Madoff's Programmers Indicted

jason8 writes with news that two programmers who worked at Bernie Madoff's investment firm have now been indicted on charges of 'conspiracy, falsifying records of a broker-dealer and falsifying records of an investment adviser,' for their role in hiding the firm's activities (PDF) from the SEC and external accountants. Quoting Reuters: "O'Hara and Perez, employed at the firm from 1990 and 1991, respectively, were primarily responsible for developing and maintaining computer programs in the investment advisory unit at the center of the fraud. Many of the programs were run on an IBM server known as 'House 17,' according to court documents. Prosecutors said the men took hush money to help keep the fraud going and designed codes to make up fake trade blotters and phantom records. US prosecutors said the two men worked under the supervision of Madoff and his top aide, Frank DiPascali, to deceive the US Securities and Exchange Commission and a European accounting firm. DiPascali is cooperating with prosecutors, who said his information led to the arrests of the programmers and the now defunct firm's outside accountant."

Re:I guess the moral of the story is to have moral

[Anonymous Coward]

I took the high road. I've been unemployed for three years since. I wish I had just done the fucking job and then my kids would have money in the college fund, my wife and I would have some savings, and I wouldn't stress about paying the mortgage each month. I did contact the authorities, and they couldn't care less about my situation. (found a huge hole where the exec mgmt had been moving money off the books, and either taking kickbacks, or using it to pay for "business expenses" they would rather not have been made public.)

No details

[UnknowingFool]

Reading the article and the indictment no details are given that the men knew it was a fraud other than the allegations. Also no details are given about "hush" money.

Re:No details

[Danimoth]

Generally, trade reports are generated from you know, trades. Typically, for the reason of the article, these systems don't allow the users to generate reports even for testing purposes. Rather, they would submit a trade in a test stock such as ZVZZT or ZXZZT. These would generate a trade, which would show on the reports, but not have any clearing associated with them. While it is possible to "dummy" in trade reports, even a rudimentary glance at the corresponding blotter would throw up red flags as there would be no clearing associated with the trades, and they would have no presence on the tape. I know the auditors were crooked, but this is an aspect of the scam that the SEC should have been all over. A system which would make it appear as if there was clearing (at least on the paper that Madoff was generating) without that clearing actually being there is something that should shout "FRAUD" to anyone involved in the project.

Re:20 years ago?

[Zak3056]

I think you read that wrong... they have been working for him "from" (i.e. since) 1990 and 1991, not "during 1990 and 1991."

Re:20 years ago?

[D. Taylor]

Um, they didn't work for him from 1990 to 1991. One was hired in 1990, the other in 1991. They still worked for him beyond 2006: http://www.finextra.com/news/fullstory.aspx?newsitemid=21200 [finextra.com]

Re:No details

[morgan_greywolf]

They would have to know what they were doing was fraudulent, since the software they wrote generated false trade records. A real electronic trade connects to the trade exchange systems, which feeds back a confirmation code that the transaction took place. Since no actual trade took place, no there was no confirmation code. The software they wrote simply made it appear that the trade legimitately took place.

no ethics

[Anonymous Coward]

While working on a contact for company A, which was servicing company B, I was asked to commit fraud to the tune of maybe 300k by falsifying data in the deliverable to Company B. I refused. It is scary to think about the absolute lack of ethics I have seen...before I walked off site in this instance I had a manager yelling at me to just do it. They found someone else to do it, eventually got caught and it was a pretty ugly fiasco, but my company was not involved. Company B was huge and could have owned us all.

Yes, they were paid off, and here's how much.

[Animats]

Here are the payoff details, from the SEC press release [sec.gov]. They were paid off, but not very well.

The SEC alleges that O'Hara and Perez had a crisis of conscience in 2006 and tried to cover their tracks by attempting to delete approximately 218 of the 225 special programs from the House 17 computer. But they did not delete the monthly backup tapes. O'Hara and Perez then cashed out hundreds of thousands of dollars each from their personal BMIS accounts before confronting Madoff and refusing to generate any more fabricated books and records.

According to O'Hara's handwritten notes from the encounter, one of them told Madoff, "I won't lie any longer. Next time, I say 'ask Frank,'" meaning that Madoff should rely on DiPascali alone to create the false data and reports.

The SEC's complaint alleges that Madoff responded by telling DiPascali to offer O'Hara and Perez as much money as necessary to keep quiet and not expose the misrepresentations. O'Hara and Perez considered the offer and demanded a salary increase of nearly 25 percent along with one-time bonuses in late 2006 of more than $60,000 each. They stated to DiPascali at the time that they did not ask for more because a greater amount might appear too suspicious. DiPascali then managed to convince O'Hara and Perez to modify computer programs so that he and other 17th floor employees could create the necessary reports themselves.