One of the unanswered questions surrounding the Bernie Madoff Ponzi scheme was how did Madoff fool so many people for so long? Well, in addition to a lot of charm, charisma and leveraging his good reputation in the industry, Madoff also had help from a couple of programmers who allegedly falsified records to fool SEC inspectors. In fact, it’s playing out just like a Hollywood movie script. The face of the operation (Madoff) supposedly had help from a couple behind the scenes programmers who helped make the entire fraud possible. Slaving away in a back room somewhere on the 17th floor of the Lipstick building (the home of the Madoff firm at 53rd Street and 3rd Avenue), the duo created a false paper trail that helped fool regulators and calm investors. I wonder if they had pocket protectors, short sleeve dress shirts and wore big glasses? They probably didn’t, but I’m sure the movie director will have them wearing the stereotypical computer nerd attire when the blockbuster Hollywood film is made.

Without the falsified trade confirmations, client account statements and other documentation, the SEC would have shut down the scheme years ago. Well, maybe they would have shut it down. There were plenty of other warnings about the Madoff fraud, and the SEC missed all of them, so I don’t want to give the commission too much credit. Anyway, according to this Wall Street Journal article, “Jerome O'Hara and George Perez, who began working as computer programmers at Bernard L. Madoff Investment Securities LLC in the early 1990s, were charged with conspiracy, falsifying books and records of a broker-dealer and falsifying the books and records of an investment advisory.” Read the WSJ article for all of the details ( subscription required).