Madoff geeks charged for writing book-cooking code

A federal grand jury has indicted two computer programmers on fraud and conspiracy charges for developing programs used by Bernard Madoff to cook the books in his billion-dollar ponzi scheme. Jerome O'Hara and George Perez knowingly created the programs that removed or altered key data contained in reports submitted to …

[Renato]

Stop in the name of the law!

If those programmers were put into the gaol for making software that Madoff used to falsify information, I think all Microsoft Excel's should be too! Most banks and finance companies use Excel to do part of their accounting.

Coat, with passport and tickets to some Caribbean Island for ...er... vacations.

[Anonymous Coward]

It's a fair cop guv.

I would have agreed with the above but for the fact that they knew exactly what they were doing and why, and screwed lots of money out of their employer for doing it. Guilty as charged, it seems.

[Phil Koenig]

A lot more where that came from

It's a pity that it takes a $35,000,000,000 fraud for the operatives to get prosecuted.

We need people thrown in the slammer who are involved with the $35,000 and $350,000 frauds too. Maybe that will start to dim the "greed is good" mentality in this culture, for once.

Or not.

[sandman]

Arms dealer defence

Excel doesn't cook the books, people do...

[Martin]

Oh, come on...

Excel can be used for all sorts of things - including fiddling the books.

The software these people are accused of writing could hardly be used for anything else BUT fiddling the books.

There is something of a difference here.

[PirateSlayer]

This is a bit of a...

The appeaser who thinks that writing code to cook books is the same as using Excel was probably one of those who said "why not prosecute google" when those filthy Pirate Bay thieving cretins were up in court. Intent!

[Neoc]

Having trouble making sense

"In 2006, O'Hara and Perez cashed Madoff checks worth $976,000 and $289,000 respectively. That same year, the pair threatened to leave their jobs unless they received raises of 20 percent. Madoff not only met their demands, he also gave them raises of $64,812 and $60,165."

No matter how I read that, it doesn't make sense - an 20% raise would be $195,200 and $57,800 respectively. So Perez was better off with the $60,165 ( ~21%) raise, but O'Hara got seriously short-changed (only got ~6.6%).

[Anonymous Coward]

Probably the checks were computed using their software

Seriously, if they have been cashing checks like this for 10 years they are total imbeciles to be caught. That is enough money to spend the rest of your days shagging your brains out and enjoying life in some tropical (or not so tropical) country with no extradition treaty with the USA.

[fred #257]

"shagging your brains out?"

(Waits for beer to drain out of keyboard)

That is just so apt around here (Auckland NZ). A bank investment advisor has just been caught for stealing $17M over 8 years - ironically, he was exposed when one of his rich dumb clients read of the Madoff case and got worried and rang the bank to check their (non-existent) account.

But it seems the guy was living the high life, all right, including - get this - paying $3.4M to two lady escorts. Wow that's awesome! Shagging his brains out indeed.

Oh dear, which icon shall I choose... money, sex - oh I know

[bluesxman]

@ Neoc

"Madoff not only met their demands, he also gave them raises of $64,812 and $60,165"

I guess I'm reading it differently to you, cause the use of the word "also" implies to me that those raises were given in addition to meeting their 20% demands.

[Martin]

20% PLUS those extra amounts?

"Madoff not only met their demands" ie gave them 20% rises (let's be British here!), "he also gave them" the extra amounts (at some other time, presumably during that year).

I grant it could be better written.

[Anonymous Coward]

Title

I'd assume the cheques they cashed were bonuses (for falling in with his scheme). Their actual salary is probably not included in the article.

[Gordon is not a Moron]

How annoyed must Perez have been

when he found out that he was only getting paid 1/3rd of O'Hara's wage for the same job?

[Winkypop]

Nuremberg defence?

"I was only following the business requirements spec"?

Perhaps not.

[PirateSlayer]

...Title

"I was only following orders" only works when you're not screwing more money out of your employer for keeping shtum. I am resisting the urge to mention IBM's jew counting machines/software...pretending that you are oblivious to the business purpose of your software doesn't cut the mustard anymore (unless you're truely an autistic code monkey).

[screaminfakah]

I agree w/ Renato

He is right. WTF is everyone stupid /or wrapped up in old thinking??? Every dollar you spend is a dollar tracked!!!

Steveo

[raving angry loony]

The title is required, and must contain letters and/or digits.

Odd that the programmers would be liable for more jailtime (and likely to get more jail time) than all the managers who planned, executed and profited from the fraud to a much greater extent.

I guess the managers have better contacts, and it really is who you know.

