive her term on December 15. The Probation Office recommended 14 years for Crupi and eight years for Perez.

The fraud, hatched in the 1970s, targeted thousands of wealthy investors, celebrities, retirees and Jewish charities. It unraveled in 2008 when the economic crisis led to more withdrawals than Madoff could pay. In addition to $17.5 billion in principal, the collapse erased about $47 billion in fake profit that customers thought was being held in their accounts.

The amount of time that has passed since the fraud collapsed with Madoff's arrest almost exactly six years ago may be another factor allowing Swain to issue lighter sentences, said Reisman, the lawyer for victims.

"Perhaps some of the public indignation has waned over that period of time, perhaps with some people - not with my clients," Reisman said.

Frisch said in a phone interview that the prison terms are also an indication of the weakness of the government's case, notwithstanding the jury's verdict.

"There is a huge gap between what happened at Madoff Securities and what the government says happened at Madoff Securities," Frisch said. "The sentences indicate Judge Swain recognises that."

- Bloomberg