the madoff affair

Nader Ibrahim


Ibrahim worked in technical support for Bernard L. Madoff Investment Securities from 2000 to 2003. His department was in charge of maintaining the computers on the company's three floors. This is the edited transcript of an interview conducted on Feb. 1, 2009.

Let's just begin with you telling us when you worked for Madoff's operation, what you did there. What was your role?

I worked at Bernard Madoff Investment Securities from [2000] to 2003. My position was technical support. I had access to all three floors of the building: 19th, the 18th, the 17th. But my location was on the 19th, where the trading floor was located.

If the traders had any issues, such as their mouse wasn't working or that they needed help opening [their programs] ... and just maintaining the floor, doing upgrades -- ...

What was the facility? How many people were staffing it? What were their responsibilities?

Just to give you a feel of the structure of the organization that was on the 18th floor [where the systems operations offices were], there were two managers. At the time that I was working there, Liz Weintraub was the head of systems. …

The person who was second in command dealt with more the facilities part of running the systems area where we would maintain the servers, maintain the computers on the floor, computers in London. The … ones who were under Liz were the programmers. Those were the people creating new software for the firm. Sometimes they had roles where they were doing mock training and stuff like that for the firm. ...

How many computer systems were there? ...

They had about 30 servers in that server room. Now, also, they had servers at their Queens office, which was an emergency site where they can basically copy their whole network over … so they would have a backup of the whole system. ... If something were to happen in New York, they can go directly to Queens and be in full operation.

They had a mirror operation?


That was updated on a daily basis?

Yes. Every night it was updated. There was a T3 [high-speed Internet connection] line that ran from [Manhattan] to Queens. ...

Tell me what it was like working with the Madoffs. ...

Well, we'd have to split [it] into two parts. There's the Madoff brothers [Andrew and Mark], the two heads of the firm. Bernie, when I first started at the company, was more involved in the operations of the trading floor and everything like that through the sons. But as I was leaving there, he became more of like a figurehead type.

During the time that you were working there, he showed up less and less?

Right. Bernie obviously had the freedom to do whatever he wanted. If he wanted to go on vacation or he wanted to do different conferences or anything like that outside of the office, he was free to do that. The sons were really running the show. …

“Everybody in the firm was really trying to figure out: What was going on? What was he doing? Where were these trades being made?”

There's a podium area on the trading floor where the two boys [Andrew and Mark] sit. But they also have their own separate offices on the 19th floor. ... When Bernie was there, he was sitting casually with them, you know, having discussions with them on that podium. ...

And what was it like? What was Bernie like? What was he like as a boss? How would you have described him to your friends?

There were many sides of Bernie. He was very reserved most of the time -- if he didn't need to talk to you, he wouldn't talk to you. If you had to deal with him, basically he says something, and it's done. It's no questions, no back and forth. It's just, he needs something, you get it done right away.

And if you didn't?

Well, if you didn't, you wouldn't hear from him directly; he would go and talk to your supervisor, ... [and] you'd hear it later. ...

Now, when you say that, I get an idea of a guy who's a bit tough.

He's tough. ... He obviously wanted his office the way he wanted it: no clutter on the desks; everything in black; the blinds can't get messed up. ...

What's the deal with black? Why everything in black?

I believe that it was because of Bernie's issue with cleanliness. ... Black shows a lot of ... dust, or marks, or anything like that. ...

He was a neat freak?

Yeah, basically.

How did that show itself in the office?

All he had to do was tell the managers on the floor,"This is the way I want things done," and the managers would convey that to us: "Bernie doesn't want the blinds messed up, ... so go around, make sure that the blinds are OK. ... Don't leave clutter on your desk." ...

These were all well-known throughout the office. And Bernie would come around every once in a while and check and make sure that everybody was following everything. ...

There was a strict dress code?

Yeah. You had to come in a tie, shirt, pants. He made sure that we did have casual Fridays at the time. But basically, it was what I [would] expect at other businesses that I've worked at.

