Madoff: The Monster of Wall Street (2023–…): Season 1, Episode 4 - The Price of Trust - full transcript
Guys, we should probably mention,
AP led with a story a few moments ago.
Bernie Madoff,
the architect of the largest
Ponzi scheme in American history,
died today in prison. He was 82.
I understand that
when Bernie died, he was cremated.
Judaism is against cremation.
We believe very strongly
that our body does not belong to us.
It belongs to God who gave it to us,
so we're supposed to return it.
From earth you come,
to the earth you return.
But then the real twist of the story
is that the remains of this man
are still around
and are sitting on a shelf
of a lawyer's office in some box,
because the family refuses
to receive the ashes.
I guess I can understand it, but it hurts.
There must have been good times with him.
They're so angry with him that
that anger will stay forever.
Everybody gets buried, even murderers.
They get buried.
This should have happened with him,
as bad as I think he is.
And was.
Nobody in the family,
they don't want to be
connected to him in any way.
Who wants to be connected
to the ashes of this vicious monster,
who did not have any compunctions
destroying people's lives?
By the time 2007 dawned,
Bernie Madoff must have looked back
over the previous two years and said,
"I never thought
I'd make it through, but I did."
With the help of the feeder funds,
with the help of inept SEC investigators,
he had managed to reach 2007
with his slush fund fat.
He regularly flies his private jet
to his townhouse in the south of France,
where he has a new boat to play with.
He lives large,
but Bernie and Ruth Madoff
were not the only ones
benefiting from this
extraordinary year of extravagance.
Back in New York,
Madoff made sure that
his trusted minions on the 17th floor
shared in this wealth.
He doubled Frank DiPascali's salary
from $2 million to $4 million.
Frank bought a new fishing boat,
everything he ever dreamed of having.
Annette Bongiorno
is given a substantial raise,
and that year unfolds
with more and more luxury.
That sense of exuberance
of having arrived at last
at a pinnacle of Wall Street success.
The basic concept of Wall Street,
which sometimes the regulators
lose sight of, as do the academics,
is it's a for-profit enterprise.
By benefiting one person,
you're disadvantaging another person.
In 2008, all of a sudden,
the global economy
was teetering on the brink.
Problems with the housing market
are making news tonight,
and now there is even more stark evidence
of how serious
things are getting in this country.
Mortgage brokers
were selling homes based on liar loans,
which mean no documentation of income,
to people that couldn't afford them
with mortgages they didn't understand.
And then the investment banks
were taking these lousy loans
they knew were going to crater,
packaging them into securities,
getting AAA ratings
from the Wall Street rating agencies,
and selling them
to investors on Wall Street.
And then, boom, fell off a cliff.
Hundreds of thousands of
homeowners are defaulting on their loans.
It literally was like
the world was falling off its axis.
Every bank was falling to pieces.
Lehman Brothers reeling
because of these bad real estate loans.
Lehman Brothers
had filed for bankruptcy.
Merrill Lynch, AIG was teetering.
Morgan Stanley and Goldman Sachs
had to be bailed out.
We're talking
about investment banks,
these are the smartest money
on Wall Street.
How have they been
getting it wrong for so long?
Bernie and Ruth
are in the south of France,
but Bernie can't tear himself away
from what's happening back home.
The stock market
is dropping precipitously.
We are faced with the prospect
of a global meltdown.
So that was the environment
that Bernie finds himself in
when he and Ruth get
back on that jet for the last time
and arrive back in New York.
At this point, all anybody cared about
was getting their cash quickly.
Where could they turn?
They could turn to Bernie Madoff.
And they did.
Phones ringing from Frankfurt,
from London,
Madrid, Vienna, Abu Dhabi.
"We want our money back."
And the withdrawal notices
start to flow in, and then pour in,
and then avalanche in.
September-October,
that is when the screws begin to tighten.
Bernie by now
is tap dancing as fast as he can.
He's badgering, he's bullying,
he's cajoling many of his oldest clients
to stop pulling out money,
start putting money back in.
He calls his mainstay investor,
Fairfield Greenwich,
run by Jeffrey Tucker
and Walter Noel, and says,
"This is a great time to buy." "No."
Then he calls Sonja Kohn of Bank Medici,
makes the same plea.
She doesn't take the bait either.
By the 2nd of December,
the writing's on the wall.
Bernie is facing about $1.5 billion
worth of withdrawal requests.
And he only has roughly
$300 million left in his bank account.
If he writes checks to those clients
who want to withdraw their money,
the checks will bounce.
But obviously, you know,
I couldn't keep doing that
because of the nature of the Ponzi scheme.
So I knew that... that the game was over.
At this point,
he and Frank DiPascali
have a conversation about,
where do they go from here?
Bernie makes it clear to Frank
that they're too far underwater
to ever get out again.
Frank has an immediate recognition
that he's gonna go
to jail for a long time,
and Frank just went ape shit.
DiPascali will later claim
that this was the moment
when he first realized
that Bernie didn't actually have
a whole bunch of assets
set away somewhere else
that would bail everybody out.
That this was when he realized
it was really a fraud.
What Bernie wants to do with
the money he has left, he tells Frank,
is he wants to write checks to some
of his biggest long-term investors,
for some of the faithful employees,
for extended family members
who had trusted him with their money
and now were going to be wiped out.
After all, the fraud is up now.
The fraud is done.
As Frank DiPascali
is preparing these checks
that Bernie plans to use
to distribute the last of his slush fund,
he portrays it to his sons
as early bonuses for employees.
Well, Mark and Andrew
are deeply disturbed by this.
It makes no sense to them
to be writing bonus checks,
given the state of the market.
So on the morning of December 10th
of 2008, I was sitting at my desk,
and things hadn't
been going well for weeks now.
Bernie was acting very peculiar,
and I was trying not to disturb him.
You know, I felt he was fragile.
And I saw Peter just sitting there,
and I remember
Mark and Andy coming into his office.
Ordinarily, they would
check with me and say,
you know, "What's my dad doing?
What's going on in the office?"
They didn't this time, they just walked
right past me and went into the office.
Mark and Andrew
attempt to change his mind
about issuing all of these checks.
They say, "Dad, you know, how do you know
what the rest of the year is gonna bring?"
"Wouldn't it be safer
to hang on to this cash
until we see how the year ends up?"
After a few attempts to deflect,
Bernie loses his composure.
I had mail for Bernie
and I went to go bring it to his office.
I obviously startled them,
and they all jumped out of their chairs
and stared at me.
And shortly after that,
Mark and Andy, they put Bernie's coat on,
and they escorted him out.
And Bernie never went anywhere
without telling me where he was going,
and he just walked past me.
He never looked at me.
And Mark came over to my desk
and leaned over and whispered,
you know, "We're going to go
do a little Christmas shopping."
I never saw Bernie again.
Mark and Andrew take him
back to the penthouse in Midtown.
Ruth is there,
and this is the first time
that Bernie comes clean.
I was in a mental state
that I could no longer continue it.
So it was almost like
a relief to say, "This is it."
"I just can't continue
this charade any longer."
And that's what caused me
to acknowledge to my family,
uh, that I had been committing this fraud.
Bernie continues to explain how big it is.
Billions of dollars.
And all he has left is that 300 million
that he was trying to give away.
Andrew just slides down the wall
until he's sitting on the floor in tears.
As soon as he hears the confession
that the entire business
has been destroyed,
there's no money,
Mark is totally devastated.
Ruth finally is able
to say something, and what she says is,
"What's a Ponzi scheme?"
It must have been one of those moments
when your world just turns upside down
and everything you thought
was true before is no longer true.
Madoff's sons get up and leave.
Before they reach the lobby, they have
decided that they must consult a lawyer.
Mark's father-in-law
is a noted lawyer in Manhattan.
They arrange to meet with him
at his apartment.
Mark and Andrew tell him
what their father has said,
and their lawyer makes it clear to them:
"This is a fraud in progress."
"Your father is writing checks
to distribute what will soon be called
the ill-gotten gains of his fraud,
and if you do not report it,
you will be accessories
to that continuing crime."
They had to turn their father in.
The FBI go
to the Madoff apartment
early the following morning.
Bernie's in his bathrobe.
"You know why we're here?"
"Yes."
They ask him,
"Is there an innocent explanation?"
And Bernie says, "No."
He tells them, "It's a Ponzi scheme."
What he told his sons was true.
One of the agents calls the office
and quickly briefs them on the outcome,
and is told, "Bring him in."
So they brief Bernie
on the dress code for being arrested.
No shoelaces, no belts, no tie.
He sheds his wedding band and his watch.
Bernie's taken downtown
to the FBI building on Foley Square,
and processed as
any criminal would have been.
And then he calls Ike Sorkin.
"Hello?"
"Ike, it's Bernie. I'm handcuffed
to a chair at FBI headquarters."
"I need your help."
I then immediately tell Madoff,
"If you're talking, stop talking."
I didn't know at the time,
but for two hours, he told the FBI
everything he knew before he called me up,
and he told them
that he was the only one involved.
I was thinking that,
"Quite frankly, he's in a lot of trouble."
"The government's not
walking away from this."
But the bail was set at $10 million,
so Bernie goes back to the apartment,
and that's when it all blew up.
All hell broke loose.
If you work on a trading desk,
stop what you're doing
before you walk out
and clean your desk out for the day.
Bernie Madoff has been arrested.
Federal authorities are calling it
one of Wall Street's
biggest Ponzi schemes.
Police say the man behind it was one
of the most admired men on Wall Street.
Bernard Madoff,
a former chairman
of the NASDAQ Stock Exchange.
My cell phone rings, and it's Harry,
and he's screaming
at the top of his lungs,
"Madoff just capitulated."
We had it right on!"
