Breaking Down Bernie Madoff – Part II

There was a report in the WSJ today regarding possible Madoff accomplices. In it was a line, which if true should create a home run for investigators.

“Across the hall was another room, where an old International Business Machines computer generated client statements, former employees say. Nearby was a small cluster of employees responsible for “stuffing envelopes” with client statements, according to a former employee. The IBM server operated independently from Madoff’s other computer systems but was supported by tech staffers who also did work for the stock-trading group, according to former employees.”

If this server was operated seperately from the other Madoff corporate networks, I can tell you from years in IT the following are true:

1. There are untold IT techs who worked for the Madoff companies, or were outside contractors, who bitched every day about having to backup and service this computer seperately from all the others. They wouldnt be able to do remote backup or software installs and version control. They would have to physically go to the computer every day or support an admin who did. That would piss them off.

2. Just how old that IBM computer is will tell us volumes. If its more than a couple years old, those same techs are complaining about why its still around. If its more than a few years old, it also means they probably cant update any software running to the latest versions. Again, a red flag to the techs because it makes their job more difficult, particularly since Madoff cant plead poverty as an excuse for not upgrading.

If its a PC (the article references a computer and a server, which dont necessarily have to be PCs), is more than 5 years old and acting as a server, its running an old operating system. NT or who knows what. Heck if its more than 10 years old, it could be running OS/2! Regardless, those techs are not only mad for having to deal with all this ancient stuff, you know they are telling jokes about the entire situation.

3. The age of the hardware will also tell you volumes about the origins of the software. Custom software running on an old computer means that it either can’t be upgraded because its tailored to the system, or more likely, he no longer uses that same employees, contractors or vendors to maintain it, so he has to run what he already has. There is a chance there is a programmer out there who quit because they recognized something was wrong.

4. Madoff is a lot more technically astute than people seem to be giving him credit for. This is from a 1999 Marketwatch interview:

”We are in the process of building a new trading platform, but it’s not a ECN,” Madoff told

Whatever software they developed to run that trading platform, he understood it and probably knew how to use it. Would it be a shock if the 1999 version of the software could run on that old IBM computer allowing him to create his own virtual market and spit out statements? A self contained trading platform could probably handle this from A to Z.

5. All of which means that between the techs and developers, someone is going to drop a dime on Bernie. He may have surrounded himself with long time friends, family and legacy employees, but there are more than a few geeks out there that know that something wasnt and isnt right.

Any other ideas out there?

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About Mark Cuban 144 Articles

Mark Cuban is the owner of the Dallas Mavericks basketball team, billionaire internet entrepreneur, and chairman and owner of the high definition television channel HDNet.

Mark made business history when at the age of 32 he sold his computer consulting firm MicroSolutions to corporate giant CompuServe and became fabulously wealthy overnight. Cuban later did the same with yet another enterprise, the live streaming Internet operation, and sold it to Yahoo! for a record breaking price that pushed his own net worth into the billions.

He publishes his own blog at Blog Maverick where he speaks freely about basketball, technology, business, and the Internet.

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1 Comment on Breaking Down Bernie Madoff – Part II

  1. Apparently Bernie’s computer used to generate statements on the 17th floor was an IBM AS/400 from sometime in the 1980s. The IT staff, who mostly serviced the legitimate market-making business on floors 18 and 19, repeatedly recommended that the AS/400 be replaced. However they were informed that such decision were made personally by Mr. Madoff and that it really wasn’t their position to tell the firm how to operate.

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