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Madoff witness kept $1.2M in deal to cooperate

Bernard Madoff, center, walks out from federal court

Bernard Madoff, center, walks out from federal court after a bail hearing in Manhattan. Five of his former employees are on trial in November 2013 for aiding his fraud which stole billions from investors. Credit: Getty Images, 2009

A government witness who pleaded guilty to conspiracy in Bernie Madoff's Ponzi scheme admitted during cross-examination on Tuesday that his family was allowed to keep nearly $1.2 million as part of his deal to cooperate with prosecutors.

Former Madoff trader David Kugel, 68, of East Norwich, testifying against five Madoff aides in federal court in Manhattan, said he forfeited all of his own assets, including millions invested with Madoff over 30 years and $2.6 million he made on the sale of his house in Manhasset.

But with investors clamoring to recover billions in losses from the Madoff collapse in 2008, he said prosecutors agreed to let his wife, Phyllis, keep $1.19 million, including enough to pay a team of white collar defense lawyers so that he wouldn't have to use a court-appointed attorney.

"That was a concern," he said. After the lawyer fees and other expenses, he said, the couple was left with $800,000 as part of his 2011 plea deal.

Kugel has testified at trial that he supplied two of the defendants -- former account managers Annette Bongiorno, 65, of Manhasset, and Joann Crupi, 52, of Westfield, N.J. -- with trading scenarios that they used for decades to report fictional trades to clients.

In addition to the $1.2 million, Kugel -- who admitted not reporting all of his Madoff income to the IRS -- testified that he was never prosecuted for tax fraud and for not filing any tax returns from 2007 to 2011.

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