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The Courts The Almighty Buck

Bernie Madoff's Programmers Arrested 280

Posted by ScuttleMonkey
from the what-corporate-veil dept.
ZipK writes "With their former boss cooling his heels on a 150-year sentence, programmers Jerome O'Hara and George Perez are now in the US Attorney's crosshairs. They've been arrested and charged with criminal conspiracy, and 'accused of producing false documents and trading records at Bernard L. Madoff Investment Securities LLC in New York.' Apparently Madoff's fraud was too large and too complex to be foisted entirely by hand."
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Bernie Madoff's Programmers Arrested

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  • by alecto (42429) on Friday November 13, 2009 @04:56PM (#30091684) Homepage

    If you destroy evidence, make sure you destroy the backups, too.

    • by NotBornYesterday (1093817) * on Friday November 13, 2009 @05:01PM (#30091746) Journal
      ... and when your boss gets 150 years, get your ass to a country without an extradition treaty with the US.
      • by Wuhao (471511) on Friday November 13, 2009 @05:37PM (#30092158)

        ... and when your boss gets 150 years, get your ass to a country without an extradition treaty with the US.

        Polanski's corollary: Stay there.

      • ... and when your boss gets 150 years, get your ass to a country without an extradition treaty with the US.

        Northern Cyprus or Somalia. Marvelous. Every other country just goes "You think he might have been naughty? Well here he is - any particular kind of metal you'd like the chains made from?"

        • by NotBornYesterday (1093817) * on Friday November 13, 2009 @05:42PM (#30092198) Journal

          any particular kind of metal you'd like the chains made from

          Mercury.

        • Somalia

          I hear there are a lot of copyright infringers there!

        • by Rakishi (759894) on Friday November 13, 2009 @05:54PM (#30092348)

          Very far from true.

          The list of countries with no extradition treaties with the US is, more or less:
          Afghanistan, Algeria, Andorra, Angola, Armenia, Bahrain, Bangladesh, Bosnia and Herzegovina, Brunei, Burkina Faso, Burundi, Cambodia, Cameroon, Cape Verde, the Central African Republic, Chad, China (People's Republic of China), the Union of the Comoros, Democratic Republic of the Congo, Cote d' Ivoire, Djibouti, Equatorial Guinea, Ethiopia, Gabon, Guinea, Guinea-Bissau, Indonesia, Jordan, Kosovo, Kuwait, Laos, Lebanon, Libya, Madagascar, the Maldives, Mali, the Marshall Islands, Mauritania, the Federated States of Micronesia, Moldova, Mongolia, Montenegro, Mozambique, Myanmar, Namibia, Nepal, Niger, Oman, Qatar, the Russian Federation, Rwanda, Samoa, São Tomé & Príncipe, Saudi Arabia, Senegal, Serbia, Somalia, Sudan, Syria, Togo, Tunisia, Uganda, United Arab Emirates, Vanuatu, Vietnam, Yemen, Zimbabwe, Bhutan, Iran, Taiwan, Korea (North).

          • "Cool, I pick Korea!!! No extradition for me!"

            *reads closer*

            "OH CRAP"
          • by Korin43 (881732) on Friday November 13, 2009 @06:16PM (#30092564) Homepage
            For some reason I don't think we need an extradition treaty with Afghanistan..
          • Re: (Score:3, Interesting)

            by geekoid (135745)

            Almost all of those have no treaty because they will hand someone over without question.

            Some will even imprison and get information for you, you kniow, becasue without a treaty there nthing from stopping them from torture.

    • by Tumbleweed (3706) on Friday November 13, 2009 @05:11PM (#30091880)

      If you destroy evidence, make sure you destroy the backups, too.

      Also, make sure you destroy evidence of your destruction of evidence and backups.

      • by skine (1524819) on Friday November 13, 2009 @05:22PM (#30092004)

        Don't forget to destroy the evidence of your destruction of the evidence of the destruction of the evidence and backups and its backups and its backups.

        • by Tumbleweed (3706) on Friday November 13, 2009 @05:31PM (#30092084)

          Don't forget to destroy the evidence of your destruction of the evidence of the destruction of the evidence and backups and its backups and its backups.

