Madoff computer programmers arrested; could face 30 years in $60B fraud

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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