NEW YORK
Two former employees for Bernard Madoff programmed an old IBM computer to generate false records that concealed the crooked financier's massive Ponzi scheme and were given hush money when they threatened to stop lying, federal prosecutors said yesterday.
Madoff gave orders to pay the pair "whatever they wanted to keep them happy," a criminal complaint said.
The complaint relies heavily on inside information provided by Madoff's chief financial officer, Frank DiPascali, who is cooperating after pleading guilty in August.
The computer programmers, Jerome O'Hara of Malverne, N.Y., and George Perez of East Brunswick, N.J., were arrested at dawn yesterday at their homes on charges including conspiracy and falsifying records.
Both were released on $1 million bond after a brief hearing Friday in federal court in Manhattan.
"Without the help of O'Hara and Perez, the Madoff fraud would not have been possible," George S. Canellos, the director of the Securities and Exchange Commission's New York Regional Office, said in a statement.
The SEC brought similar charges against the men on Friday in a parallel civil complaint.
O'Hara and Perez were hired by Madoff's firm in the early 1990s to develop and maintain programs using a computer known as "House 17." The programs allowed Madoff to generate account statements for thousands of clients "that purported to confirm the purchases of securities that, in fact, had not been purchased," the complaint said.
DiPascali has told investigators that in 2001, Madoff become alarmed by news report that his phony returns were too good to be true. Madoff "attempted to prepare for increased scrutiny" by the SEC by having O'Hara and Perez fabricate a second set of books that would throw regulators off the trail, the complaint said.
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