I said, "Hold on, Harry."
And I put down that phone,
and I had such fists of rage.
I just felt dirty and violated,
like, "How could this be? How could I be
so wrong about someone's character?"
Everything that I thought about this man,
Bernie, was completely wrong.
It felt like a betrayal.
After Bernie was arrested,
it was complete chaos.
There was the FBI coming in,
there was the SEC coming in.
There were people who took off.
I had absolutely no direction,
but I knew we had to answer the phones.
A gentleman called in.
We had a nice relationship, we would
always talk, you know, and he said,
"Eleanor,
did you know?"
It was like somebody hit me in the chest,
because I didn't even think
people were going to think I was involved.
That was just like, now another blow.
I was like, "Holy shit."
And I said, "No. No, I didn't."
And Pete is standing there,
and I hung up the phone and I'm going,
"What am I supposed to do here?"
"You know, what is going...
What am I supposed to do?"
Peter just walked away from me.
And I was just like, "You're on your own."
There were people
down in the lobby, calling up,
demanding that somebody
comes down and talks to them.
I would go down to reception,
and I got some of the other ladies,
and we would do it
for 20 minutes at a time
because it was too much. It was sickening.
People were scared. You could hear it
in their voices. They were scared.
Typically, in any
investigation, drug, organized crime,
you're starting with
the lower-level figures,
working your way up the organization.
Well, here we have the top guy, and
we just know a lot of money is missing.
All the employees had been
basically corralled on the 19th floor,
and you don't know
which one of them is a co-conspirator,
potentially a cooperator,
or another person
that has nothing to do with it.
We had to start somewhere.
So we start interviewing
all the employees.
After talking to employees, the FBI
uncovers there's a whole another floor.
And after being led to the 17th floor,
a key card is swiped
that gets them access.
We went in, and we were like,
"Holy shit."
And there's just
rooms and rooms full of boxes,
papers and documents everywhere.
And I realized that
if we start moving this evidence,
we're going to lose a lot of context.
So I declared
the 17th floor a crime scene,
and we just started the investigation
right then and there.
Now, you talk about
the proverbial needle in a haystack.
How do you figure all this out?
The key is a source, informant,
or cooperating witness
who could shepherd you through that.
And that was Frank DiPascali.
He knew that he had
a lot of criminal exposure.
He had a family he cared deeply about.
He had to think of,
what could he do for himself?
And Frank provides us with the roadmap
to figure out how the scheme worked.
It was really kind of amazing to see.
There was no real investing
ever happening.
There were no trades.
In other Ponzi schemes, you've had guys
who would trade stocks, and they'd lose.
I mean, they were bad traders,
and they were always trying to catch up.
I had never seen anything like this,
where there was absolutely
no investing going on.
Mr. Madoff, what would you say
to all those people who lost money?
Pushing and shoving,
that's what Bernard Madoff came home to
after making a brief appearance
in a Manhattan federal court Wednesday.
I was in the back of that whole scrum
of television cameras and reporters.
Don't touch me.
There is that famous scene
of him pushing a television camera,
and that was a daily occurrence.
Mr. Madoff, what would you say
to all those people that lost money?
What would you say to them?
Bernie Madoff's fraud
was like a nine-alarm fire
in the world of business journalism.
It was a fire hose of news.
It was wall-to-wall,
because what it represented
was so much larger than this one man.
When you think about the financial crisis,
it was this moment
where everybody's losing their home,
they're losing their 401K.
The unemployment rate is skyrocketing.
People wanted to point fingers,
but they were all big institutions,
they were buildings,
in many people's minds.
And then all of a sudden,
Bernie Madoff arrives on the scene,
and he becomes
the personification of this crisis,
he becomes the face
for the financial crisis.
All of the hate,
all of the venom, all of the anger
that was being focused on Wall Street,
on everything,
they could put it onto him
all of a sudden.
And people want to know,
how come Madoff got bail?
How come he's living in his penthouse,
unlike some other
less fortunate individual
who doesn't have his monetary means
who's, you know, being held
without bail on Rikers Island.
It just didn't, you know, seem right.
In the beginning,
you'd hear about Bernie Madoff.
Then you'd hear about some investors.
Filmmaker Steven Spielberg,
Mets owner Fred Wilpon...
The bold-faced names
in his investor list surfaced first.
Elie Wiesel, the Nobel Peace Prize winner
and Holocaust survivor...
For the first moment...
...I felt a kind of,
not physical, but spiritual,
mental nakedness.
That everything was taken.
It took several more days,
weeks in some cases, to put together
the retired corrections officer,
the retired teachers,
the retired dentists.
These were, like, real people,
and you could see them and you knew them
and you'd see their faces.
I think all of a sudden
it made this human. It made it real.
When my father passed away,
my younger brother says,
"Well, all of Dad's money was in Madoff,
we might as well leave it."
I decided to retire because I said,
"My God, there's money there."
"I could draw on that money.
I could take my money and live on it."
And I moved to Florida,
and I used my money,
money that I had saved, to buy the house,
and I figured, "This is gonna be terrific
because I'll get my distribution,
that'll pay back the money
that I put into the house,
and then I'll have
some money to retire on."
I said. "This is the last place
I'm gonna live in."
And I was very happy.
I was in the house four months,
that's all, when my brother called,
and he said, "Bernie Madoff
was just arrested for fraud."
And it was such a shock.
I often thought,
"What would have happened
if my father had been alive
and had heard the news?"
And I think it would have killed him
even faster than the cancer.
My father was with Madoff
since at least the early '80s.
All the accounts together,
we had somewhere around $30 million,
and then the money in Madoff went "Poof!"
Like that, gone.
It was 30 million Monopoly dollars.
I felt stupid that I had been conned,
which obviously I was.
Also, my family said,
"Well, Rich has had
some Wall Street experience,
so he understands what's going on."
And shouldn't I have known better?
So, it was definitely a thing
that really affected me personally.
Initially,
when I heard about what happened
and knew I wasn't getting any money,
I was very upset, scared.
You know, what am I going to do?
I can't try to look for work.
I was in my mid-seventies already.
But I really felt terrible for my father,
even though he had passed away.
There's an expression that
my mother used to use, called,
"It's a shanda for the neighbors,"
which means your neighbors will know
that you made that bad decision.
It's a shame.
He was fooled.
And that made me very angry.
We had made certain
financial decisions, my wife and I.
We have a son with disabilities,
and we said, "Well,
we really don't need the life insurance
because we have this asset with Madoff,
this nest egg, which would
eventually be used for his care."
That got blown to bits.
My mission was
to try to keep my mother in her house,
the house that
my father built in Palm Beach.
But I knew eventually the house,
which was our biggest asset,
was going to have to go.
My mother was devastated by it.
But don't cry me a river.
A lot of people
lost everything altogether.
A white-collar crime
is different than a blue-collar crime.
A blue-collar crime,
the bodies drop before you investigate.
And a white-collar crime,
they drop afterwards.
A French investment fund manager
who had $1.5 billion of his clients' money
with Bernie Madoff
was found dead in his Manhattan office
today, an apparent suicide.
René-Thierry de la Villehuchet.
It was all over the news.
Thierry's suicide.
It happened 11 days after
Bernie turned himself in.
Thierry locked himself
in his office that night,
and he sliced his arms open
and bled into a trashcan
so he wouldn't make a mess
for the cleaning lady.
He chose
the methodology of death that he did,
a painful solution,
to atone for his sins of omission.
What a waste of a man.
He was a man of honor,
and he was betrayed.
It was traumatic for me personally.
I cried for three days straight,
because I was thinking of calling Thierry.
I knew he had lost a lot personally.
I knew his firm was done for.
I wish I had reached out.
Maybe I could have prevented that.
For what might be the last time ever,
Bernie Madoff left his $7 million
Manhattan penthouse early this morning
and made his way to federal court.
Bernie essentially decided
to plead guilty because he was guilty.
He had very little to gain
by going to trial.
It would have prolonged a process
that was subjecting his family
to a relentless,
scalding degree of public attention.
He made the decision,
in effect, "Let's get this over with."
"I gotta get rid of those cameras,
I've gotta protect Ruth,
I gotta protect the boys."
They came up with
an array of securities fraud
and money laundering charges against him,
and it's a long process.
He had to not only say "guilty,"
he had to explain what he'd done.
At the end, his attorney asks
for a continuance of bail
until Bernie could be sentenced,
which would happen several months later.
The judge says no.
"He's pleaded guilty,
he is a confessed felon,
he's going to be locked up."
And at that moment, you know,
Bernie is going to jail that day.
Could have heard
a pin drop in that courtroom.
And you could hear the click
of the handcuffs around his wrists.
He was housed
in the Manhattan Correctional Center
until he could be sentenced.
The government wanted,
the prosecutor wanted me
to plea bargain with them, to, uh...
you know, make some sort of a deal
by providing information as to
who else was involved in this fraud.
Uh... I mean, the belief was that
I couldn't be doing this all myself,
that there had to be
other people involved.
When Bernie Madoff said,
"I did it all by myself,"
I knew that he was protecting
mostly his family,
and of course, his employees.
There was no way that one person
can pull off such a complicated fraud.
The 17th floor employees are
what I call the witless co-conspirators,
all of whom were hired
as high school graduates,
knowing nothing about
how the Street operated,
and were able to basically enable
the operations of this Ponzi scheme,
undetected, for years.
During our investigation,
the big defense of all the employees,
and even Frank DiPascali,
was they didn't know
it was a Ponzi scheme.
When they said they didn't know
it was a Ponzi scheme,
they also said, "Well,
we knew the trades weren't legitimate,
but that somehow Bernie had
the assets somewhere in Europe
and gold and real estate to cover it."
Well, that's still illegal.
