Madoff computer programmers arrested; could face 30 years in $60B fraud
Filed under: People
Federal authorities arrested two computer programmers who worked for convicted Ponzi patriarch Bernie Madoff (pictured), charging them with several criminal counts for their alleged role in the massive $60 billion scam. George Perez and Jerome O'Hara appeared in federal court Friday and faced charges of conspiracy, falsifying books and records of a broker dealer, and falsifying books and records of an investment adviser. The pair worked in Madoff's secretive 17th floor office at the Lipstick building, where the fraud was orchestrated."Jerome O'Hara and George Perez allegedly helped construct Bernie Madoff's house of cards," Preet Bharara, the United States attorney in Manhattan, said in a statement. "The computer codes and random algorithms they allegedly designed served to deceive investors and regulators and concealed Madoff's crimes."
Bail was set at $1 million for the two men, who also face federal civil charges seeking penalties.
Were they paid to keep quiet?
Authorities accuse the two men of controlling the computer software Madoff's used to generate paperwork describing trades that never took place. The men are also accused of taking "hush money" to keep secret their efforts to help Madoff perpetrate the fraud for more than 15 years.
"Without the help of O'Hara and Perez, the Madoff fraud would not have been possible," said George S. Canellos, director of the U.S. Securities and Exchange Commission's New York Regional Office. "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."
O'Hara, who lives on Long Island, New York, and Perez, who lives in New Jersey, were arrested Friday morning and taken to federal court in downtown Manhattan. They are the fourth and fifth individuals to be hauled in by authorities over their role in a crime, which cost investors, retirees and charities billions. Both men face up to 30 years in prison.
The men are charged with keeping a secret computer server known as "House 17," which maintained the bogus information needed to construct the phony reports. "The overwhelming majority of House 17 data surrounding these investor accounts were fabricated and used to perpetuate Madoff's Ponzi scheme," the SEC said.
The charges appear to have been constructed with the aid of Frank DiPascali Jr., the Madoff aide who has admitted to serving at Madoff's knee and helping the felon's nefarious scheme. He hopes to receive more lenient treatment from authorities in exchange for his cooperation.
'I won't lie any longer'
M. Catherine Scott, a special agent with the FBI, said in a sworn statement in the complaint that officials found notes of a conversation in O'Hara's desk which read, "I won't lie any longer. Next time, I say 'ask Frank,' " referring to Mr. DiPascali.
After that, according to the complaint, Madoff ordered DiPascali to pay the two men "as much money as needed to keep quiet and not expose the misrepresentations" -- or 25 percent pay raises and $60,000 bonuses.
Last month, a jailhouse interview was released in which Madoff dissed federal authorities as bumbling bureaucrats and said he was "astonished" that no one caught him earlier. "It would have been easy for them to see," Madoff said of the SEC investigators he says failed "accounting 101."
The SEC's failure to bust Madoff -- after detailed warnings -- was a major black eye for the regulatory commission charged with monitoring and stopping exactly such crimes. Madoff was arrested in December, pleaded guilty in March and is now serving a 150-year prison term in North Carolina.
Irving Picard, the court-appointed trustee in the Madoff case, has filed a $199 million lawsuit against the financier's sons Andrew and Mark, his brother Peter, and his niece Shana, alleging that they benefited from Madoff's fraud by using his investment firm as a "family piggy bank" to purchase multimillion-dollar homes, luxury cars, boats and fancy clothes.
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Reader Comments (Page 1 of 3)
11-13-2009 @ 9:23PM
desert_waterlily said...
The SEC is and has been a joke for quite some time. Wall Street has not been a friend to middle class Americans.
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11-13-2009 @ 9:27PM
Jake said...
What about Elliot Spitzer .. He was NYS Attorney Gneral at the time and he did nothing when MASS SEC exposed MADOFF CRIME FAMILY !!!
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11-13-2009 @ 9:42PM
pat said...
Keep an eye on these guys. The wall street police need to set an example. Whip em good, life behind bars should do the trick.
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11-13-2009 @ 10:47PM
Kevin said...
Make these guys work for the SEC to detect fraud - more fraud exsposed more "prison sentence" reduced...
11-13-2009 @ 9:48PM
DK said...
Just think of what they would have got if they worked for a Insurance or Mortgage Co.
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11-13-2009 @ 11:01PM
Brewcrew said...
There is nothing surprising about this story. I have been an I.T. computer consultant for 20 plus years and this activity of falsifying financial data before announcing quarterly earnings happens a lot more than what you think. In one instance I had to report a client to my company that was so blatantly cooking the books that if we did not report them to the SEC we had a risk this client could have blamed my company or myself for falsifying quarterly earnings data. The result is I could have been in the same position as the two programmers mentioned in this article, looking at jail time.
