Ex-Madoff workers lose bids to end criminal cases

Reuters News
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Posted: Mar 30, 2011 4:40 PM
Ex-Madoff workers lose bids to end criminal cases

By Jonathan Stempel

NEW YORK (Reuters) - Three former employees of imprisoned swindler Bernard Madoff lost their bids to dismiss the government's criminal cases against them.

The former Madoff employees Daniel Bonventre, Annette Bongiorno and Joann Crupi had argued that the charges should be dropped because the government was freezing assets they needed to pay their lawyers.

But U.S. District Judge Laura Taylor Swain in Manhattan said on Wednesday that the "extreme sanction" of dismissal was not justified.

She said the defendants' constitutional rights to due process and counsel were not violated, and that the law lets the government reclaim property from a defendant "even though the defendant had planned to fund his legal defense with it."

Andrew Frisch, a lawyer for Bonventre, said his client plans to appeal. Lawyers for Bongiorno and Crupi did not immediately return phone calls seeking comment.

Bonventre is a former operations chief at Bernard L. Madoff Investment Securities LLC. Bongiorno and Crupi were longtime employees. Prosecutors accused them of securities fraud, falsifying records, conspiracy and other crimes.

Eight people have been criminally charged over Madoff's Ponzi scheme. Madoff, his long-time lieutenant Frank DiPascali, and an outside accountant have pleaded guilty. Bonventre, Bongiorno, Crupi and two other former Madoff workers pleaded not guilty.

Madoff, 72, pleaded guilty in March 2009 to running an estimated $65 billion fraud. He is serving a 150-year sentence in a North Carolina federal prison.

BANK LAWSUITS

Separately, the court-appointed trustee seeking money for Madoff investors defended his right to make public the names of workers at JPMorgan Chase & Co, UBS AG and others he said helped enable Madoff's crimes.

Banks have said disclosing names could stigmatize workers.

Trustee Irving Picard, in a letter made public on Wednesday, urged U.S. Bankruptcy Judge Burton Lifland not to make a "blanket ruling" to shield names of workers he believes were associated with the Madoff matter.

Picard has recovered about $10 billion for former Madoff investors. He has filed about $100 billion of lawsuits, which include complaints seeking $6.4 billion from JPMorgan, which was Madoff's main bank, and $2 billion from UBS.

Also on Wednesday, Lifland upheld a $220 million settlement between Picard and the heirs of the late Madoff customer Norman Levy, rejecting claims by a lawyer for other Madoff investors that the settlement was unfair.

Meanwhile, a Financial Industry Regulatory Authority arbitration panel on Tuesday ordered former Cohmad Securities Corp vice president Robert Jaffe to pay $1.1 million to Madoff investors.

Investors had accused Jaffe of fraud in soliciting money for Madoff. Cohmad, Jaffe and two other Cohmad executives settled related U.S. Securities and Exchange Commission charges last year. They contend they did not know of Madoff's fraud.

The criminal case is U.S. v. O'Hara et al, U.S. District Court, Southern District of New York, No. 10-cr-00228.

(Reporting by Jonathan Stempel; Additional reporting by Joseph A. Giannone in New York and Santosh Nadgir in Bangalore; Editing by Gerald E. McCormick and Tim Dobbyn)