Was it a difficult place to work?

No. I mean, don't get me wrong, the conversations that I make about Bernie, it's not like I'd come into the door fearful that Bernie was going to check everything that was going on and not being happy to come into work that day. ...

He had two sides. He had his ... stern demeanor, and then he also would make jokes around the office. ... He had a leather couch in his office, and ... he'd make comments about ... his leather couch to female workers at the office. I mean, just stupid jokes. It would have to be somebody he was comfortable with, that he knew for a long time. ... He did it with a little bit more class. I don't remember the exact wording.

He was a flirt.

Yeah, he was definitely a sweet-talker. ...

How many people [worked on the] 19th floor, ... which was the main trading floor? ...

I'd say about 80 people on that floor alone. ...

[Was there] pretty good morale?

Yeah, pretty good morale. People were happy there. And you weren't worried about losing your job. … The only way that you would get fired is if you did something incredibly wrong. ... They did have layoffs in the systems department, but ... not as much as the trading floor. The trading floor was usually hit the most. ...

So depending on how the market was, the trading floor would expand or contract?

Right. But there were individuals who had been working there for years who usually never saw the ax or anything like that. ...

There was a recession in 2000 to 2003; I was working there. And what was funny about the whole thing is that a lot of other companies were, if you saw the amount of layoffs that they had because of the market, it didn't quite equate to what the Madoffs were doing. And it brought about a lot of questions about, where was Bernie bringing this money in? ... How could he keep all these employees at the firm? And nobody knew until now, until this situation. ...

So what was the talk around the office as to what was keeping the company going?

It was well known that Bernie was making his money through the options arm of the firm, through Frank [DiPascali]. So a lot of those were the questions that were being asked: "What is Frank doing down there?"

Down on the 17th floor?

Yeah. ...

You also had access to the 17th floor?


Was that unusual, to have access?

No, our responsibilities were to maintain the computers anywhere on all three floors. There were two gentlemen, [Jerry O'Hara and George Perez], who worked with the mainframe that was down there. But we worked in conjunction with them. ... We'd set up the terminal that connects to that mainframe.

That mainframe being the AS/400. ...

Right. But with regard to anything with regard to that system, those two programmers were focused on that. ...

Why was that a different system?

It's an older system. A lot of banks use the mainframe system because it's more secure. It's [got] very old programming; it's hard to hack. ... It's just basic financial stuff that they can run off of it.

What did you understand that system to be doing as apart from the other computers?

... There's a lot more to it which I don't know about. But the only thing I've seen from it was basically printing out statements. And then there was another group on the 17th floor who would print out reports through it.

So statements for investing clients?


It was the AS/400 IBM system that was printing out those statements?


What understanding did you have of what was going on with that system?

Like I said, I'm limited with the overall capabilities of that system. All I knew [was] that there was financial information going through that system.

Was it more tightly held in terms of access?

Only the 17th-floor employees had access to that system, other than people who are on the 18th floor who really had access to anything.

The systems people?

Right. Well, mostly the administrators, to make sure that that there's good connection into the server or anything like that. But Jerry and George were basically handling, like, password entry, any programming, ... and also architecting the manner of how that system works. ...

But the guys on the 19th floor that were doing trading, did they have access to the AS/400?

No, not at all. They had their own trading system. ...

And what kind of guy was Frank?

Me and Frank would talk a lot. He was from New Jersey. We'd talk about the Jersey Shore, about fishing, about real estate. ... A down-to-earth guy, really nice guy. ... When you came down there for his computer, he wasn't tense like a lot of the other employees were in the firm. ... He was very casual. ...

What was Frank's role at the firm?

Well, see, that's the thing with a lot of the positions in the firm. ... Everybody's role was really flexible. Like, mine was technical support, but if they needed anything in systems, they needed help with setting up a server, I was always learning new things. So what I observed, he was director of that group on the 17th floor.

Frank was the director of the 17th floor?

