They were accused of knowing that the computer programs they developed in 2003 and 2004 contained fraudulent information used in U.S. and European regulatory reviews.
The SEC said O'Hara and Perez (the arrestees) knew that the "House 17" computer was missing functioning programs needed for actual securities trading.
In August or September 2006, they cashed out hundreds of thousands of dollars in their personal BLMIS accounts before meeting with Madoff and telling him they would no longer lie for him, the FBI and the SEC said.
The charges against the pair carry maximum prison sentences of 30 years and millions of dollars in fines. (Whole article here.)
As always, the news and the authorities position the situation in it's worst light. I certainly only know the details I read. But a couple of salaried programmers who had retirement accounts of a couple of hundred thousand dollars (a very normal figure after 15 years at a financial services company) and received a "huge" bonus of $60,000 (also a very normal yearly figure for top IT people working at financial houses) seem to be an odd target.
Is every IT employee involved in any financial system or business system development supposed to question the business process if what they're being told to develop doesn't seem complete or thorough enough? Would you, as a programmer or software architect, challenge a company Vice President making millions every year (versus your regular salary) when he says "this is what I need, go build it" if it seemed incomplete (and you pointed that out)? Would you quit over it?