          This is going to turn into one of two things: A painting of Stephen Colbert, or an episode of Black Adder.

          I'm good with either outcome, really.

      • by OnlineAlias (828288) on Friday November 13, 2009 @05:55PM (#30092362)

        Well, the problem is they were sending out statements. Those statements were theoretically based on input from the markets, after the amounts were made bigger by the black box which was Madoff's investment "strategy". Once the black box was determined to be a fraud, the programmers were done, because they implemented the black box. At that point ,no amount of deleting was going to get them out of being implicated.

    • by Anonymous Coward on Friday November 13, 2009 @05:18PM (#30091970)

      Should have used perl.

    • this things so big, the only way to destroy all the evidence is to hack into Russian missile command and launch the nukes aimed at the U.S. -- Oh, and a well timed trip to a nice country somewhere in the southern hemisphere might be a good idea.
    • Re: (Score:3, Interesting)

      by hey! (33014)

      That's like saying if you intend to stick your fingers in the meat grinder, you ought to keep something you can use as a tourniquet handy. It's true, in a completely useless way.

      These guys were helping with the biggest Ponzi scheme in history. The reason that Ponzi schemes are illegal is that *they are destined to collapse*. When you're helping run the biggest one ever, it's going to be the biggest crash and burn ever. Evading the consequences means moving as much cash as you can overseas, planning to ch

  • But (Score:5, Insightful)

    by Dunbal (464142) on Friday November 13, 2009 @04:58PM (#30091704)

    So tell me, when are they going to go after the programmers at Goldman Sachs?

    • You realise GS pretty much pwns the US government.

       

      • by Dunbal (464142)

        You realise GS pretty much pwns the US government.

        And the stock market. After all, if they have a program that 'can' be used to 'manipulate the stock market' [businessinsider.com], are we to take Goldman's multi-billion dollar a quarter profit making word of "oh, but HEAVENS NO, we're not manipulating the stock market, that would be illegal - perish the thought!" word for it? Arrest those programmers too.

        • by zippthorne (748122) on Friday November 13, 2009 @05:22PM (#30092006) Journal

          I think you're reading too much into it.

          The idea being that a large investment firm, and possibly others and their clients, are all using certain code to help them decide when to execute trades. An unscrupulous third party could use knowledge of that code to place investments that trigger trades by GS, which is large enough to affect the market. In effect manipulating the market by manipulating GS.

          The market gets manipulated by the sheer size of GS, and the main loser would be GS, as well, since they're already using their software to maximize their own benefit.

          Which brings to mind the issue that the sheer size of GS is the real issue, not the software that they use. Someone here once said, "too big to fail? More like too big to be allowed to exist!" Everyone that received bail-out money should be broken into smaller entities on a staggered basis when the economy recovers.

          • Re: (Score:2, Insightful)

            by Anonymous Coward

            Which brings to mind the issue that the sheer size of GS is the real issue, not the software that they use. Someone here once said, "too big to fail? More like too big to be allowed to exist!" Everyone that received bail-out money should be broken into smaller entities on a staggered basis when the economy recovers.

            There's the old joke (updated for today's numbers) - "if you owe the bank $100,000 that's your problem. If you owe them a billion dollars, that's their probelm."

          • Re: (Score:3, Interesting)

            by TheCarp (96830)

            > Which brings to mind the issue that the sheer size of GS is the real issue, not the software that they use. Someone here once
            > said, "too big to fail? More like too big to be allowed to exist!" Everyone that received bail-out money should be broken into
            > smaller entities on a staggered basis when the economy recovers.

            As someone who loves to jump back and forth between realism and idealism, I have pointed out to a few friends that if a law were ever enacted that simply laid out a bright line for w

    • Re: (Score:3, Insightful)

      by XPeter (1429763) *
      The Goldman programmers aren't the problem. The lobbyists are.
    • when are they going to go after the god damn CRIMINALS at Goldman Sachs.

