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Univ. of Toledo College of Law

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Thursday, November 18, 2010

SEC Charges Two Former Madoff Employees with Involvement in Ponzi Scheme

The SEC charged two longtime employees at Bernard L. Madoff Investment Securities LLC (BMIS) with playing key roles in the Madoff Ponzi scheme. One employee produced phony account statements for investors and feathered her own accounts for personal gain, while the other conspired to cash out Madoff's friends and family as the fraud collapsed in addition to creating phony account statements and tracking the Ponzi scheme bank account.

The SEC alleges that Annette Bongiorno, who began working for BMIS in an administrative capacity in 1968, regularly created false books and records and helped mislead investors in telephone conversations and through account statements and trade confirmations that reported securities transactions that never happened and positions that never existed. Bongiorno also created false trades in her own BMIS accounts that enabled her to cash out millions of dollars more than she deposited.

The SEC further alleges that JoAnn Crupi, who was responsible for supervising the primary bank account used in BMIS's investment advisory operations, helped facilitate the fraud and mislead investors, auditors, and regulators into believing that BMIS was a legitimate enterprise. When the fraud was on the verge of collapse, Crupi helped decide which accounts should be cashed out and prepared checks for those selected investors, many of them who were friends or family of Madoff.

The SEC's complaints against Bongiorno and Crupi specifically allege that by their actions, they violated Section 17(a) of the Securities Act; violated and aided and abetted violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and aided and abetted violations of Sections 204, 206(1) and 206(2) of the Advisers Act and Rule 204-2 thereunder and Sections 15(c) and 17(a) of the Exchange Act and Rules 10b-3 and 17a-3 thereunder. Among other things, the SEC's complaints seek financial penalties and court orders requiring Bongiorno and Crupi to disgorge their ill-gotten gains.

 

http://lawprofessors.typepad.com/securities/2010/11/sec-charges-two-former-madoff-employees-with-involvement-in-ponzi-scheme.html

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