NEW YORK – In the many years he spent as a trader at Bernard L. Madoff Investment Securities LLC, David Kugel learned that investments Madoff claimed to be making for clients were fiction.
Kugel, 68, knew that because he was instrumental in concocting the phony trades, but he always kept his mouth shut.
Madoff “was my boss,” he testified at the trial of five former Madoff employees in federal court in Manhattan. “If he asked me to do something, I gave it to him. I didn’t question him. … I believed him.”
Prosecutors are seeking to use Kugel’s testimony – the first by a cooperator in the Madoff investigation – to show how he and other insiders purposely stayed blindly loyal to Madoff while becoming wealthy off his fraud.
But the testimony also suggested some complexities in the don’t-ask-don’t-tell environment: By Kugel’s account, there was a belief that Madoff was working his investment magic in ways he wasn’t revealing.
“I always thought he invested in shopping centers, foreign currencies and other ventures,” Kugel testified. “A Ponzi scheme? … I didn’t think he was doing that.”
When asked where all the money was going, Kugel told jurors: “I thought it was being invested. I didn’t know in exactly what.”
The collapse of Madoff’s private investment business ended up costing clients nearly $20 billion. A court-appointed trustee has recovered much of the money by forcing those customers who received big payouts from Madoff to return the funds.