The SEC today charged 2 key Ponzi participants at Bernie & Co. (or "BMIS") with:  (i) producing phony account statements;  (ii) handling cash flow - ensuring that Bernie's friends and family were covered, particularly as the fraud collapsed. 

Of course, we're (or the SEC) is referring to Annette Bongiorno, who began working for Bernie & Co. in an administrative capacity in 1968.  She 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.  Ms. Bongiorno also created false trades in her own BMIS accounts that enabled her to cash out millions of dollars more than she deposited.

JoAnn Crupi allegedly was responsible for supervising the primary bank account used in Bernie & Co.'s investment advisory operations, helped facilitate the fraud and mislead investors, auditors, and regulators into believing that Bernie & Co. 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 "F+F's" of Madoff.

 "Without their active and ongoing assistance, Madoff's world of lies would have been unsustainable."  -- George Canellos, Director of SEC's New York Regional Office

    Specific Allegations Against Bongiorno, Crupi.   According to the SEC's complaint filed in U.S. District Court in Manhattan, Bongiorno created trades that were chosen with the benefit of hindsight to generate large "gains" in BMIS accounts.  The trades and positions reported in investor accounts, however, were fictional.  And she also fabricated trades in her own BMIS accounts, depositing approximately $920,000 into these accounts but withdrawing approximately $14.5 million. 

According to the SEC's complaint, Crupi was hired in 1983 as a keypunch operator in BMIS's investment advisory operations and reported to Bongiorno.  She eventually supervised some lower-level BMIS employees and worked closely with Frank DiPascali, another high-level Bernie lieutenant, who was charged by the SEC last year.  Crupi had exclusive control over two important aspects of the BMIS fraud:  (i) handled primary bank account used in the Ponzi scheme, and (ii) created false trading portfolios and account statements related to a purported hedging strategy using baskets of stock for a group of limited partnership funds managed by a longtime BMIS investor.

Accordingly, the SEC alleges that Crupi knew the true financial condition of Madoff's Ponzi scheme and its dwindling assets.  On 12/3/08, DiPascali told Crupi that the scheme was on the verge of collapse, and they met shortly thereafter to discuss the implications of the collapse in more detail.  Crupi continued to process client deposits during this time period, depositing approximately $59 million of client checks into the Ponzi scheme bank account from 12/4 to 12/12. 

In the final days of the fraud, it was DiPascali who allegedly convinced Madoff to use the remaining funds to liquidate the accounts of family and friends of the firm, including employees, and not to honor redemption requests by the larger institutional investors.  Crupi helped DiPascali review BMIS investor lists and identify which accounts should be cashed out.  Madoff approved these actions and Crupi prepared checks for the selected investors totaling more than $350 million.  Madoff was arrested and the checks were seized before they could be distributed.

The SEC acknowledges the assistance of the U.S. Attorney's Office and the FBI, with which the Commission has coordinated its investigation.  The SEC's investigation is continuing.

For further details, click onto:   [ SEC PR 10-225, 11/18 ]   and [ SEC Complaint v. Bongiorno ]  and  [ SEC Complaint v. Crupi ]