Right. If you think in those terms, he was only really managing his group, the four or five people who were sitting close to him, and then maybe Jerry and George. Actually, no, they're more with systems. ...

But they were under him in terms of his support staff?


I mean, they were supporting his computer, the AS/400?

The mainframe system. ... [Annette] Bongiorno, she ran the area where they were pulling reports from the system.

So they were stuffing the envelopes, sending out the mailings and getting people their statements?

Yeah, I believe she was in charge of that, but she really focused on her group of three or four people. And she would always call us down, because at the end of the quarter, ... she would have to create these reports for Bernie. And she would call us on the phone: "I need these reports." She was a very tense person. Seemed like there was a lot of pressure being put on her. ...

But they were also sending out monthly statements and sending out confirmations?

I believe so. I don't believe that the end of the month was as bad as the end of the quarter. ... Although I had never seen her and Frank interact, you know that she was reporting to Frank. ...

She was difficult?

Very difficult.


Well, the system took time in order to fix an issue. I mean, things happen with computers. ... Time was a big issue for her. It needed to be done. Bernie had deadlines for her to get these things done. And she was angry. She was very angry. A lot of people in the firm were upset about that with regard to her. ...

And so you had to go into the system. So you saw what was in there.

Well, not the AS/400 system.

She wasn't working on the AS/400?

Well, obviously she was, but you've got to remember, the way the AS/400 works is it's not like it's a computer with a monitor and keyboard that you go into. Everybody in the office had their own office PCs with Windows and Microsoft Office and everything like that.

And a local hard drive.

Right. And then there's a terminal -- it's almost like a program that you install, that you type in the IP address of the server, and then you connect into the mainframe, and it ... almost looks like the old Atari graphics, you know?

You went in there to find stuff?

No, no, no.

You never went in there?

No. ... There's no reason for somebody like me who doesn't really know the files that are on the mainframe because there's no files on her local computer. All the files are on the mainframe. The only thing that's on her computer that's local is the fact that if she ... is pulling this information into an Excel spreadsheet. ... Anything that's internal within that system, that's Jerry and George.

So you had no visibility inside the AS/400?


But you did see what she was pulling out of it and printing through her system?

Well, I mean, if you're talking about Excel and stuff like that, then I guess I had seen that stuff, but I couldn't see --

So you would see the statements that were being printed there? You had some visibility of what was going on there?

I've seen the printers that they were using to print the systems. I don't think she was printing them directly. She had staff over there who were doing it. But she never had anything on her direct computer where you, you know, "Here's so-and-so's statement."

But you knew during this time that this was where a lot of the income for the firm was coming from. Talk to me a little bit about what the importance was of that 17th-floor operation versus the 19th floor.

It's funny that you asked that, because compared to a lot of the other systems within the firm, you'd think that there would be more security on that floor, especially with ... what they were doing. I guess the real security comes just from the fact that they're using a mainframe system that -- it's really outdated, unless you're familiar with that old type of programming. ...

There was ... an automated trading system that was on the 19th floor, … and that system had probably the most security in the whole firm. ... If somebody were to network into one of [those] computers, you were fired. Directly, right away, you were fired. ... So you'd think that they would have those same issues with the 17th floor if something like that was running, but it wasn't like that.

You say that during the period you were there, there were some troubles in the market, and there was some sense [that] the 17th floor was operating on sort of a different business. So what was your understanding at the time of what Frank was into, and how important was he to the health of the firm?

... I think what is misunderstood is the fact that the 17th floor, it wasn't necessarily the system that he was using there that was so important. ... The feeling I got from a lot of the traders in casual conversation, it was more the strategies that he was using down there which nobody knew about. ... That's what everybody in the firm was really trying to figure out: What was going on? What was he doing? You know, where were these trades being made? ...

Some of the people did ask, if he's putting so much money into the market, why aren't they seeing any of these fluctuations in volume? ...

In other words, on the 19th floor, they were saying: "They're making a lot of money down there, we're told. ... But we're not seeing the trades come through here."