      • Re: (Score:3, Insightful)

        by ShatteredArm (1123533)
        Since when was it a crime to have a former CEO in charge of the US Treasury, who has an obvious financial interest in the firm's survival?
        Since when was it a crime to be the exclusive market maker in CDS, after your two major competitors go out of business, giving you a completely risk-free profit on bit-ask spreads?
        Since when was it a crime to upgrade a company whose stock offering you are underwriting?
        • Since when was it a crime to have a former CEO in charge of the US Treasury, who has an obvious financial interest in the firm's survival?

          Could be seen as a conflict of interest.

    • by J4 (449)

      Bloomberg is the guy to nail. It all started with his magic box.

    • You kidding? They're just doing the work of the Lord. [lolfed.com]

      “The injunction of Jesus to love others as ourselves is an endorsement of self-interest,” Goldman’s Griffiths said Oct. 20, his voice echoing around the gold-mosaic walls of St. Paul’s Cathedral, whose 365-feet-high dome towers over the City, London’s financial district. “We have to tolerate the inequality as a way to achieving greater prosperity and opportunity for all.”

      • by whoever57 (658626)

        "We have to tolerate the inequality as a way to achieving greater prosperity and opportunity for all."

        Apparently this guy is either in denial or is ignorant about what GS is actually doing -- it is clear that their high-speed trading is effectively a zero sum game and by enriching themselves, they are not providing greater prosperity for others. In fact, they provide the reverse -- they impoverish the rest of us.

        But what should we expect from them? When I was young (a long time ago), the banks did not

        • Re: (Score:3, Insightful)

          by Dunbal (464142)

          it is clear that their high-speed trading is effectively a zero sum game and by enriching themselves, they are not providing greater prosperity for others.

          So long as I can still make money day trading on the stock market, I don't care. And I CAN still make money.

          The high speed trading provides liquidity. I need someone to buy stock from me or sell stock to me. Without these traders, I'd place a bid/ask and wait. And wait. And wait. And maybe I'd get my price. Mayb

          • The alleged benefits of high frequency trading are way overblown. It wasn't until the last few years that it became prevalent, and I think it would be very difficult to argue that we're any better off with that "liquidity."

            And the argument really falls apart when you look at which stocks are being traded. The algos all pile onto whichever stock is the worthless piece of paper du jour, leaving the bid/ask spreads on less popular stocks unaffected. CitiGroup and AIG already have enough liquidity.
      • Re:But (Score:5, Interesting)

        by CannonballHead (842625) on Friday November 13, 2009 @05:36PM (#30092152)

        The injunction of Jesus to love others as ourselves is an endorsement of self-interest

        Ah yes. A great Biblical scholar. All Biblical scholars know that Jesus definitely was trying to protect self-interest. So was Paul, when he said

        Philippians 2:3 (New International Version)
        Do nothing out of selfish ambition or vain conceit, but in humility consider others better than yourselves.

        And Jesus when He talked about being meek, humble, lowly, generous, forgiving, feeding the poor, clothing the naked. And the rest of the Bible when it talks about humility, that God hates the pride, that God "sides" with the humble, that God resists the proud, that God sees the poor and needy, that God judges the unjust - especially when they are rich and they unjustly treat the poor ...

        Definitely "an endorsement of self-interest." Frankly, I would guess that Griffiths has never read the Bible but pulled that quote from somewhere because he was in St. Paul's Cathedral and thus wanted to appear religious in some way. To most people that actually have read the Bible and even more so to people that believe it, he only comes off as being ignorant and just using the words of Jesus to excuse his own selfishness and greed (also talked about in the Bible in quite condemning terms). Not sure that's what he meant to do.

      • “We have to tolerate the inequality as a way to achieving greater prosperity and opportunity for all.”

        Defined only for all << World population

    • by khallow (566160)

      So tell me, when are they going to go after the programmers at Goldman Sachs?

      Because the US is a nation of laws and you have to break a law first before they can go after you.

      • Re: (Score:2, Insightful)

        by Dunbal (464142)

        Because the US is a nation of laws

        George Bush proved that wrong.

        you have to break a law first before they can go after you.