Federal investigators
are ripping apart 20 years of fraud
inside Madoff's firm,
moving beyond Bernie,
looking at sons Andrew and Mark
who directed trading activities.
Andrew and Mark Madoff certainly knew
that the investment advisory business
was not like
your typical brokerage account.
Maybe they didn't know
it was a Ponzi scheme,
but they knew
it wasn't what it appeared to be.
I worked there for 25 years.
Those boys grew up in front of me.
They never went downstairs
to the investment advisory side.
They didn't work there.
There was no connection.
Also under the microscope,
Madoff's wife of 49 years, Ruth,
who has not been charged in the case.
I have no comments at this time
on any subject.
I'm often asked the question,
"Do you think Ruth knew?"
I looked really closely at Ruth.
Ruth had an office kind of
around the corner from Bernie's office.
Go into her office, open the file cabinet,
and I was like,
"Whoa! We hit pay dirt here!"
If Ruth Madoff had,
you know, a street name,
it would be Ruthie Books, because she was
a bookkeeper and she was highly organized.
Personal tax returns,
bank account statements,
information on Bernie's boats,
property they owned...
It was all laid out perfectly for us.
So we learned a lot
about Bernie's lifestyle,
but I never saw anything that pointed
to her knowing about the Ponzi scheme.
Whatever Bernie shared with her,
we don't know.
You know,
my father was very money-conscious.
He tried to bring me up
in a money-conscious kind of a way.
And he would say, "You know,
if it looks too good to be true, it is."
But he didn't follow his own advice.
And I don't blame him either.
I blame the government.
The SEC, they believed the con.
They were conned too.
If you have the SEC going forward
and conducting an exam
or doing an enforcement investigation,
and instead of having
the appropriate effect,
which is to relatively easily
uncover the fraud,
you actually allow the fraud
and give the fraud credibility,
and it grows because
of your exams and investigations,
that's a very severe indictment
of the government.
I think if it wasn't
for the financial crisis,
he may never have been caught.
"We are sorry,
and we're fixing the problem."
That was the response today from
the Securities and Exchange Commission.
Contrite regulators were
called on the carpet by Congress today
after a scathing report said
the agency was incompetent.
There was an investigation
called for by Congress,
and I had to give testimony.
So when I showed up, I showed up early.
Every seat for the press was full.
I talked to everybody in the press,
let them know it would be a prizefight,
and they could expect
some riveting testimony.
And sitting there next to the press
was all the SEC staff.
And I was signaling them a message
that I was going to pound them.
As today's testimony will reveal,
my team and I tried our best
to get the SEC to investigate
and shut down the Madoff Ponzi scheme
with repeated and credible warnings
to the SEC that started in May 2000,
when the Madoff Ponzi scheme
was only a $3 to $7 billion fraud.
We knew then that
we had provided enough red flags
and mathematical proofs
where they should have been able
to shut him down right then and there.
Unfortunately,
as they didn't respond
to my written submissions in 2000,
2001, 2005, 2007, and 2008,
here we are today.
It was like an explosion
that you had never seen before.
The agency literally shook.
He was...
so, uh, specific about the failures
and so, in some ways,
harsh about the failures.
The SEC is over-lawyered
and has too few staff
with relevant industry experience
and professional credentials
to find fraud,
even when a multibillion-dollar case
is handed to them on a silver platter.
You have no excuses.
You darn well better be
apologizing to the Madoff victims.
The SEC continues to roar like a mouse
and bite like a flea.
I was told it was the most heated
Congressional testimony since Watergate.
I think I speak for everyone
when I say we hate fraud.
We wish it never happened.
We wish we could get to...
But your job is to prevent fraud,
not to hate it.
One guy led you to this pile of dung
that is Bernie Madoff
and stuck your nose in it,
and you couldn't figure it out.
You could've shut Madoff down
in one half hour
by just following up
on one of his allegations
that they were not conducting trades.
If you are the watchdog, you have totally
and thoroughly failed in your mission.
Don't you get it?
Is the SEC
too cozy with the industry?
Are they captive by this industry,
or are they looking out for us?
Looking out for the taxpayers?
When I started
doing business with all my clients,
I was a little guy with nothing.
I was this little kid from Queens.
Didn't go to Harvard or... and so on.
Why would anybody trust me
to give me business?
Turn their money over to me?
But the first thing I learned:
Whatever you do in this business,
never break your word.
Your word was your bond,
literally, and that was it.
You trusted everybody.
But nothing in this industry
is what it looks like.
The fact that Bernie Madoff pled guilty,
I think drew attention away from banks
and maybe some other big investors
who should have gone to jail,
but they didn't.
In my opinion, the feeder funds
abrogated their responsibilities
and had no criminal liability
for the fact that all these folks
were wiped out innocently.
Their culpability was a complete failure
to do due diligence, which was their job.
And I think
the owners of Fairfield Greenwich,
Sonja Kohn, all those folks,
they should have gone to jail.
But Madoff could never have perpetrated
the fraud that he perpetrated
had he not had
the complicity of JPMorgan Chase.
JPMorgan is the only entity
that had a view
into Bernie's Ponzi scheme:
The checking account.
The 703 account.
The bank
stipulated that during the period
from 2003 to 2008,
you maintained on deposit
at JPMorgan Chase
$3 to $6 billion.
- Is that correct?
- Yes.
That's enough to draw
the bankers' attention to the fact
that this is not
a normal banking relationship.
They had a statutory obligation
under the Bank Secrecy Act
to monitor that account
and to gain an understanding
of what his business was.
When you move more
than $10,000 through a banking system,
and the banker cannot see
the logic of that transaction,
it generates something
called a suspicious activity report.
And then the Feds start looking at it.
FBI.
How do you transfer
billions of dollars on phony transactions
back and forth at major banks
and not generate a SARs report?
People knew
not to ask too many questions.
If you're getting good returns
and you're getting lots of money,
and you're not to ask any questions,
you don't ask any questions.
And, you know,
greed has a way of doing that to people.
JPMorgan paid
a few billion dollars in criminal fines
for their role in the Madoff case.
Yet no one went to jail. Not one person
at the bank was found guilty of anything.
In fact, no one was even charged.
I ask you, how is that possible?
This is their way of doing business.
JPMorgan Chase has pled guilty
to five massive criminal conspiracies
involving billions of dollars
within the last six years.
When they get caught,
they're never required to disclose
the profits they made on the scheme.
They just pay a fine and they go on.
So JPMorgan Chase financially profited
from Madoff's crimes.
And I have to believe that
they absolutely understood
what was going on.
The Madoff fraud dwarfed so many frauds.
It's the largest Ponzi scheme
in the world to date.
The statement value at the end,
when the music stopped in 2008,
was $64 billion
people thought they had with Madoff.
Sixty-four billion dollars.
But that was imaginary money.
Bernie had created it out of thin air.
The $64 billion, don't forget,
was the false profits
that were being generated.
But there's
another number that was real money.
The real money that
people handed to Bernie in cash
totaled about $19 billion.
Nineteen billion dollars
of cash actually invested with Madoff.
That's a staggering number, $19 billion.
From nonprofit organizations
that had invested money,
to foundations, to individuals,
to people that had sold
a mom-and-pop business
and invested their life savings in it.
A lot of people put their money
with Madoff, all of their money,
and lost it all.
After the shocking discovery
that Bernie had made no investments,
there were no stacks of securities
tucked away in a bank vault somewhere,
there was despair.
But despair brightened when
the ruling was made from Washington
that Bernie was a member of the Securities
Investors Protection Corporation.
SIPC, as it's called.
SIPC was established
pursuant to the Securities Investor
Protection Act in 1970 by Congress,
and its purpose is
to operate an insurance fund
to provide up to $500,000 per account
if the broker takes the money
and doesn't buy the securities.
That $500,000 dollars
is coming out of Wall Street's pocket.
Wall Street finances SIPC
through dues that its members pay.
But the Madoff case,
the courts decided that
there should be what's called
a Ponzi scheme exception to statutes.
Basically SIPC insurance
wouldn't apply to a Ponzi scheme.
But this is just nonsense.
It's exactly when there's a Ponzi scheme
that customers need the insurance.
The irony of it is,
the insurance fund had been woefully
inadequate for almost two decades.
In 1990, SIPC decided
that the amount that
each member firm should contribute
to fund the Insurance fund
was $150 a year,
not per customer,
which still would have been a joke,
but per firm.
That's less than they spend on flowers
in the Executive Suite every week.
Ultimately, there were
so many Madoff victims
that if they were to compensate everyone,
SIPC would have gone bankrupt.
So that's where Irving Picard stepped in.
He became the Madoff trustee.
A trustee is the person who's responsible
for liquidating a registered
broker-dealer that becomes bankrupt.
Picard is appointed by the Securities
Investor Protection Corporation.
His fees are paid by the Securities
Investor Protection Corporation.
Irving Picard has to
figure out exactly who is owed what.
There's a formula that
Picard decides is the simplest one.
It's called the net equity formula.
We're continuing to get money out,
and we're trying to be fair.
Some are net losers,
which means that they weren't able to
get their money out of the Ponzi scheme.
But let's say
I'm an early Madoff investor.
And all the while
I've been taking money out,
not knowing it's a fraud,
and I've made more than I've put in.
According to the trustee,
I'm a net winner,
and I need to give that money back.
That's what's known as a claw back.
These clawback lawsuits
were filed by the trustee
against hundreds and
hundreds and hundreds of investors.
But it was quite a contentious issue,
because the net winners
were many of the smaller, older investors
who had been with Bernie from the get-go.
They had invested money with him
and then lived off the profits
that he was supposedly
generating for them over the years.