[JohnG]

Simulation

Whilst this pair may or may not be guilty as charged, it is worth considering how often simulations are used for development and training purposes, often using real world data.

[Mike Shepherd]

Quite an achievement

"...an IBM AS/400 server...on the 17th floor of Madoff's offices that had no link to the outside world...pulled partial information from a separate AS/400 that was linked to the Depository Trust Company and other third parties"

[Peter Page]

@Neoc: Having trouble making sense

"...not only...also...".

In addition to, I think.

[Nigel Callaghan]

Hmmm?

"The reports were generated on "House 17," an IBM AS/400 server ... that had no link to the outside world,... the server pulled partial information from a separate AS/400 that was linked to the Depository Trust Company and other third parties.

How does it pull information from a machine that it's not linked to? Am I missing something here? Or is this a new form of invisible network?

[Wallyb132]

Common Sense? Its in short supply these days

"How does it pull information from a machine that it's not linked to? Am I missing something here? Or is this a new form of invisible network?"

Pretty simple really, the 17th floor server had no internet access, or access to any machines outside the building, however it most likely was on an isolated LAN and had access to LAN resources, which included the second AS/400, which seems to have had internet access.

You see, there is such thing as isolating servers from the internet or other LAN segments / users, and only allowing them to communicate with specific machines or LAN segments, this can be done by way of VLAN or firewall device.

Its really quite elementary.

Have a nice day!

[Anonymous Coward]

Oh! Callow Youth!

It's called 'sneaker net'. One merely deposits the data onto removable media and transfers it to the other machine. I remember when I was a lad, in my job as an apprentice machine-room acolyte, I had to slog data on 800 pound portable drives 30 miles through the snow and over a 12,000 foot mountain pass on bare feet, wearing only a loin cloth fashioned from a discarded 'Wang' T-Shirt, driven by senior UNIX sys-admins with whips made of braided surplus Honeywell-Bull reel to reel tape, to transfer the weekly budget data between the PDP-11 and the VAX-11/780 at branch and head offices respectively.

And if you tell the kids of today that story, they won't believe you.

Beer, because the joke is always funnier when you're pissed.

[David Edwards]

Even I could do that code

On my old BBC Micro

10 Input "Customers name" Customer$

20 input "How much do they really have" realfunds

30 fakefunds=realfunds * RND(10)

40 Print "Your rich " Customer$ ", you have" fakefunds

(Thats why im not a programmer now BTW)

[DZ-Jay]

Re: Stop in the name of the law!

@Renato:

Did you even read the story? They are not accused of writing software that was unwittingly used to commit fraud; they are accused of writing software for the purpose of committing fraud--with intent. In other words, that they were in on the scam and wrote the software for the sake of executing the scam.

@Neoc:

It is confusing, but I guess it means that they got those as a bonus raise on top of what they asked. The article says "Madoff not only met their demands, he also gave them raises of...", implying that the 20% raise request was conceded.

-dZ.

[Valerion]

@Neoc

I'm guessing they were invested in the ponzi scheme and those payments were from the scheme not part of their actual salary.

Still... 30 years for writing some software that they were ordered to write by their employer (more than most murderers get). Yes they could've not written it but they'd have been out on their backsides. Leaving your job to take the moral highground might be nice and idealistic but when you have bills to pay in a recession you don't rock the boat.

I feel a bit sorry for them. Of course I could be wrong and they could have been totally in on it and doing it quite willingly.

[lglethal]

Sorry cant agree...

You dont try and extort a 20% raise out of a company in a recession if your worried about being out of a job, do you?

These two new exactly what they were doing, realised they could get some big bucks by doing it and so willingly made these programs, and then asked for more big bucks to cover it up. They knew exactly what they were doing and deserve everything they get!

[The Commenter formally known as Matt]

extort? hardly

Asking for a raise can hardly be called extortion. If the company is making big bucks (as they were getting paid I assume the scheme hadn't collapsed yet and as far as everyone was concerned the company was making big bucks.) then asking for/negotiating a raise is hardly extortion. Unless you are classing everyone who ever got a raise as a criminal.

When ever anyone asks for a raise the unspoken condition is: if I'm not happy with the result I'll leave. Depending on how the company views you and you skills depends on how they respond.

Maybe they are guilty, I don't know however this entire article is basically a prosecution press release, hardly enough to judge guilt!

[lglethal]

You consider 20% a normal raise???

Please dont tell me that you honestly believe any employer under normal circumstances (no matter how successful the company) is going to give someone (especially in IT) a 20% raise? If so, please provide the name of said company here, as im sure i (and everyone else on here) will be hammering at their door tomorrow!