And the word was that Madoff was telling his investors that he wasn't charging them 1 percent of assets or 20 percent of profits, but he was charging them per trade -- in other words, a commission. But you're saying those trades weren't showing up on the 19th floor.

Right. ... If ... the traders knew [what was] actually happening, they would have some kind of evidence; there would be something going on that would move the market. ...

They would see the trades going through.


They weren't seeing that?

They weren't seeing that.

How did they know how much money was being made down there? You say there were estimates.

Well, nobody knew for sure -- that's the thing -- but they knew it was a large amount of money, because obviously ... people had been there for years, you know? ... It's one thing if you hear something and then, you know, you turn a blind eye to it and never hear about it again. But after ... you start hearing the same things over and over again, you start to differentiate what's normal office gossip to what's valid statements.

And what were they hearing over and over again?

Some people were hearing that Bernie was making large amounts of money through this advisory arm. They didn't know how it was done. All they knew [was] that it had to do with an options strategy that Frank was taking care of.

And a lot of people were questioning the fact that, how could one person bring in all this money? How is one person in charge of such a large account for the firm? And people didn't know how much, like I said, [but] people were estimating his net worth at $8 billion, so --

Bernie Madoff's net worth?

Yeah. So when people were pulling out numbers like that, where were these numbers coming from? Where was this money coming from? ...

Didn't anyone ever ask Frank what he was doing?

Well, it wasn't really an environment at the company where you can just openly ask questions and not have to deal with the repercussions of somebody saying: "Well, why is this person asking questions about this? What does he know?"

I've actually heard Bernie say that himself. Somebody will decide that they want to leave the company, and then he'll say, "Well, what does he know?" ...

You mean people would ask questions around the office, and the word would get out, and they would be criticized?

Well, it was very rare, since I was there, that anybody would ask questions about something in the firm.

You just didn't do that?

You just didn't do it.

Why not?

... There were outspoken people in the firm who couldn't care less. They'd been with the Madoffs for a long time. ... It was a mix between people who were with the firm for a long time and didn't find some of the questions important enough to ask. ... This is the way Bernie was running his office; I'm trying to make my money doing what I'm doing; why am I going [to] cause any troubles for myself? ... And then there was that fear that if you really did say something, that why are you meddling in their business? Aren't you happy enough that you have a job that you're not worried about being fired because you made a mistake in the markets? A lot of the traders, their accounts would fluctuate, and they were still there.

In 2001, Barron's has an article. You were there at the time. What happened?

All I remember from that was the fact that Andrew and Mark, ... usually they have conversations with all the traders on the floor, and they were talking about the validity of the sources and ... trying to make sure that the Madoff family's position was known with everybody.

But this article comes out and causes a stir in the office?

Yeah ... People were having side conversations about it. ... [But] I think the Madoff family at the time was more concerned with it than the people who were on the trading floor.

But it raised some suspicion. ... The article pretty much was laying out that this thing didn't make sense.

Right. Well, these employees have been asking these questions for God knows how long, depending on who you ask. ... I mean, for me personally, you almost get that sense that if he is doing something legitimate, they just want to know how he's doing it. They want to know what's his secret, you know? And that's a real dangerous territory to be in. ... Now, in hindsight, you look at it and you say, well, maybe you should have asked some more questions. ... But at the time, he was supposedly a very respected person on Wall Street. ...

[People never suspected] that it wasn't legitimate?


You never heard anybody on the 19th floor or on the 18th floor among your colleagues in the IT department say, "I'm just not sure what he's up to"?

It was a big shock. ... It's like almost when you get that final piece to a puzzle, and everything comes together. ... Once that came out, all the things that they'd been seeing for all these years finally came together, and it's like: "OK, now I know that this wasn't legitimate. Now I know why he was doing this or he was doing that." But it wasn't the sense that, oh, you know he must be doing something wrong. ...

Did you know anything about this split-strike conversion strategy at the time that you were working there?

Only through what I've heard among the traders, ... that they had [been] wondering how that worked.