        Unless the programmers were committing fraud by asking people for investment money with no intention to return it, how are they breaking the law? I'm unaware that Madoff was hacking people's computers, creating viruses, or even downloading copyrighted movies.

        If you're a programmer hired to write a financial or accounting

        • Re:But (Score:4, Informative)

          by ShatteredArm (1123533) on Friday November 13, 2009 @05:17PM (#30091952)

          Hell they could start with arresting the SEC for never investigating the guy, in that case.

          THIS

          The SEC had been tipped off on this scam at least three years before it "surfaced."

        • Re:But (Score:5, Informative)

          by NotBornYesterday (1093817) * on Friday November 13, 2009 @05:26PM (#30092044) Journal

          perhaps some programmers were in on the fact that it was a scam

          FTFA:

          [according to the prosecutor] The computer codes and random algorithms they allegedly designed served to deceive investors and regulators and concealed Madoff's crimes

          At one point they tried to cover their tracks by erasing files, but did an incomplete job.

          After that, the SEC said DiPascali convinced the programmers to modify programs so that he and other employees could create [fake] reports themselves.

          ... which indicates that although they might have been bothered by what they were doing, they weren't bothered enough to quit,or call in the Feds themselves, or take any other redeeming action.

          Granted, they're innocent until proven guilty, etc., but it appears they were in this up to their ears.

        • Re: (Score:3, Insightful)

          by werfele (611119)

          Unless the programmers were committing fraud by asking people for investment money with no intention to return it, how are they breaking the law?

          I understand Madoff would provide quarterly statements showing a more-or-less constant rate of return, listing fictitious trades that would justify the rate of return, using knowledge of actual prices in the past quarter to get the numbers to come out just right (which is easy enough in hindsight). I'm all for presuming these guys innocent, but I think your outr

          • by pla (258480)
            It's hard to imagine a spec for this software that wouldn't be at least a bit suspicious, so you can hardly blame them for looking into the programmers.

            Totally non-suspicious Spec - I want a program that can generate hypothetical quarterly yield reports based on historical or speculative data, for marketing purposes.

            Just about every 401k I've ever signed up for has given me forms that look exactly like that - Basically, "If you had gotten in here and retired here, you'd have made 22.3% per year!".

            Tha
        • I'm sure that Madoff used Microsoft Word to send mail to some of his clients.

          I'm sure he made his calculations using Powerpoint too.

          Actually, that would explain a lot...

    • Re:But (Score:5, Insightful)

      by dkleinsc (563838) on Friday November 13, 2009 @05:17PM (#30091956) Homepage

      That's easy: when there is evidence that they committed a crime.

      Goldman Sachs's behavior is probably completely legal (that doesn't mean it's morally right, just legal). Also, it's extremely unlikely that programmers working in the bowels of the big investment banks (GS, MS, BoA) are in on any lawbreaking that does occur.

      It seems like these guys made several stupid mistakes:
      - Being loyal to Madoff et al once they knew what was going on.
      - Being willing to lie to the FBI and/or SEC.
      - Taking big bonuses to keep their mouth shut.
      - Staying in the country after the house of cards fell apart.

    • by geekoid (135745)

      What law did they allegedly break?

    • They went after a couple executives at GS, and the prosecutors totally botched the case (being a bit of a tin-foil hatter, I believe the Powers That Be might have had a hand in the awful prosecution).

      But GS is above such scrutiny anyway... why would they break the law when they can just make sure the law is changed to benefit them?

      If you're going to prosecute GS, you'd be better off finding a way to prosecute the legislators and regulators who allow GS (and others) to skim the cream off the nation's colle
    • by Hatta (162192)

      Honestly. It's a shame Madoff even got caught. 20 billion is chump change compared to the fraud of the big banks who brought down the economy.

  • by jhfry (829244) on Friday November 13, 2009 @04:59PM (#30091736)

    I always tell my kids that "so-and-so made me do it" is no defense. And I'm sure nearly every parent has taught their children that for generations. I hope these guys roast for not listening to their parents!

    • by geekoid (135745)

      Assuming they knowingly did something illegal.

      Of course, they work with computers, so they will probably get 450 year and have their jury railroaded.

