|
Manhattan U.S. Attorney Charges Two Former Computer Programmers
for Bernard L. Madoff Investment Securities, LLC
with Conspiracy and Falsifying Books and Records
PREET BHARARA, the United States Attorney for the
Southern District of New York, JOSEPH M. DEMAREST, JR., the
Assistant Director-in-Charge of the New York Field Office of the
Federal Bureau of Investigation ("FBI"), ALAN D. LEBOWITZ, the
Deputy Assistant Secretary of the United States Department of
Labor, Employee Benefits Security Administration ("DOL-EBSA"),
and PATRICIA J. HAYNES, the Special Agent-in-Charge of the New
York Field Office of the Internal Revenue Service ("IRS"),
announced that JEROME O'HARA and GEORGE PEREZ—former computer
programmers for Bernard L. Madoff Investment Securities, LLC
("BLMIS")—were arrested this morning at their residences by
agents of the FBI. O'HARA and PEREZ are charged in a criminal
Complaint with conspiracy, falsifying books and records of a
broker-dealer, and falsifying books and records of an investment
adviser.
As alleged in the Complaint unsealed today in Manhattan
federal court, as well as statements made in the course of
relevant court proceedings:
For decades, BERNARD L. MADOFF ran an elaborate Ponzi
scheme through BLMIS, purported to be an investment advisory
business (the "IA business"), that defrauded thousands of clients
of billions of dollars.
O'HARA and PEREZ were employed as computer programmers
at BLMIS beginning in 1990 and 1991, respectively. They
primarily were responsible for developing and maintaining
computer programs that supported the operation of the BLMIS IA
business. Many of those programs were run on an IBM server known
within BLMIS as "House 17."
As a broker-dealer and investment adviser, BLMIS was
required, under the federal securities laws and regulations, to
keep certain books and records in the ordinary course of its
business, including: trade blotters containing an itemized daily
record of details about all of BLMIS's purchases and sales of
securities; documents reflecting each order underlying the
purchases and sales of securities and the times at which the
orders were received and executed; and the name and address of
the beneficial owner of each account held at BLMIS.
Between 2004 and 2008, BLMIS was subject to at least
five reviews by the United States Securities and Exchange
Commission ("SEC") and a European accounting firm which was
conducting a review of BLMIS's operations on behalf of a European
IA client. As part of a concerted effort overseen by MADOFF and
his then employee, FRANK DIPASCALI, JR., to deceive both the SEC
and the European accounting firm, O'HARA and PEREZ developed and
maintained computer programs that generated numerous false and
fraudulent books and records.
For example, O'HARA and PEREZ created special computer
programs that, among other things:
- Created books and records for a small subset of
BLMIS IA clients to help hide the scope and nature
of the IA business;
- Changed the names of account holders to help
explain why the SEC would not find IA client
securities custodied at the Depository Trust
Company ("DTC");
- Altered details about the number of shares,
execution times, and transaction numbers for
trades reported on BLMIS trade blotters, by
employing random algorithms that produced false
and random results;
- Changed the names of the parties from which BLMIS
bought securities and to which BLMIS sold
securities;
- Created false and fraudulent order entry and
execution reports that included fictitious times
at which orders for equities transactions purportedly were placed;
- Generated false and fraudulent commission reports;
- Created fraudulent IA client account statements in
a format different from those sent to clients;
- Produced fraudulent DTC monthly reports and other
fraudulent DTC documents that were used to
deceive representatives of the European accounting
firm about where their client's securities were
custodied;
- Generated fraudulent documents that could be used
to make it appear that the IA business bought and
sold securities on the London Stock Exchange in
Europe; and
- Allowed DIPASCALI and other BLMIS employees to
alter computer programs necessary to create
additional false and fraudulent books and records
to respond to the European accounting firm's
requests for information in 2008.
O'HARA and PEREZ allegedly knew that the special
programs they developed contained fraudulent information and that
they were used in connection with the SEC and European accounting
firm reviews. In April 2006, O'HARA and/or PEREZ attempted to
delete 218 of 225 special programs from House 17 and also closed
their own BLMIS IA accounts, withdrawing hundreds of thousands of
dollars each.
In August or September 2006, O'HARA and PEREZ met with
MADOFF and told him, in substance, that they would no longer lie
for him. Handwritten notes found by the FBI in O'HARA's desk
stated, among other things: "I won't lie any longer. Next time,
I say 'ask Frank.'" After MADOFF directed DIPASCALI to pay
O'HARA and PEREZ whatever they wanted in order to keep them
happy, O'HARA and PEREZ each received pay increases of about 25
percent and net bonuses of approximately $60,000.
O'HARA, 46, of Malverne, New York, and PEREZ, 43, of
East Brunswick, New Jersey, each face a maximum sentence totaling
30 years in prison: five years on Count One (Conspiracy) and a
maximum fine of $250,000 or twice the gross gain or loss from the
offense; 20 years on Count Two (Falsifying Books and Records of a
Broker-Dealer) and a maximum fine of $5 million or twice the
gross gain or loss from the offense; and five years on count
Three (Falsifying Books and Records of an Investment Adviser),
and a maximum fine of $10,000 or twice the gross gain or loss
from the offense.
The defendants will be presented later today before
United States Magistrate Judge RONALD L. ELLIS in Manhattan
federal court.
United States Attorney BHARARA said: "Jerome O'Hara
and George Perez allegedly helped construct Bernie Madoff's house
of cards. The computer codes and random algorithms they
allegedly designed served to deceive investors and regulators and
concealed Madoff's crimes. Today they have been charged for
their roles in Madoff's epic fraud, and the investigation remains
ongoing."
FBI Assistant Director-in-Charge DEMAREST stated:
"O'Hara and Perez are charged with being instrumental in
facilitating the Ponzi scheme that was the Bernard Madoff
investment advisory business. Their subterfuge was designed to
conceal the fraud from regulators and others, and when they told
Madoff they would no longer lie for him, their continued
complicity was bought for a price."
Mr. BHARARA praised the work of the FBI in this case,
as well as DOL-EBSA and the IRS for their roles in the ongoing
investigation. He also thanked the SEC for its assistance.
Assistant United States Attorneys MARC LITT, LISA A.
BARONI, WILLIAM J. STELLMACH, BARBARA A. WARD and SHARON FRASE
are in charge of the prosecution.
The charges and allegations contained in the Complaint
are merely accusations and the defendants are presumed innocent
unless and until proven guilty.
Press Releases | New York Home
|
