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Madoff's director of operations arrested

26 February 2010  |  5567 views  |  0 digital fingerprints

Daniel Bonventre, the director of operations at Bernard Madoff's company has been arrested on charges of falsifying accounts to hide his boss's multi-billion dollar fraud.

Prosecutors for the US attorney's office in Manhattan have charged Bonventre wit conspiracy, securities fraud;, falsifying books and records of a broker-dealer, false filings with the SEC and filing false federal tax returns. He faces up to 77 years in prison.

Bonventre began working for Bernard L Madoff Investment Securities (BMIS) in 1968 and ran the back office as director of operations from 1978, overseeing the firm's accounting and securities clearing functions.

Authorities say he directed false entries to be made in the general ledger that concealed the scope of the firm's investment advisory operations and understated its liabilities by billions of dollars.

From 1997 to 2008, "more than $750 million of IA investor funds were used to support BLMIS's market making and proprietary trading operations, but were accounted for on BLMIS's books and records, including the G/L, so as to conceal the true source of the funds".

Joseph Demarest, assistant director-in-charge, FBI, says: "Bonventre's crimes consist not merely of failing to disclose material information about the Madoff investment advisory business. He affirmatively fabricated basic financial documents to conceal the dire condition of a financial empire that was really a house of cards."

The Securities and Exchanges Commission (SEC) has separately bought civil charges relating to accounting fraud.

The complaint says Bonventre helped Madoff, his lieutenant Frank DiPascali and others orchestrate lies to investors and regulators when operations at BMIS came under review.

The watchdog also alleges that Bonventre made at least $1.9 million in illicit personal profits from the scheme through fake, backdated "trades" in his own investor account at BMIS.

George, Canellos, director, SEC New York regional office, says: "A fraud of this magnitude requires a coordinated effort. Bonventre played an essential part by creating bogus financial records to give BMIS the appearance of legitimacy, when in fact the firm lost money and could not have survived without the fraud."

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