Former Madoff operations director arrested; court appearance expected later in day

Former Madoff operations exec arrested

NEW YORK — A top aide to Bernard Madoff was arrested Thursday and charged with helping the convicted Wall Street swindler cook his books.

Daniel Bonventre, the former operations director for Bernard Madoff Investment Securities, was arrested at his Manhattan home, authorities said. He faces conspiracy, securities fraud and tax charges.

The 63-year-old was also sued Thursday by the Securities and Exchange Commission. The SEC accused Bonventre of falsifying accounting records both to disguise Madoff’s multibillion dollar fraud and illegally enrich himself.

Bonventre’s attorney, Andrew Frisch, declined to comment prior to his client’s initial court appearance, expected to take place later Thursday.

As they announced the charges, authorities said their investigation has shown that Madoff needed a team of enablers to carry out his massive crime, including people working on the purportedly “legitimate” side of the family business, which processed stock trades.

Prosecutors said that, with Bonventre’s knowledge, hundreds of millions of dollars were siphoned out of accounts belonging to Madoff’s clients and were used to support those other business operations. In some cases, he used client money as collateral to obtain loans.

“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,” said George S. Canellos, director of the SEC’s New York regional office.

Investigators didn’t say how many other people on the supposedly legitimate side of the operation, which was overseen by Madoff’s sons and brother, might have been aware of the fraud. No members of Madoff’s family have been charged.

BMIS’s market-making business and proprietary trading desk have been portrayed by the family as independent and unrelated to the fraud, but the SEC said records show it operated at a “significant loss,” and only an infusion of $750 million in funds stolen from investors allowed the business to report positive revenue and income.

Madoff, 71, is serving a 150-year prison sentence after admitting that he operated a Ponzi scheme for at least two decades, cheating thousands of individuals, charities, celebrities and institutional investors out of billions of dollars.

A number of people affiliated with the business have already pleaded guilty, including Madoff’s chief lieutenant, Frank DiPascali, who has been cooperating with authorities.

Prosecutors said that for at least 30 years, Bonventre’s role at the company was to run the back office and oversee the firm’s securities clearing functions.

The SEC said Bonventre knew that the billions of dollars Madoff was collecting from investors were not being used to purchase securities, and doctored the books to hide the scheme. Bonventre cashed in on the fraud by taking $1.9 million in profit from bogus backdated trades that hadn’t actually taken place, the SEC said.

A criminal complaint also accused him of failing to report hundreds of thousands of dollars in income to the IRS.

Other people charged in the case include Madoff’s auditor, who has pleaded guilty, and two computer programmers accused of helping cover up the scheme.