As the government tells it, the fraud appears to have started in a measured way in the 1970s as phony documents were regularly manufactured to make it appear investor funds were being invested. Lists of bogus trades of securities were based on data gleaned from published sources of market information.
By the 1990s, according to the indictment, Madoff leaned on his back-office workers to produce and mail thousands of pages of statements to customers of his "split-strike conversion strategy," an investing technique based on a model basket of S&P 100 stocks that he claimed was unique. Prosecutors say no trades occurred.
Meanwhile, he also had hired O'Hara and Perez, who created software programs that made it easier to churn out thousands of bogus securities trades that could be used in phony statements to investors, the government said.
All the while, Madoff was telling investors they were making up to 45 percent in annual gains.
The indictment said Madoff sometimes asked his workers to create bogus losses from phony trades to shield him from tax liabilities, the indictment said. Toward the end of the scheme, some were rewarded with hundreds of thousands of dollars that was wrongly listed as expenses so they would owe no taxes, it added.
Ken Springer, a former FBI agent who has conducted business-related investigations for more than 25 years, said large payouts to Madoff employees helped keep the secret secure.
"They were paid to keep their mouths shut, and they did," he said. "No one wanted to admit to what was going on. They just played dumb."
In the final months of Bernard L. Madoff Investment Securities LLC, the chief architects of the fraud rewarded themselves and their friends with millions of dollars as thousands of investors were told their accounts had a composite value that had grown from about $20 billion to $65 billion, prosecutors say.
By Dec. 4, 2008, a daily report prepared by Crupi showed only $295 million of the investors' money remained, with requests for redemptions from investors totaling $1.45 billion.
In the days following their Manhattan street corner meeting near Madoff's offices, Crupi told DiPascali she would tell law enforcement authorities once the scam collapsed that she thought the trades executed on behalf of Madoff's clients were being conducted overseas, the indictment said.
In a Dec. 7, 2008, meeting at a New Jersey restaurant, Crupi told DiPascali she was "sticking to my story," the indictment said, adding that the pair discussed sending the remaining funds to certain clients and employees.
It said they eventually prepared checks totaling about $300 million to be mailed to preferred employees, employee family members and certain favored clients.
Despite the approaching storm, the sham business on one level continued to thrive, the government said.
From approximately Dec. 3, 2008, to Dec. 10, 2008, Madoff and the defendants continued to take in more than $48 million of new deposits from investors.
Madoff was arrested on Dec. 11.
Associated Press writer Tom Hays contributed to this report.
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