  • crontab (Score:5, Funny)

    by El_Muerte_TDS (592157) <elmuerteNO@SPAMdrunksnipers.com> on Friday November 13, 2009 @05:02PM (#30091762) Homepage

    Apparently Madoff's fraud was too large and too complex to be foisted entirely by hand

    And that's why we have cellscripts and conjobs

  • by cryfreedomlove (929828) on Friday November 13, 2009 @05:06PM (#30091800)
    There are so many great opportunities out there for making a legitimate living programming that it makes me wonder why these guys volunteered to spend the best years of their lives stealing from people.
    • Re: (Score:3, Insightful)

      by khallow (566160)

      There are so many great opportunities out there for making a legitimate living programming that it makes me wonder why these guys volunteered to spend the best years of their lives stealing from people.

      Something like this, they'd have to be paid a lot better than what they could make legitimately.

    • by khallow (566160) on Friday November 13, 2009 @05:14PM (#30091908)
      From the article:

      Madoff told DiPascali to pay the programmers "whatever they wanted in order to keep them happy," the investigators said, and the programmers received pay increases of about 25 percent and net bonuses of about $60,000.

      Pay increase of 25% above what was probably already a good salary and a bonus that alone matches or exceeds what a lot of programmers make in a year.

    • That's the usual reason.

    • by geekoid (135745) <dadinportland@ya ... m minus math_god> on Friday November 13, 2009 @05:22PM (#30092002) Homepage Journal

      You're a computer programmer, in your mid 40s. Finding work is difficult for a programmer after 40, every one around you is becoming stinking rich, law enforcement seems to not pay attention when things go well, you have kids in college, and you boss is pressuring.

      Every day you go in and deal with these people, everyday they lie and cut corners and get rich without any legal issues.

      What they did was wrong, but I can certainly understand why they did it, and I can't say for 100% I wouldn't have done the same thing. I like to think I wouldn't, but still.

    • Some people don't have your morals, and might actually find a high paying job like this desirable: (cnn) [cnn.com] "A new lawsuit alleges that convicted swindler Bernie Madoff financed a cocaine-fueled work environment and a "culture of sexual deviance," "
    • Re: (Score:2, Informative)

      by Anonymous Coward

      What do you mean? So a good software guy makes some low 6-figure salary, Madoff's guys made close to 7-figures, if not more. Even the secretary there made over 200k..

      A good software guy can buy a house in the suburbs, not too far from the office and maybe drive a Lexus. These guys lived in Manhattan and drove $100k+ cars, probably had a couple. You might have a babysitter or day care, they have au pairs. You have some 401k matching up to a few percent, they get maxed out and then they get to inves

      • A good software guy can buy a house in the suburbs, not too far from the office and maybe drive a Lexus. These guys lived in Manhattan and drove $100k+ cars, probably had a couple. .

        Houses in the suburb can be pretty expensive. By me, in a mediocre neighborhood (middle-middle class) you're still talking 500k for a 2-3 bedroom house in the suburbs. Heck, 1 bedroom condos are often 275k.

    • Re: (Score:2, Interesting)

      by NoYob (1630681)
      Not necessarily.

      After the Y2K and the 2001 tech crash, there wasn't as much of a demand for coders, especially with most of the new projects being web based - if you were a C/C++ coder, there were more coders than jobs.* Also, offshoring was picking up steam and then there is the age factor. When you get above 40, folks start wondering why you're still wanting to code or they think you're too old to be doing the 80+ hour week crunch periods or you're not willing (or too smart) to do that - either way, the

  • Well, of course. (Score:5, Informative)

    by Animats (122034) on Friday November 13, 2009 @05:07PM (#30091834) Homepage

    If you've followed the details of the Madoff scandal, it was obvious that it required substantial computer support.

    Each month, Madoff's investors got statements which showed fictitious trades and fictitious profits. The phony trades were for real stocks, with prices which were (almost) real. But the trades were chosen retrospectively, which is like betting on a race after it's run. So superficially reasonable statements came out. This was all generated on an AS-400 that had been in use for this for several decades.

