Madoff's Programmers Indicted

jason8 writes with news that two programmers who worked at Bernie Madoff's investment firm have now been indicted on charges of 'conspiracy, falsifying records of a broker-dealer and falsifying records of an investment adviser,' for their role in hiding the firm's activities (PDF) from the SEC and external accountants. Quoting Reuters: "O'Hara and Perez, employed at the firm from 1990 and 1991, respectively, were primarily responsible for developing and maintaining computer programs in the investment advisory unit at the center of the fraud. Many of the programs were run on an IBM server known as 'House 17,' according to court documents. Prosecutors said the men took hush money to help keep the fraud going and designed codes to make up fake trade blotters and phantom records. US prosecutors said the two men worked under the supervision of Madoff and his top aide, Frank DiPascali, to deceive the US Securities and Exchange Commission and a European accounting firm. DiPascali is cooperating with prosecutors, who said his information led to the arrests of the programmers and the now defunct firm's outside accountant."

Comments

Re:No details

[Danimoth]

Generally, trade reports are generated from you know, trades. Typically, for the reason of the article, these systems don't allow the users to generate reports even for testing purposes. Rather, they would submit a trade in a test stock such as ZVZZT or ZXZZT. These would generate a trade, which would show on the reports, but not have any clearing associated with them. While it is possible to "dummy" in trade reports, even a rudimentary glance at the corresponding blotter would throw up red flags as there would be no clearing associated with the trades, and they would have no presence on the tape. I know the auditors were crooked, but this is an aspect of the scam that the SEC should have been all over. A system which would make it appear as if there was clearing (at least on the paper that Madoff was generating) without that clearing actually being there is something that should shout "FRAUD" to anyone involved in the project.