Programmer who worked for Bernard Madoff is arrested by FBI

http://www.nj.com/news/index.ssf/2009/11/fbi_arrests_two_former_compute.html

by wglb • 17 years ago

29 18 17 years ago

jws• 17 years ago

Bernard Madoff's Coconspirators arrested by FBI would have been a better title.

First, it captures that more than one person was arrested. Second, it wasn't programming that was the crime. It was creating the system for concealing the Ponzi scheme and then being paid to lie to the authorities to keep it concealed that earned them the attention of the FBI.

ejames2• 17 years ago

I find myself wondering: How exactly would you go about doing the ethical thing in a situation where you realize your work is such that you're being offered hush money to stay quiet about it?

I don't mean "how" in terms of "how do I know the right thing to do", more a question of what, exactly, is the best way to do the ethical thing without getting burned.

Is it better to take the hush money and pretend to be satisfied, then whistle-blow to the FBI once your corrupt boss thinks you're happy? What kind of evidence would you need in order to convince an FBI agent, in a phone conversation, that you are calling in a real crime and not just a prank? If your law-enforcement contact asks you to wear a wire to work and have a leading conversation with your boss, should you do it? What kind of corporate espionage do you perform to make sure a corrupt business does not shred or cover up evidence?

Maybe I've been seeing too many spy movies recently, but I find myself fascinated by questions like that.

There's lots of hacker literature about what to do when you're an employee in the middle of an unsuccessful company, and some about what to do when you are attempting to catch a cracker or other computer saboteur on your network, but I don't think I've ever seen a story or essay on the subject of what to do when your company is not merely clueless but literally criminal.

csallen• 17 years ago

Quit.

jhancock• 17 years ago

Here's what I've learned about whistle blowing: you have little protections.

I was in a situation about 10 years ago where I wanted to report investor fraud to the SEC. My legal counsel told me I had no protections from being sued. My logic was that a contract (e.g. an employment contract) could not hold me liable for damages caused by reporting a crime. I was told my logic was wrong and that there are few protections. There have been various whistle blower laws for reporting specific crimes. Some of these have been repealed or allowed to lapse.

Flankk• 17 years ago

Honest people do not write software to defraud investors. Despite the story, they had no stroke of conscience convincing them to leave. You would never tell a criminal organization that you're going to expose them unless you're blackmailing them; there would be no benefit. These guys are con artists.

I think an honest, rational person would contact the FBI in private and seek their counsel on how to proceed.

ejames2• 17 years ago

Yeah, my questions don't really apply to the pair in the story; they knew from the beginning that the software was for fraudulent purposes, and simply lost their nerve after a while, then got arrested anyway on charges of conspiracy. Getting cold feet after the crime has been committed does not earn you leniency.

I suppose I'm thinking of it more along the lines of, say, the person in the next cubicle/department over who knows about such software and wonders what to do about it.

Contacting the FBI and asking the professionals what to do is the most obviously correct path. It's just a matter of curiosity that I wonder what they would say, and whether the advice would work.

wglb• 17 years ago

Well, it seems like it might have been moderately difficult to get traction, since the SEC had been alerted several times by informed outsiders and they faded.

Also, you could view Cuckoo's Egg (Cliff Stoll) as a cautionary tale, as he had significant difficulty persuading the FBI that there were foreign spies trying to break in to sensitive sites.

AGorilla• 17 years ago

They (allegedly) programmed a computer to generate false records. It's not like they created a trading model that happened to break an esoteric SEC law, it was probably pretty darn clear to these programmers that they were doing something illegal.

byrneseyeview• 17 years ago

If I were running a Ponzi scheme, and I needed to generate fake results, I might ask developers to create a program that generated a month's worth of random trades (perhaps explaining that this was a way to test the expected commission + slippage of a strategy that covered a given volume and mix of securities). Then I'd run it twenty times and pick the top result. Being in the 95% percentile every month was close to what Madoff did; he never showed extraordinary profits (except to people who were apparently in on it), but did show incredibly consistent returns of ~1% per month.

roc• 17 years ago

I don't think that's entirely clear. I've written my fair share of test data generation code that could have been used to fudge as many statements as you might want. One in particular even let the user enter targets (x% growth), so we'd have 'appropriate' data to demonstrate the charts and projection pieces.

So I'd like to think it's possible that they didn't realize they were complicit in fraud until after they saw it applied.

Taking the hush money kinda seals it though.

jbeda• 17 years ago

Wow -- 60k is enough to keep these guys quiet? They must have known the river of money coming in. That seems really low.

duh2• 17 years ago

Programmers (or software engineers, if you like) almost never ask / negotiate what they're really worth. I don't see how it would be any different in finance.

randombit• 17 years ago

Probably so. However on Wall Street in general (especially in areas investment banking portfolio management, high frequency trading, etc) programmer salaries in the 100-150k range is the norm. Part of that is simply NYC cost of living, of course, but 60k is really seriously low, even for an entry level gig.

tokenadult• 17 years ago

Every report I've read about any employee in Madoff's company suggests that all the employees were people with really weak skill sets. They were grateful to have the jobs they had, and unwilling to quit or to go to the feds because they knew they couldn't get equal or better money anywhere else. The reported backgrounds of most Madoff employees look very sketchy for the amount of responsibility those people supposedly had in the company. And then, initially, everyone was telling investigators that they knew nothing about what was going on, which was plainly inconsistent with the titles some of those employees had in the company structure.

anigbrowl• 17 years ago

Well, they did a 25% raise too, but yeah. If you're gonna do unethical stuff like that to begin with, for heaven's sake bargain properly...get a couple of hundred thou and a ticket to Bali or something.

Madoff sounds too fluffy to behave like a mobster and arrange an 'accident'...WTH, ask for $6 million, or do the right thing and call the SEC. This is America, godammit, we don't have time for this penny-ante stuff. I can't believe they'd risk spending the rest of their lives in prison for such pathetic amounts.

patrickgzill• 17 years ago

I get the feeling these guys were looking up the definition of money laundering in the dictionary.

Programmer who worked for Bernard Madoff is arrested by FBI

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