    The software wasn't very good. If they'd been better at it, they could have generated statements which showed trades which exactly matched real trades of others (from the "tape"; trades are public but traders are anonymous), delivered trade confirmations every day, and still shown phony profits just by picking trades randomly distributed around the 75% of each day's trades. That would survive external examination, but not a real audit. Close looks at Madoff statements show trades which could not possibly have occurred; the price is outside the day's trading range. Sloppy.

    • Re: (Score:3, Funny)

      by Anonymous Coward

      If you've followed the details of the Madoff scandal, it was obvious that it required substantial computer support.

      Each month, Madoff's investors got statements which showed fictitious trades and fictitious profits. The phony trades were for real stocks, with prices which were (almost) real. But the trades were chosen retrospectively, which is like betting on a race after it's run. So superficially reasonable statements came out.
      This was all generated on an AS-400 that had been in use for this for several decades.

      The software wasn't very good. If they'd been better at it, they could have generated statements which showed trades which exactly matched real trades of others (from the "tape"; trades are public but traders are anonymous), delivered trade confirmations every day, and still shown phony profits just by picking trades randomly distributed around the 75% of each day's trades. That would survive external examination, but not a real audit. Close looks at Madoff statements show trades which could not possibly have occurred; the price is outside the day's trading range. Sloppy.

      YOUR HIRED!

      your friendly Goldman Sachs recruiter,

      Beelzebub

  • interesting (Score:5, Interesting)

    by Trepidity (597) <delirium-slashdo ... org minus author> on Friday November 13, 2009 @05:09PM (#30091860)

    I went to an engineering school that was founded in the aftermath of WW2, so had a strong ethos of: "scientists and engineers need to understand what we're doing and why, not just implement stuff other people tell us to". I.e., don't assume the people above you are in charge of the "why" and as the scientist/engineer all you need to care about is the "how". Usually it's seen as more of an ethics thing, but interesting to be reminded that on occasion it can be a matter of self-interest, too, since you have a legal responsibility to know what you're doing and why, at least to some minimum degree.

  • by MarkvW (1037596) on Friday November 13, 2009 @05:14PM (#30091926)

    When you are a little fish . . . run to your lawyer, then together make yourselves the very best friends that the FBI ever had.

    • by Animats (122034) on Friday November 13, 2009 @06:29PM (#30092686) Homepage

      When you are a little fish . . . run to your lawyer, then together make yourselves the very best friends that the FBI ever had.

      Yes, run. It is official Justice Department policy that only the first conspirator [justice.gov] to report a criminal conspiracy gets off:. "(the) Division frequently encounters situations where a company approaches the government within days, and in some cases less than one business day, after one of its co-conspirators has secured its position as first in line for amnesty. Of course, only the first company to qualify receives amnesty. "

  • "Nunc Id Vides, Nunc Ne Vides"

    ++?????++ Out of Cheese Error. Redo From Start.

  • So apparently "I was just following the specs" doesn't work any better than "I was just following orders"...

  • by PeterChenoweth (603694) on Friday November 13, 2009 @06:05PM (#30092454)
    It's all about the decimal places.

    I hope they enjoy their stay at Federal Pound-Me-In-The-Ass Prison.
  • by Dogtanian (588974) on Friday November 13, 2009 @06:07PM (#30092474) Homepage
    ...Oh My God! Does this mean Bernie Madoff was a robot?
  • by snspdaarf (1314399) on Friday November 13, 2009 @06:13PM (#30092528)
    Is why you write in bash, and only key it in on the command line.
  • by technobabblingfool (1133901) on Friday November 13, 2009 @07:09PM (#30093044)
    Madoff kept all of his billions of money in a single account at JP Morgan Chase bank. If they are going to bust his programmers, they should bust his bank too. Even for a bank the size of Chase, Madoff just leaving billions of dollars sitting in the account instead of investing it like he claimed to be doing must have gotten their attention one or a hundred times. If the bank looked the other way [time.com] to hang onto a lucrative cash deposit, they are just as guilty as the programmers.

"Just the facts, Ma'am" -- Joe Friday

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