Seriously, have you EVER received a double digit raise? I doubt it - the only time you get a serious salary hike like that is if you change roles and become management. You will never see a massive raise staying in the same job, doing the same work - no matter how well the company is doing. And i dare you to provide me with examples where this does not apply! (discounting the possible case of going from permie to subbie but thats not what we have here!)

Asking for a 20% raise after writing a very illegal program (and they knew it was so) is defintely extortion in my book!

[Pascal Monett]

"they'd have been out on their backsides"

Yes, you are wrong and need to re-read the article.

Not only did they not contact any authorities whatsoever, but they did the job knowing the fraud consequences, profited from the results and added what sounds like a bit of blackmail on the side to increase their share of the spoils.

That is not honest work by any stretch of the word.

So hang 'em high ! Next to Maddof preferably.

[Jean-Luc]

They well deserve it

I hope the rest of the folks involved get nuked as well. And that SEC heads roll. But these two were an essential part of a scheme that scammed many many people out of an amazing amount of money. How many people, not all of them super-rich, will have lost their life savings? Commit suicide?

Plus, if you go to jail for a year for breaking into a car, but only a few years for stealing millions, cost/benefit is clearly pointing you to do high-level white collar crime. That will bring us more Enrons and Madoffs.

Please, how could you not know that this was investment fraud? Last, but not least, the Madoff thing came apart as soon as the recession hit. It was going on for years _before_. So that lame excuse of needing the job does not apply. The fact that they were squeezing the boss for $ is irrelevant IMHO.

Do the crime, do the time. I usually think the throw-them-in-jail crowd is overreacting, but that applies very well here.

BTW, "Excel guy" at the top is a nitwit.

[John Smith 19]

AS/400s

Not just for honest businesses.

[Graham Bartlett]

@Valerion

Excuse me? "My employer told me to do something I knew full well was illegal, but I did it anyway bcos he'd have sacked me otherwise. And then I blackmailed him for a further $200k."

This pair are not exactly innocent little choirboys. And nor were they doing this bcos they were scared of losing their jobs in a recession - they'd been working for him since the 90s, and they did most of this while the economy was riding high.

[Anonymous Coward]

Understanding

"The reports were generated on "House 17," an IBM AS/400 server kept on the 17th floor of Madoff's offices that had no link to the outside world, prosecutors allege. To ensure the reports appeared genuine, the server pulled partial information from a separate AS/400 that was linked to the Depository Trust Company and other third parties"

Is it me or are those two statements contrdictory - if House 17 is linked to another server which is linked to the outside world, then House 17 is linked to the outside world.

Do the prosecutors understand how networking works?

[BarrySalt]

Data Transfer

Ever heard of "sneakernet"?

[Valerion]

@Graham Bartlett

Yeah fair enough matey.. as I said at the end maybe they were fully in on it. The blackmailing doesn't exactly help their cause much...

[Shinobi87]

yea....

cos they will be paying that 5mill back when they get out of jail! these fines nowdays are ****ing stupid

[Flaco Dude]

Wall Street Journal reports Madoff beatdown

some judo dude powned Madoff -- "broken nose, fractured ribs and cuts to his head and face"

[John Smith 19]

And tohe going rate for a code monkey on Wall street is what>?

Consider the spec on this code and how mind-numbingly blind would the programmer have to be to *not* know exactly what this was for?

These guys made some fair sized bucks for *years* doing their thing. You'd either have to be very stupid or very arrogant to think you could hang around in NY once the house of cards (which it exactly what this is) started to tumble.

Although the very firm stand they took on their bonuses *was* in the highest traditions of the BOFH himself.

[Paul Smith]

Duh...

"Investors sunk about $36bn into Madoff's ponzi scheme, according to CBS News. Of that, about $18bn was liquidated before the house of cards collapsed and the other half is missing. Madoff is currently serving a 150-year prison sentence."

It was a Ponzi scheme! That means one suckers investment is used to pay another suckers bonus. Nothing is missing, it was paid out to suckers to encourage them (and their friends) to invest even more.

[John Smith 19]

@Paul Smith

"It was a Ponzi scheme! That means one suckers investment is used to pay another suckers bonus. Nothing is missing, it was paid out to suckers to encourage them (and their friends) to invest even more."

To a point. The whole Ponzi idea relies on the high level of investor confidence that they *don't* take their money out (after ROI is huge, the paperwork they get says so).

If Maddof whines and says "Oh we had to put most of it out to convince people it was real" this is BS. It will take *very* careful accounting to find out where most of it has gone. I'll take a wild guess and say the "B. Madoff Institute for the Care & Support of Fraudulent Financiers."