- The Washington Times - Saturday, November 14, 2009

Two former employees of convicted Ponzi schemer Bernard Madoff used their computer skills to help cover up one of the largest investor frauds in history and were given hush money when they threatened to stop cooperating, federal prosecutors said Friday.

Prosecutors say Jerome O’Hara, of Malverne, N.Y., and George Perez, of East Brunswick, N.J., provided the technical support necessary to produce the false documents and trading records that kept Madoff’s fraud undetected for more than 15 years and led to client losses of at least $50 billion.

“Without the help of O’Hara and Perez, the Madoff fraud would not have been possible,” said George S. Canellos, director of the Securities and Exchange Commission’s (SEC) 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 for so many years.”

The FBI arrested Mr. O’Hara and Mr. Perez early Friday at their homes on charges that included conspiracy and falsifying records. Both were released on $1 million bond after a brief hearing in federal court in Manhattan.

The SEC brought similar charges against the men on Friday in a parallel civil complaint.

Attorneys for Mr. O’Hara and Mr. Perez did not return telephone calls seeking comment.

Madoff and his lieutenant, Frank DiPascali Jr., routinely asked Mr. O’Hara and Mr. Perez for their help in creating phony records that combined actual positions and activity from Bernard L. Madoff Investment Securities LLC with fictional investor balances, the SEC complaint says.

Mr. O’Hara and Mr. Perez wrote programs that generated thousands of pages of fake trade blotters, stock records, Depository Trust Corp. reports and other phantom books and records to substantiate nonexistent trades, the SEC says.

The two programmers used an in-house computer known as “House 17” to process investment advisory account data - a computer that they knew was missing a host of functioning programs necessary for actual securities trading and reporting, the agency said.

In 2006, the SEC said, Mr. O’Hara and Mr. Perez “had a crisis of conscience” and tried to cover their tracks by attempting to delete 218 of the 225 special programs from the House 17 computer.

The pair then cashed out hundreds of thousands of dollars each from their personal Madoff investment accounts before telling Madoff they would not take part in the fraud anymore, the SEC says.

Madoff reportedly told DiPascali to offer them as much money as necessary to keep them quiet. Mr. O’Hara and Mr. Perez considered the offer and demanded a salary increase of almost 25 percent and a one-time bonus of more than $60,000 each.

DiPascali eventually convinced them to modify computer programs so that he and other employees could create the necessary reports themselves, the SEC complaint said.

“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,” said Joseph Demarest, head of the FBI’s New York office.

Madoff pleaded guilty in March to operating a Ponzi scheme and was sentenced to 150 years in federal prison. DiPascali also has pleaded guilty to criminal charges related to their fraud.

Mr. O’Hara, 46, and Mr. Perez, 43, face up to 30 years in prison if convicted on all counts.

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