The Securities and Exchange Commission has charged two computer programmers for helping convicted Ponzi schemer Bernard L. Madoff cover up fraud at his investment advisory firm for more than 15 years.

The SEC alleges that Jerome O'Hara of Malverne, N.Y., and George Perez of East Brunswick, N.J., provided the technical support necessary to produce false documents and trading records, and took hush money to help keep the scheme going.

“Without the help of O'Hara and Perez, the Madoff fraud would not have been possible,” said George S. Canellos, director of the SEC’s New York Regional Office, in a statement. “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.”

According to the SEC’s complaint, Madoff and his lieutenant Frank DiPascali, Jr., routinely asked O'Hara and Perez for help in creating records that, among other things, combined actual positions and activity from market-making and proprietary trading businesses with the fictional balances maintained in investor accounts. O’Hara and Perez wrote programs that generated many thousands of pages of fake trade blotters, stock records, Depository Trust Corporation reports and other phantom books and records to substantiate the firm’s nonexistent trades. They assigned file names to many of these programs that began with the letters “SPCL,” short for "special."

A separate computer internally known as “House 17” was used to process the firm’s investment advisory account data at the direction of Madoff, DiPascali and others. The SEC alleges that O’Hara and Perez knew that the House 17 computer, apparently named after the 17th floor offices where much of the illegal activity took place, was missing a host of functioning programs necessary for actual securities trading and reporting. According to the SEC’s complaint, they recognized that the trades being entered into House 17 and the account statements and trade confirmations being sent to investors did not reflect actual trades.

The SEC alleges that O'Hara and Perez had a crisis of conscience in 2006 and tried to cover their tracks by attempting to delete approximately 218 of the 225 special programs from the House 17 computer. But they did not delete the monthly backup tapes. O’Hara and Perez then cashed out hundreds of thousands of dollars each from their personal Bernard L. Madoff Investment Securities accounts before confronting Madoff and refusing to generate any more fabricated books and records.

According to O’Hara’s handwritten notes from the encounter, one of them told Madoff, “I won’t lie any longer. Next time, I say ‘Ask Frank,’” meaning that Madoff should rely on DiPascali alone to create the false data and reports.

The SEC’s complaint alleges that Madoff responded by telling DiPascali to offer O'Hara and Perez as much money as necessary to keep quiet and not expose the misrepresentations. O’Hara and Perez considered the offer and demanded a salary increase of nearly 25 percent along with one-time bonuses in late 2006 of more than $60,000 each.

They stated to DiPascali at the time that they did not ask for more because a greater amount might appear too suspicious. DiPascali then managed to convince O'Hara and Perez to modify computer programs so that he and other 17th floor employees could create the necessary reports themselves.

This is the SEC's latest enforcement action concerning the Madoff fraud since the scheme collapsed last December. The Commission previously charged Madoff and his investment firm, DiPascali, and auditors David G. Friehling and Friehling & Horowitz CPAs, P.C. The SEC also charged certain feeder funds and solicitors with committing securities fraud through a Ponzi scheme perpetrated on advisory and brokerage customers of BMIS. Madoff, DiPascali and Friehling have all pleaded guilty to criminal charges related to their conduct.

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