Did you encounter skepticism on their part at the time about that strategy really producing a lot of profits?

Yes, there was skepticism, only in the fact that they didn't understand the details of that strategy -- not the fact that they didn't [understand] a split-strike strategy, just, what was Bernie doing different than everybody else?

Was it your sense that Bernie was heavily involved in Frank's operation?

I had never seen Bernie down there. ...

Did you see Frank up in Bernie's office?

I've never seen Frank upstairs, but ... I've talked to people in the firm, and they've said they've seen Frank upstairs. ...

How involved is Bernie in that operation down there? You don't see him down there, but obviously that's a core part of that business.

Well, you almost have to ask how involved was Bernie with any part of the firm, because if you really think about it, from what a lot of the employees just see, they see Bernie coming into the office, going to that little podium area that they have on the trading floor, sitting down with their sons having conversations, going into the conference room, having the two managers come in, having conversations. But I've never seen him downstairs, never seen him have conversations with Frank. So who knows what Bernie's involvement was?

Did Bernie talk to employees? Did he give a sense of how much he understood what was going on in the market?

It was very, very rare that you would see Bernie having a conversation with the traders. It was usually to piggyback on what Mark or Andy was talking about. ...

So Mark and Andy were running the floor?


And was the sense that this was a successful operation, the Madoff operation? ...

... From my understanding, any business who's still running, especially after a recession, or it's been in business as long as Bernie has, they must be doing something right. ...

The feeling was that he was one of the largest market makers in the business, so if you were involved in that business, you knew Bernie Madoff.

Did you ever seen Mark or Andy on the 17th floor?

No. Never saw any of the members of the Madoff family on the 17th floor. ...

Did you ever see Ruth Madoff, [Bernie's wife,] around the office?

She only came in, like, once a month, and it was very rare that I would have any interaction with her. ... Her office was located next to Shana [Madoff, Bernie's niece and the company's compliance lawyer,] on the 18th floor. So she would come in, ... and usually she was out midday. She wasn't there very long. ...

Did the SEC [Securities and Exchange Commission] ever come to visit?

I've never seen any SEC members there. ...

What do you make of these ideas that one guy can claim that he was running this Ponzi scheme all by himself?

That's a question that's been posed to me before, and I definitely believe, with the amount of knowledge that Bernie had with regard to just the technical aspects of how his operation worked, I couldn't imagine that one individual could completely be in charge. ... First of all, he would need a system that would be able to --

Execute all those trades.


Or put out false statements.


And it would take a guy that understood a lot more about computers.

Right. Absolutely.

And he didn't?

No. Not at all. ... He had a program, Thomson Financial, [that] had streaming quotes on it. It's a very format-based program, so if you double-click on the mouse, a little window will pop up and cover all your streaming quotes. ...

He would lose the window on his screen, ... [and he] couldn't find it?

Exactly. Or he had to have all the windows perfectly aligned so that when he opened his computer, it would look exactly the same every day.

And one window wouldn't cover another?


If that happened, then he needed help?


So his basic computing, ... he didn't know how to do it?


And so in your mind, the idea that this guy could have single-handedly run a huge fraud is beyond your imagination?


So what sense can you make of what was going on there?

These are questions that I've discussed with others about how much did everybody know. ... I couldn't see how the Madoff family wouldn't know about one arm of the ... operation. ...

Even if Peter [Madoff, Bernie's brother,] or the two sons, Andy and Mark, weren't down there, you think they had to know about what was going on?

It would make common sense, you know, just being there and seeing how they ran their business. And the fact that a lot of people are questioning what Frank really knew -- I mean, if this guy was taking phone calls from clients and having to deal with concerns from different people, wouldn't those questions have been asked by him before anybody else?

So you saw Frank taking calls from clients?

I haven't personally. This is information that I've gotten. ...

Was Frank very sharp about the computer? ... He knew much more about computers than Bernie?

... He knew how to run his own computer, but ... he needed our help for a lot of the things. He was a little bit more advanced, but it's not like he could set up a system on his own or anything like that. ...

