Madoff's Programmers Indicted 147
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."
So what? (Score:5, Insightful)
Wake me up when someone at AIG gets indicted.
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So, it's off to federal "pound me in the ass" prison for those guys...
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Probably. Unless they happen to be rich, which I doubt, after all, tech people are not exactly the best paid in financial businesses...
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He probably made them an offer they couldn't refuse.
Re:So what? (Score:4, Insightful)
Programmers often claim to be professional workers rather than technicians. This is pretty much a case study: do you walk because you are being asked to behave unethically, or do you rationalize the problem and accept the $200K/year (or whatever?)
Last week I was meeting with our business head, and he asked me if and why my team was able to execute a pretty complex plan. I said yes, of course, and the only reason I gave was that everyone on the team was honest: they would each work hard, and would update us rapidly on their real progress and problems. Got it sold in under a minute, no PERT charts needed. Just professionals planning to get a job done - if even one person on the team might behave like the programmers involved in Madoff's operation, I wouldn't have been able to promise anything.
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Actually, from what I dimly recall, they were on ~$100k, and demand a raise to ~$150k when they realized that what they were doing wasn't legit. They should have asked for a lot more (or quit, of course).
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Dont forget Goldman, Citi, Fanny, Freddy, BofA, CountryWide, etc....
They all new what they were doing.
Re:So what? (Score:4, Insightful)
You are of course correct. Also, Lehman Bros. Especially Lehman Bros. Their failure was the straw that broke the camels back. And yes, they knew what they were doing. They were so clever about what they were doing that they came up with ways to hide liability that no one ever thought of before. String em all up I say.
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I say that a bank that can hold the economy hostage like that is too big.
Too big to fail means too big period.
Either we need a more robust economy that can survive a flopout, or we need tougher regulation on the banks.
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Thank the gods, they've finally found the two guys responsible for the global economic meltdown ----
OR NOT!!! Perhaps it was Bradley Birkenfeld, the UBS banker who attempted to out all those mega-rich American tax cheats to the US Treasury???? (Already in jail -- for 40 months for attempting to be a whistleblower - about the only real crime today in the USA). Say, whatever became of Robert Rubin, Maurice Greenberg, Hank Paulson, Alan Greenspan and the rest of those supercriminals?????
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AIG was the conduit by which billions of US taxpayer dollars made their way to foreign companies. They also looked the other way when banks were trading worthless Mortgage-Backed securities - if they were doing their jobs, their risk assessment group would have dropped the banks' policies like a hot potato.
I was going to post (Score:1, Offtopic)
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He also socializes in there with former Colombo crime family boss Carmine Persico.
I guess the moral of the story is to have morals. (Score:5, Insightful)
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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
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Sorry for the Godwin. But I agree, it seems the roles of who is cooperating are reversed here from what I'd expect.
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I know it doesn't put food on the table but you did good. Sometimes the satisfaction you get from doing the right thing is all you get for your efforts.
Let's hope there really is Karma.
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Re:I guess the moral of the story is to have moral (Score:5, Interesting)
but is it a bribe, or a bonus?
I mean, if I worked at a financial org, and they asked me to write some wierd code that created dummy trade records, I may think 'eh?' and ask whether it was correct or not, but they'd then tell me its all legal, above board and just another one of those stupid regulatory rules that seem to make no sense to mere programmers... and I'd shrug, say "well, ok then" and do it. then they give me a huge bonus and I think "great, working for financial services is wonderful - they always pay large bonuses"
I mean, imagine if you worked on a popular OS and my boss told me to put a back-door in, saying the NSA required it of us. what would you do? :)
"Investigative Journalism" is dead (Score:3, Insightful)
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It also seems an inexplicable role reversal of the big fish cooperating to catch the little fish.
In a drug bust, they bust the little guy to get the middleman, and pressure the middleman to get the big kahuna. In this case, they started at the top, and so every link in the chain leads further down instead of up. Oh, also, the big guys have better lawyers. These IT guys sure don't look innocent to me, but you can be sure that they're being sold out by bigger fish who want to stay out of the fire.
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I agree. There ought to be a law that says the small fish can't be punished more than the big fish. There are plenty of cases where a criminal involved their girlfriend in a crime and then turned state's evidence against her while she "stood by her man". It sucks.
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I mean, if I worked at a financial org, and they asked me to write some wierd code that created dummy trade records, I may think 'eh?' and ask whether it was correct or not
"Hey, Jim, we need you to write setup code for some test cases."
Re:I guess the moral of the story is to have moral (Score:4, Funny)
"How about testing the imaginary scenario of us making billions of off fake trades? We'll have a little fun with it, haha."
