Madoff Developers: Be Careful Who You Code For

 
 
By Donald Sears  |  Posted 2009-11-16
 
 
 

As the layers of the Bernie Madoff ponzi-scheme scandal continue to be peeled away, two programmers on the Madoff books are now in the spotlight and facing a potential 30-year prison sentences.

Jerome O'Hara, 46, and George Perez, 43, the accused programmers, began working for Madoff in the early 1990s, under the direction of another Madoff employee, Frank DiPascali Jr. The accused knew what they were doing, said the FBI in a statement, and even went so far as to write notes to Madoff in 2006 that they were "done lying" and would direct SEC inquiries to DiPascali Jr. But $60,000 salary increases were enough, apparently, to shut them up.

Take a look at what O'Hara and Perez developed and managed, according to FBI and Department of Justice details ('IA' means investment advisory):

  • Created books and records for a small subset of BLMIS IA clients to help hide the scope and nature of the IA business;
  • Changed the names of account holders to help explain why the SEC would not find IA client securities custodied at the Depository Trust Company ("DTC");
  • Altered details about the number of shares, execution times, and transaction numbers for trades reported on BLMIS trade blotters, by employing random algorithms that produced false and random results;
  • Changed the names of the parties from which BLMIS bought securities and to which BLMIS sold securities;
  • Created false and fraudulent order entry and execution reports that included fictitious times at which orders for equities transactions purportedly were placed;
  • Generated false and fraudulent commission reports;
  • Created fraudulent IA client account statements in a format different from those sent to clients;
  • Produced fraudulent DTC monthly reports and other fraudulent DTC documents that were used to deceive representatives of the European accounting firm about where their client's securities were custodied
  • Generated fraudulent documents that could be used to make it appear that the IA business bought and sold securities on the London Stock Exchange in Europe; and Allowed DIPASCALI and other BLMIS employees to alter computer programs necessary to create additional false and fraudulent books and records to respond to the European accounting firm's requests for information in 2008.
  • The career lesson? If you discover you are developing technology for hiding fraudulent, criminal activity you should stop, contact law enforcement, and save your career before you become a convicted felon.

    Felons don't generally recover so well from being associated with a case of this magnitude.

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