The FBI arrested Nov. 13 two of convicted swindler Bernie Madoff's programmers. Jerome O'Hara and George Perez were charged with conspiracy, falsifying books and records of a broker-dealer and falsifying books and records of an investment adviser.
For decades, Madoff ran an elaborate Ponzi scheme through BLMIS (Bernard L. Madoff Investment Securities), purported to be an investment advisory business that defrauded thousands of clients of billions of dollars. O'Hara and Perez were employed as computer programmers at BLMIS beginning in 1990 and 1991, respectively. They primarily were responsible for developing and maintaining computer programs that supported the operation of BLMIS.
According to the FBI, BLMIS was subject to at least five reviews by the SEC (U.S. Securities and Exchange Commission) and a European accounting firm. As part of a concerted effort overseen by Madoff and his then employee, Frank DiPascali Jr., to deceive both the SEC and the European accounting firm, O'Hara and Perez developed and maintained computer programs that generated numerous false and fraudulent books and records.
O'Hara and Perez allegedly knew that the special programs they developed contained fraudulent information and that they were used in connection with the SEC and European accounting firm reviews. In April 2006, O'Hara and/or Perez attempted to delete 218 of 225 special programs from Madoff's computer system and also closed their own BLMIS accounts, withdrawing hundreds of thousands of dollars each.
"Jerome O'Hara and George Perez allegedly helped construct Bernie Madoff's house of cards," U.S. Attorney Preet Bharara said in a statement. "The computer codes and random algorithms they allegedly designed served to deceive investors and regulators and concealed Madoff's crimes. Today they have been charged for their roles in Madoff's epic fraud, and the investigation remains ongoing."
The FBI said in August or September 2006, O'Hara and Perez met with Madoff and told him that they would no longer lie for him. Handwritten notes found by the FBI in O'Hara's desk stated, among other things: "I won't lie any longer. Next time, I say -ask Frank.'"
After Madoff directed DiPascali to pay O'Hara and Perez whatever they wanted in order to keep them happy, O'Hara and Perez each received pay increases of about 25 percent and net bonuses of approximately $60,000.
"O'Hara and Perez are charged with being instrumental in facilitating the Ponzi scheme that was the Bernard Madoff investment advisory business. Their subterfuge was designed to conceal the fraud from regulators and others, and when they told Madoff they would no longer lie for him, their continued complicity was bought for a price," said Joseph M. Demarest Jr., the Assistant Director-in-Charge of the New York Field Office of the FBI.
O'Hara, 46, of Malverne, N.Y., and Perez, 43, of East Brunswick, N.J., each face a maximum sentence totaling 30 years in prison: five years on count one (conspiracy) and a maximum fine of $250,000 or twice the gross gain or loss from the offense; 20 years on count two (falsifying books and records of a broker-dealer) and a maximum fine of $5 million or twice the gross gain or loss from the offense; and five years on count three (falsifying books and records of an investment adviser), and a maximum fine of $10,000 or twice the gross gain or loss from the offense.