"Hah, you're such a kidder, Bernie."
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but is it a bribe, or a bonus?
The 'please don't tell the SEC about this'-condition might have given them a hint about that.
I mean, imagine if you worked on a popular OS and my boss told me to put a back-door in, saying the NSA required it of us. what would you do? :)
Check with the NSA? Ask which law authorizes the NSA to do that?
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I mean, imagine if you worked on a popular OS and my boss told me to put a back-door in, saying the NSA required it of us. what would you do? :)
I would contact the RCMP and CSIS immediately!
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I mean, imagine if you worked on a popular OS and my boss told me to put a back-door in, saying the NSA required it of us. what would you do? :)
Put a back-door in the back-door. What else is there to do?
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"Yo dawg!, I heard you liked back-doors so I put a back-door in the back-door. What else is there to do?"
There, FTFY
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Being the
Re:I guess the moral of the story is to have moral (Score:5, Interesting)
That's exactly why big financial institutions make their programmers spend 1hr+/week going through on-line training courses with dull topics like chinese walls, information leakage, money-laundering, ethics, non-public information, etc. The topic hardly matters, the point that is trying to be explained is "if it seems wrong, don't do it. Escalate to your management or the compliance department." A good firm takes this stuff seriously: I've seen several examples of a junior associate reporting pressure to do something questionable, three levels of managers and lawyers zoom in, 24 hours later, it is announced that a senior person has left the firm.
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Except, when you escalate it to your (crooked) superiors, and their (crooked) lawyers, and they tell you that it's all A-OK and perhaps even required for XYZ compliance, how would you know they were wrong? You can still refuse to do it, but it's quite possible they'd convince you, depending on how obfuscated the crookedness was.
So why haven't they busted all those guys at GS? (Score:2)
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Get it in writing, so if the shit hits the fan you can cover your ass.
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Had these Maddoff programmer guys gotten excessively large bonuses, they would have quit and retired. When you're a millionaire, why keep grinding away with that long commute...
When they wanted to leave (because their hands were dirty and getting dirtier), they were offered good money to stay and set things up so someone else could do most of the dirty work. Why keep doing it? Heck, if you'll sell out for $xx,000 once, you keep at it because you want the next payday too.
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This is only sometimes true. If you tortured people for the CIA under orders, the Obama administration says it won't prosecute you. Although that's not exactly the same, because their argument is that it's okay because the CIA lawyers said it was.
No it isn't. The moral is: don't commit fraud. (Score:2)
If we are to believe the indictment quoted in the opening post, those people were guilty of the following:
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As far as I understand, the law simply asks if you (or any ordinary person in your place) could reasonably have known that you were helping with fraud. If you were, you're guilty.
Actually, shouldn't that be: if there is no reasonable doubt that they knew they were abetting fraud, then they're guilty? Or did they do away with the whole "presumption of innocence" thing when I wasn't looking?
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"if your boss asks you to break the law, tell them that you won't do it, and if they persist, explain that you are going to contact authorities immediately."
IMO, That is the worst advice I have ever heard, why on earth would you tell someone you were going to turn them in? What a great way to put yourself and your family in danger. Wouldn't it be better to just resign and report it anonymously? _Telling_ your boss (or anyone) that your going to turn them in serves no purpose and is just pure stupidity.
Re:I guess the moral of the story is to have moral (Score:2)
If your boss asks you to break the law, the argument "I was just following orders!" doesn't hold up...
Unless its water boarding, or tapping phones without a warrant.
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...every gun-maker is also breaking the law as the gun mostly is used for illegal things anyway...
[Citation Needed]
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If a boss tells me to program an option, and that option could be used for illegal things then it's actually my fault?
I think this does become your responsibility if that option can only be used for illegal purposes. I'm not knowledgeable enough about the financial industry to say whether or not what these guys programmed was obviously illegal and had no legal area of use, but if it only had use for illegal acts then they knowingly aided in Madoff's scheme and should be prosecuted for it.
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as the gun mostly is used for illegal things anyway/quote> Uh, you're being facetious, right?
Insert "scheme" joke here. Or "chroot jail"... (Score:5, Funny)
Insert "scheme" joke here. Or "chroot jail", "execution protection", "dropping privileges",...
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...or at least a joke about back orifice attacks.
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create schema ponzi;
Would be interesting... (Score:3, Insightful)
I hope I would say "no" to something like this. As engineers and software developers, we generally feel obliged to do what we are told.
Re:Would be interesting... (Score:5, Funny)
They got to wear Hawaiian shirts on casual Friday.
