By Joseph Ax
NEW YORK (Reuters) – A former trader at Bernard Madoff’s firm on Wednesday became the latest in a string of cooperating defendants to avoid incarceration for crimes related Madoff’s historic multibillion-dollar Ponzi scheme.
David Kugel, 69, was sentenced to 10 months of home detention and 200 hours of community service by U.S. District Judge Laura Taylor Swain in New York.
A week ago, two other former Madoff employees who helped U.S. prosecutors, Enrica Cotellessa-Pitz and Eric Lipkin, also avoided prison time before the same judge.
Kugel, the first government witness to testify in 2013 at the trial of five former Madoff employees, described how he provided historical market data pulled from copies of the Wall Street Journal to portfolio managers Annette Bongiorno and Joann Crupi. They then used the information to manufacture fake trades in clients’ investment accounts, he said.
“If someone looked at it, it would look potentially like a real trade, like something that had taken place,” he told jurors.
Kugel never worked in the so-called “back-office,” or investment advisory business, where the core fraud took place, instead spending 38 years as a trader in the Madoff firm’s legitimate proprietary trading unit.
Though his actions helped conceal the fraud, Kugel said he was unaware that Madoff was orchestrating a massive Ponzi scheme. The government did not dispute that assertion.
“The guilt, embarrassment and humiliation I feel have become part of my DNA,” he told Swain on Wednesday. “If only I had realized that Bernie Madoff was cheating people out of their way – this thought will haunt me for the rest of my life.”
Prosecutors credited Kugel for providing “critical” evidence that for the first time demonstrated the fraud began in the 1970s, rather than the 1990s as Madoff claimed.
Kugel’s son, Craig, who also worked at Madoff’s firm, is scheduled to be sentenced on Thursday for falsely filing documents that ensured health coverage for relatives of Madoff employees who were not eligible.
Bongiorno, Crupi, back-office director Daniel Bonventre and computer programmers Jerome O’Hara and George Perez were convicted on all counts in 2014 following the only criminal trial to stem from the Madoff fraud.
Fifteen defendants have been convicted at trial or via guilty plea, including Madoff himself, who is serving a 150-year prison term. The fraud is estimated to have cost investors $17 billion in principal losses.
The case is U.S. vs Kugel, U.S. District Court for the Southern District of New York, No. 10-cr-228.
(Reporting by Joseph Ax; Editing by David Gregorio)