Well guess what, I was let go right after I reported this with no backing from my company whatsoever. I was in a no win situation.
Bernie Maddoff and his criminal friends are just the tip of the iceberg when it comes to falsifying financial data.
If anyone out there who works in I.T. think twice before your boss says you have a “Special Assignment” to complete before the quarterly earnings report. It could land you in jail.
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11-14-2009 @ 7:48AM
ivette said...
im sure you sleep well at night, you did the right thing!!
11-13-2009 @ 11:01PM
George said...
We were paid to keep quiet, sounds like I was only driving the car and looking out. Gitmo should stay open for all the corrupt politicians and scam artists. As they are the real enemy combatants
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11-14-2009 @ 8:22AM
John George said...
Here, Here, George! A great Post!
My immediate question on these two programmers is how the hell do IT schleps post million dollar bail bonds?
Gee, it sounds like these two are Bernie's business partners, doesn't it?
But what do I know? After all, I'm only a US taxpayer!
For the Republic!
John George
North Caolina
11-13-2009 @ 11:41PM
David S. said...
I guess they should've figured something might have been up. But when you just program computers, you can't be directly in league like Uncle Bernie. He should be forced to forfiet all of his assets not already iezed, and then he'd get a real taste of what his victims will face. Thier sin is not firguring out what what he was doing. But his wife on the other hand was being pampered by his greedy assisting of her in making money disappear. His Board f Directors should have smelled something was up. They might have caught wind of it, and fearing financial retribution, might have just turned a "Blind Eye" to the bilking of public, and private investors. It was the Grand scheme of a Greedy Bernie Madoff. I blame those in his inner circle for the lack of bowing the wistle, I m,ean thier "Mis Feasance, Or Mal Feasonce in the greedy scheme. I remember Bernie Sitting quietly and lying to niaeve investors, who just kept hearing " My Company is in sound financial shape". What of the leverage The SEc Should've had for the oversite, or fraud detection that was needed , but was not delegated by the Lawmakers to uncover this massive willful fraud. That's MY PERSONAL OPINION. Speaking FOR MYSELF.
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11-14-2009 @ 12:20AM
Richard Keane said...
Secret Software & Naked Short Selling
We need NSS arrests - not Insider Trading arrests
It is November 5th, 2009 at high noon and the SEC is all over the news about another arrest. They are all on stage giving this big press conference on 14 arrests for Insider Trading connected to the Galleon Group investigation. Is it Insider Trading? The Government wanted the world to believe this caused the financial meltdown on Wall Street. Three weeks earlier the SEC made the first arrest for Insider Trading involving Raj Rajaratnam and 5 other people on Wall Street.
It is my opinion that the Government and the SEC is involved in a cover up to try and make people think that it was insider trading that caused the crisis of 2008. Let the truth be known. The news media, along with Goldman Sachs and many other Wall Street companies and people of power are all involved in the biggest cover up in the history of the United States. It involves greed to the fullest extend. The SEC is responsible, under the leadership of Christopher Cox in July 2007, the Securities Exchange Commission abolished the Up Tick rule. The elimination of the Up Tick rule created a wave of corruption that grew out of control, based on Naked Short Selling and the use of secret software and super fast computers.
Insider trading has played a role in the financial crisis, yet the story not being told by the news media is the arrest of a Goldman Sachs employee who tried to steal Goldman Sachs secret software. This arrest came over the July 4th Holiday week-end and was aired briefly on a Saturday night on TV and then came Monday July 6th, 2009 and the story disapeared. A few weeks later Goldman Sachs reported its FY 2009 2nd QT earnings ( April – May -June ) and Goldman Sachs made over $100 million dollars a day in 46 of the 64 trading days for that quarter. How could this be possible after a 17 month recession. Wall Street changed two major Laws. The first being the use of decimal places (2001 )instead of fraction. Years later and after they lobbied for the removal of the Up Tick rule ( 2007 ) the secret software was designed and in place ready to go into full operation now that Wall Street was allowed to naked short sell millions upon millions of shares that Goldman Sachs and other hedge funds didn’t even own and failed to deliver. Their greed took over, who wouldn’t , when Goldman Sachs was making over $100 million a day in trading. They destroyed companies like Sirius XM radio and overstock.com and many others. Then they began naked shorting the banking industry and attacking each other.
This is the truth that the news media, corporate Amercia, the SEC, the Government, Goldman Sachs, Hank Paulson and the many others that were in power have not told the American people and the world. Now, as I write this letter, they are now trying to con the world into thinking it was insider trading that caused 95% of the middle class workers to lose 20% - 60 % of their investments and 401K’s.
