Free The Madoff Chronicles: Inside the Secret World of Bernie and Ruth by Brian Ross Page A

friends he was trading in stocks.
    When an ABC News reporter approached Rudy Bongiorno outside his house following Madoff’s arrest, he angrily shouted, “Don’t come on my property.”
    Investigators came to believe that Annette was involved in the illegal scheme from the beginning of her employment, between 1967 and 1968. In her effort to cut a deal with the government, she reportedly said that “the same things she was doing in 2008 she was doing in her first year with Madoff.” Only Ruth and his brother, Peter, were with Madoff longer than Annette.
    Annette recruited Frank DiPascali, her next-door neighbor in the Italian working-class neighborhood of Howard Beach in Queens. According to investigators, DiPascali ultimately became even more important than Annette in the day-to-day running of the Madoff scheme. Former employees said DiPascali’s ascendancy led to friction with Annette, who resented losing some of her power to Frank.
    “He was a pimple-faced kid, you know?” said Little Rick, who was there when DiPascali first started working at the company in 1975, as an assistant to the managing director. “He was self-made there. He was molded there, in other words.”
    DiPascali worked his way up through Research and Option Trading. Titles did not mean much at the Madoff firm because they were given out on a random basis or often self selected, but according to a résumé DiPascali submitted in 2002 to a New Jersey school system whose board he sought to join, he was promoted to chief financial officer in 1996. Investigators say that DiPascali’s salary in the final years ranged between $2,250,000 and $3,000,000.
    Former employees said that when Bernie came to the seventeenth floor, he would meet with Frank in one of the rooms that had the “Do Not Enter” and “Do Not Clean” signs on the door.
    Investigators say DiPascali, with a team of five others, including his brother-in-law, Robert Cardile, was in charge of producing statements reflecting thousands of trades that were supposedly being executed for Madoff’s investment clients. In reality, there were no trades.
    When questions were raised by suspicious investors or government investigators, it was DiPascali who would be by Madoff’s side to offer elaborate fictions about the sophisticated “split strike conversion” trading strategy and computer systems supposedly being used on the seventeenth floor. He would not, however, offer any tours of his seventeenth-floor operation.
    Customers were told that Madoff “would carefully time purchases and sales to maximize value” in a “basket of fifty stocks” chosen from the Standard & Poor’s 100 Index, a collection of the one hundred largest publicly traded companies. The story went that sometimes Madoff would get “out of the market” and put everything in cash, in U.S. securities. To guard against a downturn, Madoff would supposedly hedge his bets by buying and selling “option contracts” matching the stocks in the basket. Under this fictional strategy, if the stocks went down, the value of the options would go up. In September 2008, DiPascali reassured one major hedge fund investor by telling him that Madoff used “twenty derivatives dealers and international banks” in their option trades. It was yet another lie.
    To hear Madoff and DiPascali tell it, they had found a foolproof strategy, all carried out in great secrecy on the seventeenth floor. Investors on average received between 12- and 20-percent returns, although certain Madoff clients were rewarded with much higher rates of return. One prominent investor earned as much as 950 percent one year. Madoff said he made his profit by charging $.04 per share commission on the stocks he traded and $1.00 for every option contract he purchased.
    Madoff was known to become irritated if someone asked too many questions, and he refused to answer standard industry inquiries about percentages held in cash, the amount of borrowed money, or the names of