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They got to wear Hawaiian shirts on casual Friday.
Yeah, and maybe they got to install that linux thing on their computers that they've been asking for.
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Actually, instead of just being the man who designed the slim jim - in this car analogy, there would be two sets of people:
1. Programmers / person who created AND GAVE the slim jim to #2
2. DiPascali / person who broke into the car.
Yes, they were paid off, and here's how much. (Score:5, Informative)
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.
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Well there goes my question about statutes of limitations.
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As an engineer you should do what is right and not illegal. The engineer is the one who makes ideas manifest in the real world, and as such you should know that if it's illegal you're head will be on the chopping block. Up until that point where it's created it's just an illegal idea.
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But software developers are not domain experts in the financial industry, which has gotten more and more arcane over the years, from derivatives to credit-default swaps, mortgage-backed securities, on so forth.
Look at it this way:
1. If you're a programmer working on a medical device (to be used in a hospital), are you responsible for the amount of radiation given off, or is your M.D. supervisor responsible who told you the legally permissible dose?
2. If you're working on a medical records application, are y
Scotty is rolling over in his orbital grave (Score:2)
"As engineers and software developers, we generally feel obliged to do what we are told."
Shut your mouth! You are going to ruin it for the rest of us!
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Madoff made billions from this.
There is no indication of this. His collection of properties and luxeries were quite modest for a renowned legendary career trader on Wall Street who co-founded NASDAQ.
As for the programmers, they lived in average midde class homes. They asked for a bonus of $60,000 but were fed up with what they were being asked to do, which was to rig up some information for auditors. I've looked at this in some detail (they were AS/400 programmers
No details (Score:4, Informative)
Re:No details (Score:5, Insightful)
They didn't turn Madoff in. (Score:5, Insightful)
Also, the courts are granting one of the masterminds leniency in exchange for prosecuting their underlings? Isn't that the opposite of how it works? Reducing the sentence of a drug kingpin in exchange for testimony against 2 of his street dealers, really?
Justice Department policy is that the first one to come forward and turn in the others gets leniency. [justice.gov] Those guys could have turned in Madoff, even after Madoff's arrest, until Madoff confessed. But the one "that is second in the door -- even if by only a matter of days or hours, as has been the case on a number of occasions -- will not be eligible for leniency." If your company is crooked, it's very important to know this.
Madoff himself, of course, is Prisoner #61727-054, at Butner Federal Correctional Institution (medium security).
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Also, the courts are granting one of the masterminds leniency in exchange for prosecuting their underlings? Isn't that the opposite of how it works? Reducing the sentence of a drug kingpin in exchange for testimony against 2 of his street dealers, really?
If the kingpin gets caught before the street dealers, why not?
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This was a crime executed with... a computer ZOMG!!! The "kingpin" was just a naive, technically illiterate bureaucrat. These two masterminds were the true terrorists. Who knows what other crimes they might attempt if this patriotic whistle blower didn't do the right thing.
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You are looking at the small picutre of the individual instance, where, yeah, maybe it doesn't make sense.
Part of the big picture, though, is this: if you do this, then the small fry have more motivation to preemptively turn in the top dog, because they kno
Re:No details (Score:5, Informative)
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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 fake blotter report would take care of this. An auditor following the trade from the initial booking to settlement would be satisfied from seeing these reports. There's z
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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.
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Not all hush money is created equally. Most people wouldn't even know that it was hush money if they were receiving it. Most likely, he hired some programmers and told them that they would be paid above what they're worth, in exchange for secrecy and trust.
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Should've used the standard programmer defense (Score:2)
"Hey I was just following the spec!! Honestly I didn't know it's all hex to me!"
Makes me think of this scene from Clerks (Score:4, Insightful)
http://www.youtube.com/watch?v=n6lzEhoXads [youtube.com]
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Digital Era Henchmen Among Us (Score:5, Interesting)
Big Tobacco health data. Big Pharma test data. Big Oil environmental data. Enron accounting or trading data. Retails sales zappers.
There is no way all this data "tweaking" can be done without involving IT people: DBA's, programmers, techies.
Right now, at this very moment, some of these Digital Era Henchmen are reading Slashdot on iPhones or 32 inch monitors purchased with blood money. And chances are that some of these people are making snide comments about Microsoft or Darl McBride's ethics. Tsk tsk.
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Big Tobacco health data. Big Pharma test data. Big Oil environmental data. Enron accounting or trading data. Retails sales zappers.
Don't forget about CRU's Harry. [pajamasmedia.com]
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To be fair, once they find out, it's usually a thing where if they tell, it's blacklisting for life from any company, if you don't conveniently "disappear". Just look at the news.
