Bernie Madoff was a lot of things to a lot of people—a once-trusted financial advisor, a man who always beat The Street, and, as it turned out, a felonious con-man who caused thousands of his clients to lose billions in their investments.

Madoff was also a technology laggard, which enabled his Midas-like ability to always deliver huge (and completely fake) investment returns. On an IT evolution scale, Bernard L. Madoff Investment Services' enterprise systems and IT infrastructure stayed as much in the Dark Ages as possible—just the way he and his co-conspirators wanted it.

All of these fascinating details come from an intriguing investigative article in Securities Industry News, by John Dodge: "How Bernie Made Basket Cases of His Customers' Accounts." (For more analysis on the Madoff saga and getting to "One version of the truth" with corporate data, see Bernie Madoff's Client List vs. MDM Software: Lessons Learned.)

The article, which is based on court records and interviews with former Madoff IT personnel, lays out how Madoff used proprietary and closed-loop systems to cover his illegal business dealings and giant Ponzi scheme. A former IT project manager at the firm, Bob McMahon, is extensively quoted in the article and gives a telling overview of the IT environment.

"McMahon knew if 'technologists' replaced the proprietary systems with more modern and open computers, they would have invariably found the absence of data on countless stock trades that supposedly took place," writes Dodge. "In a sense, the preservation of old computer technology helped Madoff successfully go undetected for years until his massive Ponzi scheme collapsed." (For more on Wall Street IT issues, see Wall Street Scandal: When Does Open Source Become Proprietary Code?)

The antiquated IT environment at the firm offered traders green-screen terminals (developed circa 1985), "where only text appeared on screen and instructions were in almost cryptic codes entered into command lines," notes the article. Younger traders mostly opted for creatively named "M2" Windows-based desktop PCs running in-house trading software, referred to as MISS, which most likely stood for Madoff Investment Systems and Services, Dodge writes.

A closed, walled-off IBM AS/400, called "House 17," was the back-office workhorse of the scheme. "House 17's expressed purpose was to maintain phony records and crank out millions of phony IRS 1099s on capital gains and dividends, trade confirmations, management reports and customer statements," according to article.

Many more telling details in the article illustrate the dangers of "closed" systems as well as falling behind the technology curve—both inside your own four walls and at your outside service providers' companies.

The Securities Industry News article sums up the Madoff saga this way: "It's also a cautionary tale to information technology managers and executives at shops up and down Wall Street. If you think something is amiss, don't let it rest. Do your own investigation. Before the company you work for turns out to be missing as well."

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