In the end the Entire story will be told and I hope I get my chance to tell it. Check the facts. There was an arrest of that Goldman Sachs employee in July 2009. Why was it covered up? Where are the arrests for Naked Short Selling and Goldman Sachs use of their secret software that stole the wealth off investors all across the country. It will go down as the biggest scandal in history.
I give you permission to re-print this letter. Please follow up and investigate. This story needs to be told. Please contact me. It is exactly what is taken place.
Richard Keane
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11-15-2009 @ 6:12PM
STEVE said...
I am convined that you are 100% correct.That scandal where billions were stollen and financial and industrial infrastructure of US was sollen and transfered to ASIA(MAINLY CHINA)BY H POULSON'S ,RUBINS AND GREENSPANS OF THE WALL ST.with the help of those fools in the WHITE HOUS that were to ignorrant to know that they have FOXES GUARDING THE HEN HOUSE,starting with Harvey Pitt at helm of the SEC BACK IN 90'S.and the talking heads on CNBC being the cheer leaders.
11-14-2009 @ 9:03AM
John George said...
Good Morning Mr. Keane:
I thought I had a grip on the current economic "take down" until I read your great post! You are direct, to the point and as sharp as an arrow piercing the American Heart of Darkness! You should change your byline to 'Killer Keane' and present your work to the Washington Post!
To this liturgy of greed, theft and deceit unequaled in written human history, we should add the slimy crooks in Congress who spear-headed the Great Bailout Con and did all they could (in front of the entire nation and against the will of the people) to bankrupt our Republic; I call them the "Gang of Seven"; Schumer, Frank, Gillibrand, Ackerman, Dodd, Reid and Paulson.
Please keep up the great work and correspond with me, if you please. I am assembling a book and would like to quote you and split proceeds, if any. (geo257@gamil.com)
For the Republic!
John George
North Carolina
11-14-2009 @ 2:37PM
toni said...
Hello Richard, I'm impressed with your insight and understanding of what brought down this country. I see that there is a movie in the making by a guy named druilhet...madoff with america. sounds like he has the real story and needs to hear your input...you should contact him. Can't wait for the movie to be released.
TL
Colorado
11-14-2009 @ 12:20AM
Richard Keane said...
Rick Aristottle Munariz of the Motley Fools is paid to mislead investors about Sirius XM Radio. He is part of a news media collusion lead by CNBC and their own Jim Cramer. Jim Cramer's street.com web site is also hip deep into the collusion. Jim Cramer and his writers, especially Scott Moritz are all part of the scandal and it leads upward to CNBC/GE executives and Goldman Sachs. Thank god their is now an investigation taking place with Goldman Sachs. Goldman Sachs was investigated and 10 firms, including Goldman Sachs were fined $1.4 Billion dollars in 2003. Now the full blown investigation by Boston's Chief Financial Regulator William Galvin will reveal the corruption of Goldman Sachs again and I can only hope that William Galvin will follow the money trail and check the bank accounts of Rick Aristottle Munariz of the Motley Fools along with Scott Moritz of the Street.com Just check these 2 writers banking accounts and the investigation will reveal that they are being paid off to write mis-leading stories about Sirius XM Radio. The money trail from these 2 writers will lead to >>> Motley Fools >>> Street.com >>> Jim Cramer >>> CNBC >>> GE / CNBC executives >>> NAB >>> Goldman Sachs.
It has all been a news media collusion along with the combination of Wall Street corruption by Goldman Sachs to destroy Sirius XM Radio inc. by naked short selling, flash trading, superfast computers, using secret software to manipulate the Sirius XM Stock price in decimal places the past few years since the Siri /XM merger was announce in Jan 2007. It was a pact agreed to by the news media and Goldman Sachs, which is why CNBC keeps reporting positive story after positive story about Goldman Sachs. All are into this collusion knee deep and this is why they will not report Goldman Sachs and their biggest scandal in the history of Wall Street.
Goldman Sachs got greedy. The scandal with Sirius XM Radio, worked so well with their secret software that was making them millions of dollars a day. Well, their Greed expanded into not just naked shorting & decimal place trading Sirius XM radio, but Goldman Sachs, next said , heck this secret software works so well, along with CNBC's cover up lets do it to our competition the banking industry. Goldman Sachs next used these tactics on the banking industry in 2008 - 2009. They have been protected by CNBC by paying CNBC millions of dollars a month in advertising or shall we say paid protection.
Goldman Sachs greed almost ruined this country when they began using naked shorting and their secret software to attack the banks. It was their Greed of making millions using this software attacking Sirius XM Radio and when they expanded their scandal to the banking industry, they were now making over $100 million dollars a day. This is a fact, as Goldman Sachs made over $100 million dollars a day in 46 of 64 trading days last Quarter 2009 ( April , May, June 2009 ).
