NEW YORK — In December 2008, two of Bernard Madoff’s most loyal employees met on a Manhattan street corner and fretted over a closely held secret that the rest of the world would learn about eight days later: that their boss was a con man for the ages.
Frank DiPascali told JoAnn Crupi that Madoff had just confided that his investment firm was out of money and that client accounts — worth billions on paper — actually had no more value than Monopoly money, authorities say.
The pair then is alleged to have cooked up a cover story that quickly collapsed under the weight of the largest Ponzi scheme in history — one authorities say cost investors an estimated $17.3 billion.
The exchange was recounted for the first time in a newly rewritten indictment this week expanding the case and charges against five defendants headed for a trial next year.
The indictment brings into sharper focus the final few years of a fraud the government says dated to at least the early 1970s, two decades before Madoff said it began and well before 1992, when the government said in its original case against the defendants that the conspiracy began.
It portrays a private investment business in Manhattan where as many as a dozen officers grew a fraud so sophisticated that repeated probes by the Securities and Exchange Commission and queries from banks and investors could draw no blood. All the while, it says, they rewarded themselves with millions of dollars, sometimes tax-free or with taxes greatly reduced by fake losses generated by made-up securities trades.
Those facing a criminal trial next year are Annette Bongiorno, 64, Madoff’s longtime secretary and a supervisor in his private investment business; Daniel Bonventre, 65, his director of operations for investments; Crupi, 51, who managed accounts; and two computer programmers, Jerome O’Hara, 49, and George Perez, 46. All have pleaded not guilty.
Besides the 74-year-old Madoff, who is serving a 150-year prison sentence, six others have pleaded guilty in the case, including a brother who served as his chief compliance officer; former finance chief DiPascali; a payroll manager; an accountant; a comptroller; and a securities trader.
The new account fills in information prosecutors learned as they built their case with help from several cooperators, including DiPascali.
US Attorney Preet Bharara said that with the new charges, ‘‘the architecture of Madoff’s house of cards and each defendant’s alleged role in it becomes clearer.’’
Mary Galligan, the head of the FBI’s New York office, said the government has known for years that the Ponzi scheme was not the work only of Madoff, who pleaded guilty to fraud and insisted he acted alone.
‘‘Each of the defendants in his or her way allegedly played a key role in designing, building, or maintaining the house of cards. The habitual doctoring of books and records, the fictitious trades, the phantom accounts, were the core of the charade,’’ she said.
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 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 an investing technique based on a model basket of S&P 100 stocks that he said was unique. Prosecutors say no trades occurred.
The indictment said Madoff sometimes asked his workers to create bogus losses from phony trades to shield him from tax liabilities, the indictment said.