For example,
if my grandfather had opened
an account with Bernard Madoff,
and that account
was inherited by my mother,
and then upon her death,
I inherited the account,
you'd be asking me as the granddaughter
to pay back for withdrawals
my grandfather made 45 years ago.
So you can imagine
that people were furious,
particularly those who had been
taking money out every year,
say, to fund their retirement
or to send their kids to college.
And by the way,
they were paying taxes on that.
People were saying, "How can I give back
money I've already given to the IRS?"
Basically, Picard took money
from one set of Madoff investors
to pay off another
set of Madoff investors,
which I call the reverse Ponzi scheme.
The victims were victimized again.
I had been
in Madoff for so long, since 1992,
and we took out
more money than we put in.
So the trustee came back at us
and said, "Fork it over."
We didn't have it,
because we took out the money
and spent it every year.
And our claw back case went on for years.
Years of calling the lawyers
and saying, "What's going on?"
We could not plan the rest of our life.
It was just horrible.
Just horrible.
At one point, we were told we'd
probably be better off getting a divorce,
because we had heard that
they're not taking the wife's assets.
But you just don't know,
and now you don't trust anybody anymore.
But then we said, "Hell, no."
And we thought
we'd fight it a different way,
which was through
the Hardship Application.
They give you
a form to fill out and say, "You know..."
Yeah, they said,
"If you had to go into your closet
and sell all your clothing right now,
what would you get for it?"
And, you know, I had six pairs of jeans.
What's the value of jewelry?
- Jewelry...
- I don't wear jewelry.
We didn't have that.
They wanted to know your artwork...
We don't have artwork.
We filled out the form showing you
what we have, which is not a whole lot.
This is painful for us to go through this
year after year,
not knowing what's going to happen.
But in the end, it worked.
Our attorneys in New York talked to them,
and the trustee ended up saying,
"You're free."
I kind of lost my husband
for several years,
because all he did
was try to find a solution.
And he got so absorbed
in finding the solution.
There was part of him that was gone.
And that takes its toll.
I earned all the money,
I invested all the money,
I did all the due diligence,
and it all blew up in my face.
You know, it's...
...it's one thing to lose your life savings,
and that's bad.
But when you lose your house too,
it's terrible.
I think you have to distinguish
who the victims are in this case.
There are, you know,
the widows out there who...
This was all their money.
They trusted it to Bernie.
People who invested via feeder fund.
They didn't know any better.
But if you look at big investors,
people who had hundreds of millions
or even billions of dollars
on the books with Madoff,
who are supposedly
very savvy, sophisticated,
they entered into
this agreement with the devil, in effect.
I think that they knew
what they were getting into.
We're talking about
the big four investors.
Norman Levy,
Jeff Picower,
Stanley Chais,
and Carl Shapiro.
I had a very special relationship
with the big four clients, all right?
They didn't want to screw me either,
generally, because, number one,
we had a close
family type of relationship,
and also I made them a lot of money.
They didn't wanna kill
the goose that laid the golden egg.
Picower was a little bit different.
Picower behaved as a co-conspirator.
I don't think
Bernie's billion-dollar Ponzi scheme
could have survived without him.
Bernie needed Picower to help
keep the money flowing,
and it is my opinion that Bernie Madoff
helped Jeffry Picower commit tax fraud.
They used each other.
Moreover, Picower made more money
off of Madoff's fraud than anyone else,
and Irving Picard knew what was going on.
So after Madoff was arrested,
Irving Picard starts
chasing him for money.
Irving Picard,
the trustee in charge of recovering
money lost in the scheme,
sued the publicity-shy
Picower and his wife,
citing outrageous annual returns
as high as 950% on Madoff investments
at a time average returns on the market
were only about 9%.
I've always believed that Picower
knew a lot more about the fraud.
Unfortunately, we will never know.
Investigators are trying to figure out
how Jeffry Picower wound up dead
at the bottom of his swimming pool
in Palm Beach County.
Police are investigating
his death as a drowning,
but apparently are not
ruling anything out.
Obviously, they knew he was
in the midst of being held accountable
for his role in the Ponzi scheme,
and that he might have
tried to commit suicide.
But the general consensus from the autopsy
was that it was a heart attack.
Had Jeffry Picower lived,
I believe he would have been indicted.
While Jeffry Picower
certainly should have gone to prison,
Picard was able to claw back the money.
So Jeffry Picower's wife Barbara
is forced to return $7.2 billion
of the ill-gotten gains
from the Ponzi scheme.
We are hopeful
that positive and fair outcomes,
like that of the Picower negotiations
and several of our other settlements,
can and will be repeated.
As for the other longtime investors,
Norm Levy's estate
is forced to return $220 million.
The estate of Stanley Chais
agreed to settle for $277 million.
And Carl Shapiro
forfeited $625 million.
Irving Picard had recovered
more than 14 billion
of the roughly 19 billion in cash
that had flowed into the fraud.
No one would ever have dreamed that
you would recover that amount of money.
But the methods
that the law required him to use
were just heartbreaking.
Going after innocent Madoff victims,
many of which the average age was 70,
some of these folks
had to go work in Walmart...
Suing them for their IRAs
and their houses,
and the amount of fees they took
I consider unconscionable.
Irving Picard's law firm,
over the course of many, many years,
billed over a billion dollars
to oversee the Madoff trusteeship.
So Irving Picard became a very wealthy man
as a result of the Madoff debacle.
I don't think the process was fair at all
because we were innocent,
and to put us through all that...
Yeah. I feel victimized for sure.
But I feel differently.
Um, I mean, looking at it analytically,
it was the only way
to pay the other victims,
is to take money back
from people that took more money out,
because there's no other money.
I don't like the law,
but I don't have a better alternative.
I think it was a necessary evil
that we had to go through,
and he was doing his job, the trustee.
For the last three months,
Bernie Madoff has spent his days
in a 7.5x8-foot jail cell
here in Lower Manhattan,
not far from this court.
Today he'll find out how he will spend
the rest of his life.
I wake up every morning and my wife...
The things that matter, I have.
And he can't take them away.
It says a lot about America's history
of punishing white-collar crime
that the biggest fear Madoff's victims had
as he approached his sentencing date
was the slap on the wrist.
That he would somehow
get patted on the head
and sent off to some
fairly pleasant prison environment
to spend, you know,
a fairly lenient sentence.
I mean, this had happened.
People had seen that.
When I went
to the sentencing in June of 2009,
there were a lot of Bernie Madoff's
victims in the courtroom.
They were really captivating,
talking about how
they had lost everything.
I was in the process of retiring.
That will never happen,
the way things are right now.
I go to the grocery
and have to watch what I'm buying.
A whole different ball game now.
I wake up in the middle
of the night, dreaming about this,
and how... The damage
that he's done to my entire family.
The vastness of the financial pain
was something I had never seen before.
The defense lawyer, Ike Sorkin,
pleaded for mercy, for leniency.
He said, "This is a 70-year-old man!"
"He's obviously not going to commit
a crime like this again."
And then Bernie said,
"I will turn to my victims and apologize."
The strange part was that
Bernie Madoff really had no expression.
He didn't show any remorse.
He wasn't emotional.
He was like a financial serial killer.
He was able to look widows in the eye
and take their money and say,
"You are taken care of. You can trust me,"
and screw them over in the next breath.
And he did that
over and over and over.
And then the judge began to talk.
He announced that
he was required to impose a sentence
that would reflect
the magnitude of Madoff's crime.
And he sentenced him to 150 years.
This was a purely symbolic sentence.
It was a judge saying,
"You have inflicted
so much harm on society."
"Society is going to inflict
a commensurate amount of harm on you."
It was a remarkable moment
in that courtroom.
Once Madoff himself
had pled guilty and been sentenced,
there was a real desire
by multiple government agencies,
by victims, by all of us,
to try to hold the people
who were criminally involved accountable.
And for a period of time,
I was a member of the team
prosecuting everything relating
to the Madoff Securities fraud.
It takes several years for them
to put the whole case together
based on everything that Frank told them,
and this leads to charges
against 17th-floor employees
that were complicit in the Ponzi scheme,
according to the government.
Annette Bongiorno
and Jodi Crupi got six years in prison.
Jerry O'Hara and George Perez
both got two and a half years.
What sometimes gets forgotten
is Peter Madoff remained
under scrutiny by prosecutors.
Peter Madoff pled guilty
and was convicted of two counts,
one of falsifying the records
of a broker-dealer,
and the other of engaging
in a criminal conspiracy
that actually had multiple criminal aims.
None of those charges accused him
of participating in the Ponzi scheme,
and he insisted that
he had known nothing about it.
Nevertheless, he was sentenced
to ten years in federal prison.
Frank DiPascali,
he's charged with securities fraud.
But because Frank cooperates
with the government,
his sentence isn't given until
after the government case is finished.
Government case finishes,
we're now talking years.
Frank has lung cancer
and dies within four weeks,
and is never sentenced.
This was a fraud of epic proportions,
and each of the people
that was convicted at trial
was involved in that fraud
for a period of decades,
And their hands weren't just
a little dirty, they were totally dirty.
At the same time, they plainly
were not the prime movers of the fraud.
So, you know,
was the sentence imposed on them
fair?
You know, that's not for me to say.
If I were the judge,
would it have been more severe?
It would have been.
After Bernie was arrested,
so many people hated Mark and Andy.
They hated these lovely young men,
who they saw as monsters.
Since the scandal broke,
the pressure has not let up
on Mark or his brother Andrew.
I want his family to feel the pain
that they've inflicted on our family.
They were subjected
to the most unrelenting, fierce,
hostile public and media coverage
I've ever seen.
Mr. Madoff?
The sons were shocked
and horrified by their father's crime.
And they confronted Ruth
with the need to choose.
