Programmers Charged In Madoff Scheme - InformationWeek
IoT
IoT
Software // Information Management
News
11/13/2009
01:37 PM
50%
50%

Programmers Charged In Madoff Scheme

Two men were arrested for developing and maintaining computer programs that helped convicted Ponzi schemer Bernard Madoff cover up his operation.

Two computer programmers were arrested Friday on charges of helping convicted Ponzi schemer Bernard L. Madoff cover up his illegal operation that bilked thousands of investors out of billions of dollars.

Jerome O'Hara, 46, Malverne, N.Y., and George Perez, 43, East Brunswick, N.J., were arrested at their homes by the FBI. They were scheduled to appear in a New York federal court later in the day.

The two men face charges filed separately by U.S. Attorney Preet Bharara in Manhattan and the Securities and Exchange Commission. The criminal complaint filed by Bharara charged the suspects with conspiracy, falsifying books and records of a broker-dealer, and falsifying books and records of an investment adviser. The men each face a maximum sentence of 30 years in prison and fines totaling more than $5.25 million.

"Without the help of O'Hara and Perez, the Madoff fraud would not have been possible," George S. Canellos, director of the SEC's New York office said in a statement. "They used their special computer skills to create sophisticated, credible, and entirely phony trading records that were critical to the success of Madoff's scheme for so many years."

According to the U.S. attorney's office, O'Hara and Perez worked for Madoff beginning in 1990 and 1991, respectively, and were primarily responsible for developing and maintaining computer programs that supported Madoff's investment business. Many of the programs ran on an IBM server known within the firm as "House 17."

Between 2004 and 2008, Madoff's firm underwent five reviews by the SEC and a European accounting firm. In order to cover up Madoff's Ponzi scheme, O'Hara and Perez allegedly developed and maintained programs that generated numerous false and fraudulent books and records.

For example, a small subset of Madoff's investment clients were created to hide the scope and nature of his business, according to the U.S. attorney. Names of account holders were changed to help explain why the SEC wouldn't find client securities custodied at the Depository Trust Co.

In addition, random algorithms were created to produce false details about the number of shares, execution times, and transaction numbers for trades reported on the trade blotters of Madoff's firm.

In April 2006, O'Hara and Perez allegedly tried to delete 218 of the 225 programs on House 17 that contained fraudulent information, closed their own investment accounts with Madoff, and withdrew hundreds of thousands of dollars each.

In August or September 2006, the suspects met with Madoff and said they would no longer "lie for him," according to the U.S. attorney's office. To quiet O'Hara and Perez, Madoff authorized a 25% pay increase for each of the men and bonuses of about $60,000.

Madoff, 71, pleaded guilty in March to running a decades long Ponzi scheme that defrauded thousands of clients of billions of dollars. He is serving a 150-year sentence in a North Carolina federal prison. Madoff's lieutenant Frank DiPascali Jr. and auditor David G. Friehling also pleaded guilty to criminal charges.


InformationWeek has published an in-depth report on Dell's $3.9 billion buy of Perot Systems. Download the report here (registration required).

Comment  | 
Print  | 
More Insights
Comments
Newest First  |  Oldest First  |  Threaded View
How Enterprises Are Attacking the IT Security Enterprise
How Enterprises Are Attacking the IT Security Enterprise
To learn more about what organizations are doing to tackle attacks and threats we surveyed a group of 300 IT and infosec professionals to find out what their biggest IT security challenges are and what they're doing to defend against today's threats. Download the report to see what they're saying.
Register for InformationWeek Newsletters
White Papers
Current Issue
2017 State of the Cloud Report
As the use of public cloud becomes a given, IT leaders must navigate the transition and advocate for management tools or architectures that allow them to realize the benefits they seek. Download this report to explore the issues and how to best leverage the cloud moving forward.
Video
Slideshows
Twitter Feed
InformationWeek Radio
Archived InformationWeek Radio
Join us for a roundup of the top stories on InformationWeek.com for the week of November 6, 2016. We'll be talking with the InformationWeek.com editors and correspondents who brought you the top stories of the week to get the "story behind the story."
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.
Flash Poll