CNBC is part of the scandal, taking in million a months from Goldman Sachs for their silence. Why wouldn't Goldman Sachs pay CNBC millions of month, that was nothing to them, since they are making over $100 million dollars a day. They helped CNBC try to ruin the competition ( Siri ) and now CNBC will help them ruin the other Banks. A true partnership by Goldman Sachs & CNBC.
The scandal lives on today, but thankfully the investigation by William Galvin will be expanded into the news media collusion of CNBC, Motley Fools & Street.com along with many other news media types.
Their Greed and goals have cost the average investors of the World hundreds of billions of dollars the past few years. In the end the truth is going to come out, but how does the people of the World hear the truth when the news media is part of the Scandal.
Well, a few years ago, CNBC & Goldman Sachs would have gotten away with it, but thank you www.Satwaves.com , www.twitter.com/stockshockmovie and the many social media outlets and bloggers out there. Thank you for helping bring the truth to the World. Each day we get closer and closer to the biggest scandal in the history of the United States. ( Written by Richard Keane – August 30th, 2009 )
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11-14-2009 @ 12:21AM
Richard Keane said...
Decimal Place Trading caused the recession of 2008
This recession was caused by the manipulation of stock prices on Wall Street through naked short-selling, flash trading, high-frequency trading, secret software, super-fast computers and what I feel was the main cause of this corruption: “Decimal Place Trading.” As I write this article today, much of this corruption is now slowly coming out through social media outlets such as Twitter and Facebook, along with bloggers on the internet, Yahoo bulletin boards, and the movie Stock Shock. The news media is also to blame for what has taken place in this country -- including the near-collapse of Wall Street and the banking industry.
There are many things to point fingers at or place the blame on, and I can think of a few off-hand that I would like to cover -- the first being Wall Street’s regulation changes. I am no expert -- I am not even a writer -- but decided to tell this story since the business news media was not telling it. These Wall Street regulation changes contributed to the aforementioned problems in many ways, with the first being the removal of fractions in stock pricing. On January 29, 2001, the New York Stock Exchange, or NYSE, went to four-decimal-place trading. On March 12, 2001, the National Association of Securities Dealers Automated Quotation, or NASDAQ, followed suit. This new rule had the best of intentions as we headed toward the computer and digital world, but over time it was manipulated and companies like Goldman Sachs figured out how to take advantage of the new system. I am not sure how it happened, whether it was lobbied for years or what -- but along came the biggest mistake of all with the elimination of the uptick rule in July of 2007. This rule had been implemented after the great depression, and had been in place since 1938. How could the Securities and Exchange Commission, or SEC, abolish a rule that had been in place for close to 70 years, and had worked? Put these two changes together, and you get a simple equation: greed plus corruption equals recession.
Reports have been released on the web that Goldman Sachs made over 100 million dollars per day in 46 out of 64 trading days in Fiscal Year 2009, second quarter (April, May and June). Let me say that again. They made over 100 million dollars per day, and are still doing it as I write this letter today. But the question remains, how did they do it? There has been no report of this by any of the news media. How can this be? This corruption is 100 times the gravity of the Bernie Madoff story, and yet there has been no coverage by CNBC or Bloomberg News. Why? Goldman Sachs, upon Wall Street transitioning to fractions and the abolishment of the uptick rule, designed secret software and used this software to gain an advantage on every potential investor. Basically, Goldman Sachs became a Las Vegas poker dealer in New York City on Wall Street, turning profits on investors every trade with their super-fast computers and software.
Richard Keane August 26th, 2009 Revised version
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11-14-2009 @ 1:15AM
Mitch said...
The only differnece between Madoff and his cronies and Osama Bin Laden, as it relates to damage to our country, is the spelling of their names.
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11-14-2009 @ 1:30AM
the man with a plan said...
their are so many crooks in wallstreat and the gov that you probly never would catch all of them madalf got cought but how many out their are still doing things to the american people and has not yet got cought . evan the police are in big on lots of things , one time in south flo this guy found and counted 40 million dollars of drug money he turned it over to the police and they told him wants the investigation was ove he would get the cash bach they gave him 400 thousand and said claimed that was all their was now for some reason the police man got new personal cars and some boaits that could not be accounted for , but in a matter of 2 weaks it was all hushed and the old man that found the money to start with has vanished without a trace i wander what happin ,
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11-14-2009 @ 3:49AM
wnrwlbt4 said...
GREED! ITS EVERYWHERE
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11-14-2009 @ 4:17AM
tpetrello said...
I am sure that the 5 who have been caught and charged is only the tip of the iceberg......No one could steal that much for 15 years and keep it that quiet.....All of Madoff's family knew exactly what this pig was doing including his wife...Why is'nt she in prison too....taking her assets was letting her off TOO easy.....THEY all are just the JEWISH MAFIA......A family of SCUMBAGS....
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