In fact, they insist that
she break off all contact with Bernie.
"It's him or us," they told her.
And even worse,
"It's him or your grandchildren."
"Choose."
But she could never totally let go of him.
She'd been with him
since she was 13 years old,
she couldn't walk away from him
in his hour of need.
And that set up
what became months of conflict
between Ruth and her beloved sons.
They'd refuse to see her.
The family just shattered.
It was as if
you'd smashed it with a hammer.
What he did to me, to my brother,
and to my family, is unforgivable.
What he did to thousands of other people,
destroyed their lives, um...
I'll never understand it
and I'll never forgive him for it,
and I'll never speak to him again.
Andy found a way
that he wanted to move on,
and Mark didn't.
He just didn't.
It was too much.
Have you talked to your dad?
I have no comment.
I'm sorry. I can't help you.
He went into a dark place.
And I don't know if there was anything
anybody could have done for him, because
he was constantly being accused.
The innuendos from people.
There was no relief.
There was nowhere he could go.
It's hard for me
to talk about Mark. Anyway.
The Madoff scandal
took a tragic twist on Saturday
when the oldest son
of the disgraced imprisoned financier
was found hanging from a pipe in his
fashionable New York City apartment,
dead of an apparent suicide.
Police said 46-year-old Mark Madoff
was discovered by his father-in-law
shortly after 7:30 a.m.,
a black dog leash wrapped around his neck,
Madoff's two-year-old son
asleep in his room.
He leaves behind
four children from two marriages.
I remember thinking at the time that
that was an "F you" to his father.
He did it on the two-year anniversary
of his father
telling him about the Ponzi scheme,
and I think he purposely
planned it for the anniversary
as a way to tell his father,
"This is what you did to me."
I just can't get over
what he did to him... what happened.
I can't.
It's because I have a son
who's close in age to him, you know,
and I can't imagine him
suffering like that.
And he suffered, he really suffered.
I think that's why I cry.
We were very close.
He was my best friend.
And, uh, I wanted to help him.
I just wish until my dying day
that I had done what he wanted.
I don't know if it would have
made a difference or not, but...
If I could change things,
at least if I had tried.
In the aftermath of Mark's death,
Ruth had grown increasingly close to Andy.
There was some kind
of rapprochement between them,
and he became a great source
of support and encouragement for her.
And then just almost
too much sorrow to believe,
the cancer that Andrew
had defeated a decade earlier
came back...
and in a virulent form.
It was terrible,
but Andy was fighting it.
I said, "Do you think it would help you
to talk to him? To talk to Bernie?"
He goes, "That's not gonna happen."
I saw him in the spring.
He came down to talk to a class
I was teaching at Princeton.
And over lunch with his fiancée,
he said to me,
"You know, my dad's crime...
it killed my brother quickly
and it's killing me slowly."
Andrew Madoff
died of lymphoma at the age of 48,
six years after father
Bernie Madoff's infamous
$65 billion Ponzi scheme collapsed.
He passed away with
his family around him, leaving Ruth alone.
Her husband locked up for life,
her sons both gone.
Bernard Madoff at least
knows he'll have a roof over his head.
His wife, Ruth, though,
doesn't have that assurance anymore.
Yesterday,
federal marshals seized
Bernard Madoff's
$7 million Manhattan penthouse.
The apartment is gone,
and so are the seized homes
in Palm Beach, Florida,
the south of France, and Long Island,
leaving his wife effectively homeless.
I was there when we basically
threw her out of her apartment.
We took everything and...
"You got to get out of here."
I was in the kitchen,
and I'm actually inventorying her jewelry.
She really seemed numb and shell-shocked.
And she was smoking a cigarette.
I said, "Ruth, that's gonna kill you."
And she said, "Oh, if only it would."
She seemed kind of resigned to this,
you know, bad ending.
Ruth Madoff
has vacated the residence.
She has surrendered all personal property
to the United States Marshal Service.
Suddenly, she was a nomad.
She lived out of two suitcases
in the back of her car.
And that was her life now.
She lost everything.
She lost her position in life,
she lost both her sons,
and she lost her husband
that she'd been with since she was 13.
When I visited
Bernie in prison in the years after,
there was very little authentic
about Bernie's descriptions of his fraud,
about how he felt about what he'd done,
but I felt that there was
that authentic evidence of grief
about what had happened to his family.
Noted psychiatrists
that I talked with about Madoff's case
hypothesized that what Bernie was grieving
was the loss of his family's adoration.
It was not so much that he loved them
as that he loved having them love him.
Which is, of course,
pure narcissism and pure sociopath.
But, whatever it was,
I could see the toll that it took.
Thank you.
Thank you. Please, everybody be seated.
It is an indisputable fact
that one of the most significant
contributors to our economic downturn
was an unraveling
of major financial institutions
and the lack
of adequate regulatory structures
to prevent abuse and excess.
A culture of irresponsibility took root
from Wall Street
to Washington to Main Street.
So the question is, what do we do now?
We did not choose how this crisis began,
but we do have a choice
in the legacy this crisis leaves behind.
I think the global financial crisis
showed us that
you can't trust Wall Street.
You can't trust the investment banks.
You can't trust the Wall Street analysts,
you can't trust the rating agencies,
and you certainly
can't trust the regulators.
Madoff was the scapegoat
for the financial crisis.
No one went to jail except for Madoff
and a few of his henchmen and henchwomen.
No one from the rating agencies
went to jail.
No one from the Wall Street
analyst community.
No one at the investment banks
went to jail.
The CEOs didn't go to jail.
They got to collect their bonuses.
Their banks were bailed out.
But no one bailed out Bernie's victims.
You can't
distance yourself from the victims.
To see what they went through,
it's difficult.
In the end, my mother passed away
before we had to sell the house.
That last day, leaving and packing up,
it was one of the worst days of my life.
I drove away through the gate at the end.
And I started crying like...
Couldn't hold back.
I wasn't just leaving
the house that my father built...
...that my mother lived in.
It was the end of Palm Beach life.
A big part of my life. Over. Gone.
I live in a rented condo,
so I don't own anymore.
I miss that house.
I would've liked
to have been able to hold on to it,
but I learned to live
without a lot of money.
Maybe that's the good thing that
my father taught us: how to survive.
So, I don't begrudge
having to move or doing new things.
Now I'm learning
all about Shakespearean plays,
and I thought,
Bernie Madoff's story
is very Shakespearean.
It fits with the way
Shakespeare liked to write,
and he's had a villain in it,
and he had children,
but he wanted power.
And it is a tragedy.
The fact that Bernie Madoff
had been turned in to the FBI by his sons
lifted it into something
more and more tragic in terms of betrayal,
and the more I studied the story,
the more I began to see it
as this parable of betrayed trust.
It's the monster in everybody's closet.
It's the terror under the bed.
It's what everyone knows
could happen to anyone.
The only people
who can deceive you completely
are people you trust completely.
And the price of trusting anyone
is that they can betray you like that.
People want to believe
in good returns without downside risk.
Everybody wants that in their portfolio,
but they're chasing the Holy Grail.
The Holy Grail doesn't exist in real life,
nor does it exist in finance.
Madoff was a fake.
There was nothing real there.
And so could there be
another Bernie Madoff in the future?
There will be another Bernie Madoff.
That will happen. Mark my words.
The Madoff case.
It's a record-breaking case as of 2008.
But remember...
records are made to be broken.
AP led with a story a few moments ago.
Bernie Madoff,
the architect of the largest
Ponzi scheme in American history,
died today in prison. He was 82.
I understand that
when Bernie died, he was cremated.
Judaism is against cremation.
We believe very strongly
that our body does not belong to us.
It belongs to God who gave it to us,
so we're supposed to return it.
From earth you come,
to the earth you return.
But then the real twist of the story
is that the remains of this man
are still around
and are sitting on a shelf
of a lawyer's office in some box,
because the family refuses
to receive the ashes.
I guess I can understand it, but it hurts.
There must have been good times with him.
They're so angry with him that
that anger will stay forever.
Everybody gets buried, even murderers.
They get buried.
This should have happened with him,
as bad as I think he is.
And was.
Nobody in the family,
they don't want to be
connected to him in any way.
Who wants to be connected
to the ashes of this vicious monster,
who did not have any compunctions
destroying people's lives?
By the time 2007 dawned,
Bernie Madoff must have looked back
over the previous two years and said,
"I never thought
I'd make it through, but I did."
With the help of the feeder funds,
with the help of inept SEC investigators,
he had managed to reach 2007
with his slush fund fat.
He regularly flies his private jet
to his townhouse in the south of France,
where he has a new boat to play with.
He lives large,
but Bernie and Ruth Madoff
were not the only ones
benefiting from this
extraordinary year of extravagance.
Back in New York,
Madoff made sure that
his trusted minions on the 17th floor
shared in this wealth.
He doubled Frank DiPascali's salary
from $2 million to $4 million.
Frank bought a new fishing boat,
everything he ever dreamed of having.
Annette Bongiorno
is given a substantial raise,
and that year unfolds
with more and more luxury.
That sense of exuberance
of having arrived at last
at a pinnacle of Wall Street success.
The basic concept of Wall Street,
which sometimes the regulators
lose sight of, as do the academics,
is it's a for-profit enterprise.
By benefiting one person,
you're disadvantaging another person.
In 2008, all of a sudden,
the global economy
was teetering on the brink.
Problems with the housing market
are making news tonight,
and now there is even more stark evidence
of how serious
things are getting in this country.
Mortgage brokers
were selling homes based on liar loans,
which mean no documentation of income,
to people that couldn't afford them
with mortgages they didn't understand.
And then the investment banks
were taking these lousy loans
they knew were going to crater,
packaging them into securities,
getting AAA ratings
from the Wall Street rating agencies,
and selling them
to investors on Wall Street.