So not continuing to follow orders could put you on the streets, homeless forever, or worse. No matter what you do at that point, your life is already in jeopardy, perhaps physically.
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on iPhones or 32 inch monitors purchased with blood money.
Money's money. Let me know where to get in on that. All I do is cook meaningless data right now because our data-entry system is so riddled with bugs and agents don't care to report errors. Where do I apply to cook meaningful data? I'd sure like to be able to afford a car one of these days. Capitalism in action.
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Big Tobacco health data. Big Pharma test data. Big Oil environmental data. Enron accounting or trading data. Retails sales zappers.
There is no way all this data "tweaking" can be done without involving IT people: DBA's, programmers, techies.
Right now, at this very moment, some of these Digital Era Henchmen are reading Slashdot on iPhones or 32 inch monitors purchased with blood money. And chances are that some of these people are making snide comments about Microsoft or Darl McBride's ethics. Tsk tsk.
Or maybe you're one of them, and the above comment is just a clever way to direct attention away from yourself. But what if, with this comment, I'm trying to achieve the same thing?
I... I just don't know anymore.
About Time! (Score:3, Insightful)
It's about time some simple programmers got held accountable for their deeds.
I can live with programmers and bad testing, bad code, bad QA, but I can NOT accept EVIL code.
Just following orders does not cut it. These people knew what they were doing, there is no hiding it.
Want to be called a "software engineer"? Live by the engineers code of ethics, be judged by the engineers standards, and accept the same punishment. Otherwise, it's just being a simple programmer.
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If they wrote the fraudulent code but released it under the GPL, is it still "evil"?
Statute of Limitations? (Score:2)
I would think that after 19 or 20 years, respectively, that the statute of limitations for mere fraud would have kicked in.
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There are all sorts of caveats to the statute of limitations. It's not as bulletproof as it is made out to be. Obviously, Class A felonies are exempt from the statute, but there are likely other caveats and exemptions.
In this case, however, it appears that the programmers were hired *since* 1990 and 1991, and have continued to work with Bernie and the Boffers till at least 2006.
If that is not the case, it's possible that the court decided that they aided and abetted a criminal action which continued on to
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I would think that someone capable of finding his way to Slashdot should be able to RTFA correctly... ... wait, never mind.
Given that this is Slashdot, allow me to clarify it for you: they have been working for him (one since 1990, the other since 1991) until as recently as the last 4 years.
no ethics (Score:2, Informative)
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
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Madoff was already the scapegoat and sacrificial lamb, a token conviction for all the others that did exactly the same (but hey, "we're doing something against it, see, we even arrested a big one"). Why do you think it would not work for his underlings?
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I think you read that wrong... they have been working for him "from" (i.e. since) 1990 and 1991, not "during 1990 and 1991."
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You're right. The wording of "from" is a bit strange.
Re:20 years ago? (Score:4, Informative)
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It is alleged that the men had a "crisis of conscience" in 2006, but were persuaded to continue with the fraud after being offered a salary increase of nearly 25% along with one-time bonuses in late 2006 of more than $60,000 each.
Now you know why I start laughing when I hear people say "Why does Wall Street and the banks keep giving those huge bonuses when they know it just pisses the American people off?"
'Tis either that, or wonder who will turn state's evidence.
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What if they went on to do this same stuff for others afterward? Maybe that's why they granted leniency to Madoff in exchange for helping nap these guys? Otherwise that part just sounds quite odd. Though that just makes you wonder who else is doing the same thing that we haven't heard about. tl;dr
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A little less damned if you don't. This request came to these programmers before the economy was in the tanks. They probably could have found new jobs. I have no experience with prison but I think I'd rather be unemployed than in prison of any sort.
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I have no experience with prison but I think I'd rather be unemployed than in prison of any sort.
Some people actually like prison. It's an environment where you literally have to try to screw up and where all the choices are made for you, so you just have to do whatever you do and you'll be fine. These types of people, obviously, tend to go into underling professions in real life, and the two programmers here who simply did what they're told without thinking about legality fit the bill pretty well.
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Unless you're young, white, male, and of slight build. Then it's pound-you-in-the-ass time.
That's what they are afraid of (Score:1)
"...where all the choices are made for you"
Including sexual orientation?
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and the two programmers here who simply did what they're told without thinking about legality fit the bill pretty well.
How do we know that they weren't fully aware of what they were doing and wanted the money. It is possible that they were being used as tools by Madoff or they might have done this for the allure of money.
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Uh, so it's not a server because it does more then one thing?