Madoff's former IT experts arrested over $65bn fraud

Former Bernard Madoff computer programmers have been arrested for allegedly helping fraudster hide Ponzi scheme

Two computer programmers who worked for fraudster Bernard Madoff were arrested today on charges of helping to cover up his $65bn swindle.

The US attorney's office in New York said that Jerome O'Hara and George Perez were arrested at their homes by the FBI. It said the pair formerly worked for Bernard L Madoff Investment Securities on the infamous 17th floor of his Manhattan offices from where he ran his scam.. They are charged with conspiracy, falsifying books and records of a broker-dealer, and falsifying books and records of an investment adviser.

The securities and exchange commission allege the defendants used their computer skills to produce false documents and trading records to hide the fraud. It is also alleged that they took bribes in return for their silence during their 20-year service for Madoff.

"Without the help of O'Hara and Perez, the Madoff fraud would not have been possible," said George Canellos, director of the SEC's New York 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."

The 71-year-old Madoff was sentenced in June to 150 years in prison for orchestrating a decades-long Ponzi scheme whereby investors were paid returns with cash from new clients.

According to the SEC's complaint, Madoff and his lieutenant Frank DiPascali routinely asked O'Hara and Perez for their help in creating records that combined actual positions with the fictional balances in investor accounts.

The SEC says O'Hara, 46, and Perez, 43, wrote programs that generated many thousands of pages of fake trade blotters, stock records, Depository Trust Corporation (DTC) reports and other phantom books and records to substantiate nonexistent trading. They assigned file names to many of these programs that began with "SPCL," which is short for "special."

The SEC alleges that O'Hara and Perez had a crisis of conscience in 2006 and tried to cover their tracks by attempting to delete approximately 218 of the 225 special programs. According to notes found in O'Hara's desk, one of them told Madoff, "I won't lie any longer. Next time, 'ask Frank,'" meaning Madoff should rely on DiPascali to create the false reports. But Madoff then told DiPascali to give the pair a salary increase of nearly 25% and bonuses of more than $60,000 each to keep them quiet. DiPascali has pleaded guilty to fraud, as has auditor David Friehling.