And then, boom, fell off a cliff.
Hundreds of thousands of
homeowners are defaulting on their loans.
It literally was like
the world was falling off its axis.
Every bank was falling to pieces.
Lehman Brothers reeling
because of these bad real estate loans.
Lehman Brothers
had filed for bankruptcy.
Merrill Lynch, AIG was teetering.
Morgan Stanley and Goldman Sachs
had to be bailed out.
We're talking
about investment banks,
these are the smartest money
on Wall Street.
How have they been
getting it wrong for so long?
Bernie and Ruth
are in the south of France,
but Bernie can't tear himself away
from what's happening back home.
The stock market
is dropping precipitously.
We are faced with the prospect
of a global meltdown.
So that was the environment
that Bernie finds himself in
when he and Ruth get
back on that jet for the last time
and arrive back in New York.
At this point, all anybody cared about
was getting their cash quickly.
Where could they turn?
They could turn to Bernie Madoff.
And they did.
Phones ringing from Frankfurt,
from London,
Madrid, Vienna, Abu Dhabi.
"We want our money back."
And the withdrawal notices
start to flow in, and then pour in,
and then avalanche in.
September-October,
that is when the screws begin to tighten.
Bernie by now
is tap dancing as fast as he can.
He's badgering, he's bullying,
he's cajoling many of his oldest clients
to stop pulling out money,
start putting money back in.
He calls his mainstay investor,
Fairfield Greenwich,
run by Jeffrey Tucker
and Walter Noel, and says,
"This is a great time to buy." "No."
Then he calls Sonja Kohn of Bank Medici,
makes the same plea.
She doesn't take the bait either.
By the 2nd of December,
the writing's on the wall.
Bernie is facing about $1.5 billion
worth of withdrawal requests.
And he only has roughly
$300 million left in his bank account.
If he writes checks to those clients
who want to withdraw their money,
the checks will bounce.
But obviously, you know,
I couldn't keep doing that
because of the nature of the Ponzi scheme.
So I knew that... that the game was over.
At this point,
he and Frank DiPascali
have a conversation about,
where do they go from here?
Bernie makes it clear to Frank
that they're too far underwater
to ever get out again.
Frank has an immediate recognition
that he's gonna go
to jail for a long time,
and Frank just went ape shit.
DiPascali will later claim
that this was the moment
when he first realized
that Bernie didn't actually have
a whole bunch of assets
set away somewhere else
that would bail everybody out.
That this was when he realized
it was really a fraud.
What Bernie wants to do with
the money he has left, he tells Frank,
is he wants to write checks to some
of his biggest long-term investors,
for some of the faithful employees,
for extended family members
who had trusted him with their money
and now were going to be wiped out.
After all, the fraud is up now.
The fraud is done.
As Frank DiPascali
is preparing these checks
that Bernie plans to use
to distribute the last of his slush fund,
he portrays it to his sons
as early bonuses for employees.
Well, Mark and Andrew
are deeply disturbed by this.
It makes no sense to them
to be writing bonus checks,
given the state of the market.
So on the morning of December 10th
of 2008, I was sitting at my desk,
and things hadn't
been going well for weeks now.
Bernie was acting very peculiar,
and I was trying not to disturb him.
You know, I felt he was fragile.
And I saw Peter just sitting there,
and I remember
Mark and Andy coming into his office.
Ordinarily, they would
check with me and say,
you know, "What's my dad doing?
What's going on in the office?"
They didn't this time, they just walked
right past me and went into the office.
Mark and Andrew
attempt to change his mind
about issuing all of these checks.
They say, "Dad, you know, how do you know
what the rest of the year is gonna bring?"
"Wouldn't it be safer
to hang on to this cash
until we see how the year ends up?"
After a few attempts to deflect,
Bernie loses his composure.
I had mail for Bernie
and I went to go bring it to his office.
I obviously startled them,
and they all jumped out of their chairs
and stared at me.
And shortly after that,
Mark and Andy, they put Bernie's coat on,
and they escorted him out.
And Bernie never went anywhere
without telling me where he was going,
and he just walked past me.
He never looked at me.
And Mark came over to my desk
and leaned over and whispered,
you know, "We're going to go
do a little Christmas shopping."
I never saw Bernie again.
Mark and Andrew take him
back to the penthouse in Midtown.
Ruth is there,
and this is the first time
that Bernie comes clean.
I was in a mental state
that I could no longer continue it.
So it was almost like
a relief to say, "This is it."
"I just can't continue
this charade any longer."
And that's what caused me
to acknowledge to my family,
uh, that I had been committing this fraud.
Bernie continues to explain how big it is.
Billions of dollars.
And all he has left is that 300 million
that he was trying to give away.
Andrew just slides down the wall
until he's sitting on the floor in tears.
As soon as he hears the confession
that the entire business
has been destroyed,
there's no money,
Mark is totally devastated.
Ruth finally is able
to say something, and what she says is,
"What's a Ponzi scheme?"
It must have been one of those moments
when your world just turns upside down
and everything you thought
was true before is no longer true.
Madoff's sons get up and leave.
Before they reach the lobby, they have
decided that they must consult a lawyer.
Mark's father-in-law
is a noted lawyer in Manhattan.
They arrange to meet with him
at his apartment.
Mark and Andrew tell him
what their father has said,
and their lawyer makes it clear to them:
"This is a fraud in progress."
"Your father is writing checks
to distribute what will soon be called
the ill-gotten gains of his fraud,
and if you do not report it,
you will be accessories
to that continuing crime."
They had to turn their father in.
The FBI go
to the Madoff apartment
early the following morning.
Bernie's in his bathrobe.
"You know why we're here?"
"Yes."
They ask him,
"Is there an innocent explanation?"
And Bernie says, "No."
He tells them, "It's a Ponzi scheme."
What he told his sons was true.
One of the agents calls the office
and quickly briefs them on the outcome,
and is told, "Bring him in."
So they brief Bernie
on the dress code for being arrested.
No shoelaces, no belts, no tie.
He sheds his wedding band and his watch.
Bernie's taken downtown
to the FBI building on Foley Square,
and processed as
any criminal would have been.
And then he calls Ike Sorkin.
"Hello?"
"Ike, it's Bernie. I'm handcuffed
to a chair at FBI headquarters."
"I need your help."
I then immediately tell Madoff,
"If you're talking, stop talking."
I didn't know at the time,
but for two hours, he told the FBI
everything he knew before he called me up,
and he told them
that he was the only one involved.
I was thinking that,
"Quite frankly, he's in a lot of trouble."
"The government's not
walking away from this."
But the bail was set at $10 million,
so Bernie goes back to the apartment,
and that's when it all blew up.
All hell broke loose.
If you work on a trading desk,
stop what you're doing
before you walk out
and clean your desk out for the day.
Bernie Madoff has been arrested.
Federal authorities are calling it
one of Wall Street's
biggest Ponzi schemes.
Police say the man behind it was one
of the most admired men on Wall Street.
Bernard Madoff,
a former chairman
of the NASDAQ Stock Exchange.
My cell phone rings, and it's Harry,
and he's screaming
at the top of his lungs,
"Madoff just capitulated."
We had it right on!"
I said, "Hold on, Harry."
And I put down that phone,
and I had such fists of rage.
I just felt dirty and violated,
like, "How could this be? How could I be
so wrong about someone's character?"
Everything that I thought about this man,
Bernie, was completely wrong.
It felt like a betrayal.
After Bernie was arrested,
it was complete chaos.
There was the FBI coming in,
there was the SEC coming in.
There were people who took off.
I had absolutely no direction,
but I knew we had to answer the phones.
A gentleman called in.
We had a nice relationship, we would
always talk, you know, and he said,
"Eleanor,
did you know?"
It was like somebody hit me in the chest,
because I didn't even think
people were going to think I was involved.
That was just like, now another blow.
I was like, "Holy shit."
And I said, "No. No, I didn't."
And Pete is standing there,
and I hung up the phone and I'm going,
"What am I supposed to do here?"
"You know, what is going...
What am I supposed to do?"
Peter just walked away from me.
And I was just like, "You're on your own."
There were people
down in the lobby, calling up,
demanding that somebody
comes down and talks to them.
I would go down to reception,
and I got some of the other ladies,
and we would do it
for 20 minutes at a time
because it was too much. It was sickening.
People were scared. You could hear it
in their voices. They were scared.
Typically, in any
investigation, drug, organized crime,
you're starting with
the lower-level figures,
working your way up the organization.
Well, here we have the top guy, and
we just know a lot of money is missing.
All the employees had been
basically corralled on the 19th floor,
and you don't know
which one of them is a co-conspirator,
potentially a cooperator,
or another person
that has nothing to do with it.
We had to start somewhere.
So we start interviewing
all the employees.
After talking to employees, the FBI
uncovers there's a whole another floor.
And after being led to the 17th floor,
a key card is swiped
that gets them access.
We went in, and we were like,
"Holy shit."
And there's just
rooms and rooms full of boxes,
papers and documents everywhere.
And I realized that
if we start moving this evidence,
we're going to lose a lot of context.
So I declared
the 17th floor a crime scene,
and we just started the investigation
right then and there.
Now, you talk about
the proverbial needle in a haystack.
How do you figure all this out?
The key is a source, informant,
or cooperating witness
who could shepherd you through that.
And that was Frank DiPascali.
He knew that he had
a lot of criminal exposure.
He had a family he cared deeply about.
He had to think of,
what could he do for himself?
And Frank provides us with the roadmap
to figure out how the scheme worked.
It was really kind of amazing to see.
There was no real investing
ever happening.
There were no trades.
In other Ponzi schemes, you've had guys
who would trade stocks, and they'd lose.
