CFO Tells How He Helped Madoff

In FBI records, DiPascali recounts trying to keep employees in the dark about the scam.

After several drinks at a Greek restaurant on Manhattan’s Third Avenue in the summer of 2006, two computer programmers at Bernard Madoff’s investment firm asked their supervisor whether the boss’s business was a scam.

Chief Financial Officer Frank DiPascali laughed off the question, telling George Perez and Jerome O’Hara that Madoff was honest. DiPascali would later tell the FBI he wondered why they took so long to ask.

Bonventre and Bongiorno began working for Madoff in 1968, with Bongiorno rising to the level of supervisor and account manager. Crupi, an employee since 1983, tracked daily bank account activity, prosecutors said. Perez and O’Hara started at the firm in the early 1990s.

The five were arrested in 2009 and 2010. In addition to DiPascali, who began working for Madoff in 1975, former employees David Kugel, Enrica Cotellessa-Pitz and Eric Lipkin have pleaded guilty and are aiding prosecutors.

Asked if his boss was a crook, DiPascali said he gave Perez and O’Hara the same explanation Madoff had given him.

“The explanation involved the idea that, because Madoff was trading not as an agent but as principal, making these trades out of his own inventory that was kept at various places overseas, he was able to allocate these trades to customers after the fact, back-date their trades, and do other things with the accounts a broker acting as an agent would not be able to do,” the FBI report states. DiPascali “reassured them that Madoff had so many investments and assets.”


“Madoff would very vocally proclaim he had just had achieved great financial success with a deal he had been arranging in Europe or somewhere else,” DiPascali told the Federal Bureau of Investigation. The report stated that “while not understanding it at the time, Individual eventually realized those pronouncements were calculated by Madoff to perpetuate” the impression that “trading activity was somehow backed up by his deals and investments overseas.”

Early on, Madoff began planning for a fraud that might last for years, DiPascali told agents.

DiPascali succeeded, convincing the programmers that auditors would require only a subset of data to be included on trade blotters they could produce, according to the FBI report. Still, DiPascali said he faced “an even larger hurdle” in persuading them to fabricate the actual data, one report states.

So DiPascali reminded Perez and O’Hara that Madoff’s purported “split-strike” strategy entailed the purchase of large blocks of securities in piecemeal fashion, creating voluminous records that would confound outside auditors. To simplify matters, he told them he’d gather a list of Madoff counterparties.

Eventually, O’Hara and Perez grew suspicious. After dinner with DiPascali at the Greek restaurant, they confronted Madoff and urged him to quit the financial advisory business, DiPascali told the FBI.

“Madoff began by politely reminding them he had been doing this for 40 years, that they were computer programmers -- for an obsolete system no less -- and they simply did not understand what they were talking about,” DiPascali told the FBI. Seated at a desk reviewing some figures, Madoff then regaled them with tales of his exploits in the industry, DiPascali said.

One of those tidbits was Madoff’s occasional outburst that a stock upstairs at his offices in Midtown Manhattan -- where he ran a legitimate trading business -- had “hit a home run,” DiPascali told the FBI. At other times, when Crupi asked why she was finding the prices of the stocks she was purportedly buying in the prior day’s newspaper, Madoff told her “the trades were happening in the trading room even though she did not see them,” DiPascali reported.

“Crupi had convinced herself over the years that Madoff had a vast array of assets all over the world,” DiPascali told the FBI. “In Crupi’s mind, Madoff was illiquid in 2008 because the worldwide economic downturn had tied up all of Madoff’s assets.”

DiPascali lied to subordinates until the moment of Madoff’s arrest, he told the FBI. The day before, after Madoff instructed him to issue checks to favored employees, DiPascali said he realized that he couldn’t do so until convincing Bongiorno “to cash out” certain accounts.

“DiPascali needed to fabricate a story to convince Bongiorno,” an FBI report states. “DiPascali did not know how Bongiorno would handle the truth” so he “concocted a story” about an upcoming audit that required her to cash out.

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