In those computers, would you see client lists? Would you see statements?

We really dealt with just the files that were on the computer.

What kind of files were on those computers?

That's the key, because an Excel file could be anything. Could be a statement, could be a breakdown, could be a report, you know?

But sometimes they were open on the desktop.

No, they usually were pretty good. Everybody in the firm was pretty good that once we came along, you were to close everything. ... We weren't sitting there and reading their information; we were just trying to help them with their problem. ...

Walk me down the hall, into Frank's office. Describe as well as you can what you would see. ...

The 17th floor, you walk out of the elevators. It's recessed back a little bit. And to the back of the floor, there's a black wall. Has card-key access. You walk inside. Now, when you go inside, it's just a square hallway that goes around.

In the center there's this room with a card key, where the AS/400 mainframe system was located. Once you walk in through the door, immediately on your left, there was Frank's offices. ... In order to get into that office, you had to walk a little into the hallway. And then there was a doorway on the left, with the window in the front to see what the traders were doing, but not [in] Frank's office. Frank had black on that side, a black wall. ...

What was in Frank's office?

Frank had his desk with a two-screen PC on his desk where he did the majority of the work. There was another PC that was located in the corner of that office, and a lot of people didn't know what the purpose of that PC was. A lot of the system administrators were asking that question to each other. ...

So there's a computer in the corner of Frank's office that's still a mystery to you?


You never had to do any work on it.


It was on?


What was on the screen?

Just the AS/400 terminal. That's the only thing I can see on it.

So the computer on Frank's desk and the one in the corner ... were connected to the AS/400?


Were the computers ... connected to the trading floor on the 19th floor?

They had what we called MIST terminals, ... but they never seemed to use them.

So they weren't using the system on the 19th floor.


So if Frank is in charge, he's the chief financial officer. And he's in charge of Bernie Madoff's advisory service --


Or he's running it. He's taking calls from clients. And the way they generated income was, according to what Bernie was claiming, was to take commissions on trades on the 19th floor.


From what you could see, ... there was no trading coming from the 17th to the 19th.

Right. ...

You're a computer guy; you're smart about what's going on with these systems. ... If you had access, where would you look? Where would you go? ...

To understand better what Frank did, I would definitely stop at that AS/400 system. ... But you have to understand something. ... Most people who work with Windows PCs are [knowledgable] about Windows PCs. But when you're dealing with something that is almost antiquated, so antiquated that only a few people knew about [it] during that time, people who were in the industry -- ...

Who in the office do you think understood that system best?

Jerry O'Hara. And George Perez.

They were in charge of that system. And they were there up until the end.


And they worked closely with Frank.

Right. ...

Now that you're reading about this in the news every day, the questions that are being raised about what went on on the 17th floor, is there anything that comes back? Anything that comes to mind? ...

You've got to remember, it's been six years now since I've been in there, so ... a lot of the conversations really come through other employees who were still there and who I talked to.

What are they telling you?

What were the functions of certain members of not only the 17th, but the 19th and 18th? ... A lot of people are just questioning the functionality of that AS/400 system and were really questioning how the operation worked.

Questioning the functionality of the AS/400 system? What do you mean by that?

They want to know, what else did it do other than print statements and print out reports? ... Can you put bank account information in there? Was it connected outside of the office? ... How was the security set up for it, because once you connected into it, it had its own passwords and everything. But was it just a basic one-password thing, or did they have security for different parts of it? Were different people given different access?

Those are all good questions. Do you have any answers?

No, because the only people who would know that were the programmers or the heads of systems. ...

You think there was some suspicion, but it wasn't like that there was something illegal. It was just sort of a mystery?

Right, because you have to remember that a lot of these people thought they were working for a respectable firm and that this guy was well admired among people in the industry. I mean, you don't go and work for a small firm like this, especially with some of the people who had the credentials that they did, because you think that something's amiss. ...

posted may 12, 2009

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