I mean, they were bad traders,
and they were always trying to catch up.
I had never seen anything like this,
where there was absolutely
no investing going on.
Mr. Madoff, what would you say
to all those people who lost money?
Pushing and shoving,
that's what Bernard Madoff came home to
after making a brief appearance
in a Manhattan federal court Wednesday.
I was in the back of that whole scrum
of television cameras and reporters.
Don't touch me.
There is that famous scene
of him pushing a television camera,
and that was a daily occurrence.
Mr. Madoff, what would you say
to all those people that lost money?
What would you say to them?
Bernie Madoff's fraud
was like a nine-alarm fire
in the world of business journalism.
It was a fire hose of news.
It was wall-to-wall,
because what it represented
was so much larger than this one man.
When you think about the financial crisis,
it was this moment
where everybody's losing their home,
they're losing their 401K.
The unemployment rate is skyrocketing.
People wanted to point fingers,
but they were all big institutions,
they were buildings,
in many people's minds.
And then all of a sudden,
Bernie Madoff arrives on the scene,
and he becomes
the personification of this crisis,
he becomes the face
for the financial crisis.
All of the hate,
all of the venom, all of the anger
that was being focused on Wall Street,
on everything,
they could put it onto him
all of a sudden.
And people want to know,
how come Madoff got bail?
How come he's living in his penthouse,
unlike some other
less fortunate individual
who doesn't have his monetary means
who's, you know, being held
without bail on Rikers Island.
It just didn't, you know, seem right.
In the beginning,
you'd hear about Bernie Madoff.
Then you'd hear about some investors.
Filmmaker Steven Spielberg,
Mets owner Fred Wilpon...
The bold-faced names
in his investor list surfaced first.
Elie Wiesel, the Nobel Peace Prize winner
and Holocaust survivor...
For the first moment...
...I felt a kind of,
not physical, but spiritual,
mental nakedness.
That everything was taken.
It took several more days,
weeks in some cases, to put together
the retired corrections officer,
the retired teachers,
the retired dentists.
These were, like, real people,
and you could see them and you knew them
and you'd see their faces.
I think all of a sudden
it made this human. It made it real.
When my father passed away,
my younger brother says,
"Well, all of Dad's money was in Madoff,
we might as well leave it."
I decided to retire because I said,
"My God, there's money there."
"I could draw on that money.
I could take my money and live on it."
And I moved to Florida,
and I used my money,
money that I had saved, to buy the house,
and I figured, "This is gonna be terrific
because I'll get my distribution,
that'll pay back the money
that I put into the house,
and then I'll have
some money to retire on."
I said. "This is the last place
I'm gonna live in."
And I was very happy.
I was in the house four months,
that's all, when my brother called,
and he said, "Bernie Madoff
was just arrested for fraud."
And it was such a shock.
I often thought,
"What would have happened
if my father had been alive
and had heard the news?"
And I think it would have killed him
even faster than the cancer.
My father was with Madoff
since at least the early '80s.
All the accounts together,
we had somewhere around $30 million,
and then the money in Madoff went "Poof!"
Like that, gone.
It was 30 million Monopoly dollars.
I felt stupid that I had been conned,
which obviously I was.
Also, my family said,
"Well, Rich has had
some Wall Street experience,
so he understands what's going on."
And shouldn't I have known better?
So, it was definitely a thing
that really affected me personally.
Initially,
when I heard about what happened
and knew I wasn't getting any money,
I was very upset, scared.
You know, what am I going to do?
I can't try to look for work.
I was in my mid-seventies already.
But I really felt terrible for my father,
even though he had passed away.
There's an expression that
my mother used to use, called,
"It's a shanda for the neighbors,"
which means your neighbors will know
that you made that bad decision.
It's a shame.
He was fooled.
And that made me very angry.
We had made certain
financial decisions, my wife and I.
We have a son with disabilities,
and we said, "Well,
we really don't need the life insurance
because we have this asset with Madoff,
this nest egg, which would
eventually be used for his care."
That got blown to bits.
My mission was
to try to keep my mother in her house,
the house that
my father built in Palm Beach.
But I knew eventually the house,
which was our biggest asset,
was going to have to go.
My mother was devastated by it.
But don't cry me a river.
A lot of people
lost everything altogether.
A white-collar crime
is different than a blue-collar crime.
A blue-collar crime,
the bodies drop before you investigate.
And a white-collar crime,
they drop afterwards.
A French investment fund manager
who had $1.5 billion of his clients' money
with Bernie Madoff
was found dead in his Manhattan office
today, an apparent suicide.
René-Thierry de la Villehuchet.
It was all over the news.
Thierry's suicide.
It happened 11 days after
Bernie turned himself in.
Thierry locked himself
in his office that night,
and he sliced his arms open
and bled into a trashcan
so he wouldn't make a mess
for the cleaning lady.
He chose
the methodology of death that he did,
a painful solution,
to atone for his sins of omission.
What a waste of a man.
He was a man of honor,
and he was betrayed.
It was traumatic for me personally.
I cried for three days straight,
because I was thinking of calling Thierry.
I knew he had lost a lot personally.
I knew his firm was done for.
I wish I had reached out.
Maybe I could have prevented that.
For what might be the last time ever,
Bernie Madoff left his $7 million
Manhattan penthouse early this morning
and made his way to federal court.
Bernie essentially decided
to plead guilty because he was guilty.
He had very little to gain
by going to trial.
It would have prolonged a process
that was subjecting his family
to a relentless,
scalding degree of public attention.
He made the decision,
in effect, "Let's get this over with."
"I gotta get rid of those cameras,
I've gotta protect Ruth,
I gotta protect the boys."
They came up with
an array of securities fraud
and money laundering charges against him,
and it's a long process.
He had to not only say "guilty,"
he had to explain what he'd done.
At the end, his attorney asks
for a continuance of bail
until Bernie could be sentenced,
which would happen several months later.
The judge says no.
"He's pleaded guilty,
he is a confessed felon,
he's going to be locked up."
And at that moment, you know,
Bernie is going to jail that day.
Could have heard
a pin drop in that courtroom.
And you could hear the click
of the handcuffs around his wrists.
He was housed
in the Manhattan Correctional Center
until he could be sentenced.
The government wanted,
the prosecutor wanted me
to plea bargain with them, to, uh...
you know, make some sort of a deal
by providing information as to
who else was involved in this fraud.
Uh... I mean, the belief was that
I couldn't be doing this all myself,
that there had to be
other people involved.
When Bernie Madoff said,
"I did it all by myself,"
I knew that he was protecting
mostly his family,
and of course, his employees.
There was no way that one person
can pull off such a complicated fraud.
The 17th floor employees are
what I call the witless co-conspirators,
all of whom were hired
as high school graduates,
knowing nothing about
how the Street operated,
and were able to basically enable
the operations of this Ponzi scheme,
undetected, for years.
During our investigation,
the big defense of all the employees,
and even Frank DiPascali,
was they didn't know
it was a Ponzi scheme.
When they said they didn't know
it was a Ponzi scheme,
they also said, "Well,
we knew the trades weren't legitimate,
but that somehow Bernie had
the assets somewhere in Europe
and gold and real estate to cover it."
Well, that's still illegal.
Federal investigators
are ripping apart 20 years of fraud
inside Madoff's firm,
moving beyond Bernie,
looking at sons Andrew and Mark
who directed trading activities.
Andrew and Mark Madoff certainly knew
that the investment advisory business
was not like
your typical brokerage account.
Maybe they didn't know
it was a Ponzi scheme,
but they knew
it wasn't what it appeared to be.
I worked there for 25 years.
Those boys grew up in front of me.
They never went downstairs
to the investment advisory side.
They didn't work there.
There was no connection.
Also under the microscope,
Madoff's wife of 49 years, Ruth,
who has not been charged in the case.
I have no comments at this time
on any subject.
I'm often asked the question,
"Do you think Ruth knew?"
I looked really closely at Ruth.
Ruth had an office kind of
around the corner from Bernie's office.
Go into her office, open the file cabinet,
and I was like,
"Whoa! We hit pay dirt here!"
If Ruth Madoff had,
you know, a street name,
it would be Ruthie Books, because she was
a bookkeeper and she was highly organized.
Personal tax returns,
bank account statements,
information on Bernie's boats,
property they owned...
It was all laid out perfectly for us.
So we learned a lot
about Bernie's lifestyle,
but I never saw anything that pointed
to her knowing about the Ponzi scheme.
Whatever Bernie shared with her,
we don't know.
You know,
my father was very money-conscious.
He tried to bring me up
in a money-conscious kind of a way.
And he would say, "You know,
if it looks too good to be true, it is."
But he didn't follow his own advice.
And I don't blame him either.
I blame the government.
The SEC, they believed the con.
They were conned too.
If you have the SEC going forward
and conducting an exam
or doing an enforcement investigation,
and instead of having
the appropriate effect,
which is to relatively easily
uncover the fraud,
you actually allow the fraud
and give the fraud credibility,
and it grows because
of your exams and investigations,
that's a very severe indictment
of the government.
I think if it wasn't
for the financial crisis,
he may never have been caught.
"We are sorry,
and we're fixing the problem."
That was the response today from
the Securities and Exchange Commission.
Contrite regulators were
called on the carpet by Congress today
after a scathing report said
the agency was incompetent.
There was an investigation
called for by Congress,
and I had to give testimony.
So when I showed up, I showed up early.
Every seat for the press was full.
I talked to everybody in the press,
let them know it would be a prizefight,
and they could expect
some riveting testimony.
And sitting there next to the press
was all the SEC staff.
And I was signaling them a message
that I was going to pound them.
