(Bloomberg) — Bernard Madoffs former computer programmers sought to confuse and delay fraud investigators in the months after the con mans 2008 arrest for running a $17 billion Ponzi scheme, prosecutors said.
Jerome OHara and George Perez, on trial for creating millions of fake documents to fool investors, allegedly told a colleague in early 2009 to hinder a probe by Irving Picard, the trustee unwinding Madoffs fraud, according to a Jan. 28 filing in federal court in New York.
Haresh Hemrajani, a formerMadoffemployee who is scheduled to testify as a government witness as soon as this week, said OHara told him to drag things out and not give the trustee everything they were asking for in a timely fashion, according to the filing.
The trial is the first in the U.S. stemming from the worlds biggest Ponzi scheme, which collapsed after Madoffs confession and arrest in December 2008. OHara, Perez and three other ex-employees went on trial in October over accusations they got rich aiding the fraud for decades.
The focus of recent testimony has been on OHara and Perez, who are accused of creating computer code that tricked customers and regulators. The men have said they were following orders and didnt know how their programs were used. They and the other defendants deny wrongdoing.
In the Jan. 28 court filing, lawyers for OHara and Perez asked U.S. District Judge Laura Taylor Swain, who is overseeing the trial, to block Hemrajanis proposed testimony, saying prosecutors alerted them too late. The U.S. told the lawyers about the details Jan. 28, they said. The lawyers filing summarized the governments new allegations.
In an anotherMadoff-relateddevelopment, a group of the con mans victims who managed to withdraw more money from his firm than they invested asked to be excluded from JPMorgan Chase & Co.s $543 million settlement of claims stemming from the fraud.
A group of 193 investors said in a Jan. 28 filing in U.S. Bankruptcy Court in New York that the accord between JPMorgan and Picard doesnt cover net winners. They asked for permission to not be part of the settlement.
The groups lawyer, Helen Davis Chaitman of Becker & Poliakoff LLP in New York, said she intends to file a new lawsuit on behalf of these and other victims who say they were harmed inMadoff$17 billion Ponzi scheme, even though they didnt lose their principal.
The alleged conversations with Hemrajani at issue in the trial took place a few months after Madoffs arrest, and before the programmers were charged, according to the Jan. 28 filing. Earlier witnesses have also testified about the mens behavior during that time.
After Madoffs arrest, while OHara was on sick leave, Perez allegedly told Hemrajani he shouldnt fulfill Picards technical requests because he wasnt familiar with the computer system, according to the filing. Perez also asked Hemrajani for details about what hed told the trustees investigators.
When OHara returned from leave, he allegedly told Hemrajani not to be too helpful with Picard, and to not explain the computer systems and code in common English, according to the filing.
OHara became angry when Hemrajani refused to tell him about a conversation with an agent from the Federal Bureau of Investigation in a glass-walled conference room in Madoffs offices, according to the filing. Hemrajani told prosecutors that OHara walked by while he was working with the agent on a computer program that later became evidence in the case.
Later, OHara asked Mr. Hemrajani what the FBI was asking about, according to the filing. When Mr. Hemrajani refused to tell Mr. OHara, Mr. OHara pressed for more information, and ultimately expressed his anger and walked away.
Richard Dietrich, a senior technician at International Business Machines Corp., testified Jan. 28 that OHara and Perez created a web of simple equations to make thousands of fake transaction numbers, dates and time stamps appear realistic on documents used to trick auditors. Dietrich, an expert witness for the U.S., analyzed computers seized from Madoffs Manhattan office.
The other defendants are Annette Bongiorno, an employee for 40 years who ran the investment advisory unit where the fraud occurred; Joann Crupi, who managed large accounts; and Daniel Bonventre, who oversaw the broker-dealer and proprietary trading operations where real trading took place.
Madoff, 75, pleaded guilty to fraud in 2009 and is serving a 150-year sentence at a federal prison in North Carolina. Seven of his employees also pleaded guilty to associated crimes.
The criminal case is U.S. v. OHara, 10-cr-00228, U.S. District Court, Southern District of New York (Manhattan).
The liquidation case is Securities Investor Protection Corp. v. Bernard L.MadoffInvestment Securities LLC, 08- bk-01789, U.S. Bankruptcy Court, Southern District of New York (Manhattan).