Bernie Madoff: how low tech helped him get away with his Ponzi Scheme
My 4,200 word investigative package about how Bernie Madoff fooled his customers for decades hit the street last week in Securities Industry News (SIN). Primary sources for the 3,000 word main bar include two IT managers who worked for Bernard L. Madoff Investment Services and myriad untapped legal documents in the ongoing Madoff case.
My conclusion is that Madoff and his right-hand man Frank DiPascali Jr. used an isolated and aging IBM AS/400 installed around 1993 to generate phony customer statements, trade confirmations and IRS 1099 dividend forms. Clients didn’t have a clue he was taking their money and putting it into his personal piggy instead of buying stocks, treasuries and options as he was telling them.
I also did two sidebars: one about a victim’s attempt to get some restitution and about the field of data forensics which was instrumental in figuring out how the AS/400 functioned a printing press. One irony is that the expert I spoke with had the same name as me. The actual data forensics investigator for Madoff’s AS/400, Joseph Looby, would not speak to me given the ongoing investigation. The three arrested in the giant Ponzi scheme – Madoff, DiPascali and accountant David Friehling – have pled guilty, but it’s likely more will be charged.
Let me know your thoughts on my work. It is certainly one of the bigger packages I have done in recent memory. The story got picked up by the Huffington Post, ProPublica.org, Dodgeretort.com and CIO.com as well as other Sourcemedia publications (SIN is one of several Sourcemedia pubs about the financial industry).
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