As today's testimony will reveal,
my team and I tried our best
to get the SEC to investigate
and shut down the Madoff Ponzi scheme
with repeated and credible warnings
to the SEC that started in May 2000,
when the Madoff Ponzi scheme
was only a $3 to $7 billion fraud.
We knew then that
we had provided enough red flags
and mathematical proofs
where they should have been able
to shut him down right then and there.
Unfortunately,
as they didn't respond
to my written submissions in 2000,
2001, 2005, 2007, and 2008,
here we are today.
It was like an explosion
that you had never seen before.
The agency literally shook.
He was...
so, uh, specific about the failures
and so, in some ways,
harsh about the failures.
The SEC is over-lawyered
and has too few staff
with relevant industry experience
and professional credentials
to find fraud,
even when a multibillion-dollar case
is handed to them on a silver platter.
You have no excuses.
You darn well better be
apologizing to the Madoff victims.
The SEC continues to roar like a mouse
and bite like a flea.
I was told it was the most heated
Congressional testimony since Watergate.
I think I speak for everyone
when I say we hate fraud.
We wish it never happened.
We wish we could get to...
But your job is to prevent fraud,
not to hate it.
One guy led you to this pile of dung
that is Bernie Madoff
and stuck your nose in it,
and you couldn't figure it out.
You could've shut Madoff down
in one half hour
by just following up
on one of his allegations
that they were not conducting trades.
If you are the watchdog, you have totally
and thoroughly failed in your mission.
Don't you get it?
Is the SEC
too cozy with the industry?
Are they captive by this industry,
or are they looking out for us?
Looking out for the taxpayers?
When I started
doing business with all my clients,
I was a little guy with nothing.
I was this little kid from Queens.
Didn't go to Harvard or... and so on.
Why would anybody trust me
to give me business?
Turn their money over to me?
But the first thing I learned:
Whatever you do in this business,
never break your word.
Your word was your bond,
literally, and that was it.
You trusted everybody.
But nothing in this industry
is what it looks like.
The fact that Bernie Madoff pled guilty,
I think drew attention away from banks
and maybe some other big investors
who should have gone to jail,
but they didn't.
In my opinion, the feeder funds
abrogated their responsibilities
and had no criminal liability
for the fact that all these folks
were wiped out innocently.
Their culpability was a complete failure
to do due diligence, which was their job.
And I think
the owners of Fairfield Greenwich,
Sonja Kohn, all those folks,
they should have gone to jail.
But Madoff could never have perpetrated
the fraud that he perpetrated
had he not had
the complicity of JPMorgan Chase.
JPMorgan is the only entity
that had a view
into Bernie's Ponzi scheme:
The checking account.
The 703 account.
The bank
stipulated that during the period
from 2003 to 2008,
you maintained on deposit
at JPMorgan Chase
$3 to $6 billion.
- Is that correct?
- Yes.
That's enough to draw
the bankers' attention to the fact
that this is not
a normal banking relationship.
They had a statutory obligation
under the Bank Secrecy Act
to monitor that account
and to gain an understanding
of what his business was.
When you move more
than $10,000 through a banking system,
and the banker cannot see
the logic of that transaction,
it generates something
called a suspicious activity report.
And then the Feds start looking at it.
FBI.
How do you transfer
billions of dollars on phony transactions
back and forth at major banks
and not generate a SARs report?
People knew
not to ask too many questions.
If you're getting good returns
and you're getting lots of money,
and you're not to ask any questions,
you don't ask any questions.
And, you know,
greed has a way of doing that to people.
JPMorgan paid
a few billion dollars in criminal fines
for their role in the Madoff case.
Yet no one went to jail. Not one person
at the bank was found guilty of anything.
In fact, no one was even charged.
I ask you, how is that possible?
This is their way of doing business.
JPMorgan Chase has pled guilty
to five massive criminal conspiracies
involving billions of dollars
within the last six years.
When they get caught,
they're never required to disclose
the profits they made on the scheme.
They just pay a fine and they go on.
So JPMorgan Chase financially profited
from Madoff's crimes.
And I have to believe that
they absolutely understood
what was going on.
The Madoff fraud dwarfed so many frauds.
It's the largest Ponzi scheme
in the world to date.
The statement value at the end,
when the music stopped in 2008,
was $64 billion
people thought they had with Madoff.
Sixty-four billion dollars.
But that was imaginary money.
Bernie had created it out of thin air.
The $64 billion, don't forget,
was the false profits
that were being generated.
But there's
another number that was real money.
The real money that
people handed to Bernie in cash
totaled about $19 billion.
Nineteen billion dollars
of cash actually invested with Madoff.
That's a staggering number, $19 billion.
From nonprofit organizations
that had invested money,
to foundations, to individuals,
to people that had sold
a mom-and-pop business
and invested their life savings in it.
A lot of people put their money
with Madoff, all of their money,
and lost it all.
After the shocking discovery
that Bernie had made no investments,
there were no stacks of securities
tucked away in a bank vault somewhere,
there was despair.
But despair brightened when
the ruling was made from Washington
that Bernie was a member of the Securities
Investors Protection Corporation.
SIPC, as it's called.
SIPC was established
pursuant to the Securities Investor
Protection Act in 1970 by Congress,
and its purpose is
to operate an insurance fund
to provide up to $500,000 per account
if the broker takes the money
and doesn't buy the securities.
That $500,000 dollars
is coming out of Wall Street's pocket.
Wall Street finances SIPC
through dues that its members pay.
But the Madoff case,
the courts decided that
there should be what's called
a Ponzi scheme exception to statutes.
Basically SIPC insurance
wouldn't apply to a Ponzi scheme.
But this is just nonsense.
It's exactly when there's a Ponzi scheme
that customers need the insurance.
The irony of it is,
the insurance fund had been woefully
inadequate for almost two decades.
In 1990, SIPC decided
that the amount that
each member firm should contribute
to fund the Insurance fund
was $150 a year,
not per customer,
which still would have been a joke,
but per firm.
That's less than they spend on flowers
in the Executive Suite every week.
Ultimately, there were
so many Madoff victims
that if they were to compensate everyone,
SIPC would have gone bankrupt.
So that's where Irving Picard stepped in.
He became the Madoff trustee.
A trustee is the person who's responsible
for liquidating a registered
broker-dealer that becomes bankrupt.
Picard is appointed by the Securities
Investor Protection Corporation.
His fees are paid by the Securities
Investor Protection Corporation.
Irving Picard has to
figure out exactly who is owed what.
There's a formula that
Picard decides is the simplest one.
It's called the net equity formula.
We're continuing to get money out,
and we're trying to be fair.
Some are net losers,
which means that they weren't able to
get their money out of the Ponzi scheme.
But let's say
I'm an early Madoff investor.
And all the while
I've been taking money out,
not knowing it's a fraud,
and I've made more than I've put in.
According to the trustee,
I'm a net winner,
and I need to give that money back.
That's what's known as a claw back.
These clawback lawsuits
were filed by the trustee
against hundreds and
hundreds and hundreds of investors.
But it was quite a contentious issue,
because the net winners
were many of the smaller, older investors
who had been with Bernie from the get-go.
They had invested money with him
and then lived off the profits
that he was supposedly
generating for them over the years.
For example,
if my grandfather had opened
an account with Bernard Madoff,
and that account
was inherited by my mother,
and then upon her death,
I inherited the account,
you'd be asking me as the granddaughter
to pay back for withdrawals
my grandfather made 45 years ago.
So you can imagine
that people were furious,
particularly those who had been
taking money out every year,
say, to fund their retirement
or to send their kids to college.
And by the way,
they were paying taxes on that.
People were saying, "How can I give back
money I've already given to the IRS?"
Basically, Picard took money
from one set of Madoff investors
to pay off another
set of Madoff investors,
which I call the reverse Ponzi scheme.
The victims were victimized again.
I had been
in Madoff for so long, since 1992,
and we took out
more money than we put in.
So the trustee came back at us
and said, "Fork it over."
We didn't have it,
because we took out the money
and spent it every year.
And our claw back case went on for years.
Years of calling the lawyers
and saying, "What's going on?"
We could not plan the rest of our life.
It was just horrible.
Just horrible.
At one point, we were told we'd
probably be better off getting a divorce,
because we had heard that
they're not taking the wife's assets.
But you just don't know,
and now you don't trust anybody anymore.
But then we said, "Hell, no."
And we thought
we'd fight it a different way,
which was through
the Hardship Application.
They give you
a form to fill out and say, "You know..."
Yeah, they said,
"If you had to go into your closet
and sell all your clothing right now,
what would you get for it?"
And, you know, I had six pairs of jeans.
What's the value of jewelry?
- Jewelry...
- I don't wear jewelry.
We didn't have that.
They wanted to know your artwork...
We don't have artwork.
We filled out the form showing you
what we have, which is not a whole lot.
This is painful for us to go through this
year after year,
not knowing what's going to happen.
But in the end, it worked.
Our attorneys in New York talked to them,
and the trustee ended up saying,
"You're free."
I kind of lost my husband
for several years,
because all he did
was try to find a solution.
And he got so absorbed
in finding the solution.
There was part of him that was gone.
And that takes its toll.
I earned all the money,
I invested all the money,
I did all the due diligence,
and it all blew up in my face.
You know, it's...
...it's one thing to lose your life savings,
and that's bad.
But when you lose your house too,
it's terrible.
I think you have to distinguish
who the victims are in this case.
There are, you know,
the widows out there who...
This was all their money.
They trusted it to Bernie.
People who invested via feeder fund.
They didn't know any better.
But if you look at big investors,
people who had hundreds of millions
or even billions of dollars
on the books with Madoff,
who are supposedly
very savvy, sophisticated,
they entered into
this agreement with the devil, in effect.
I think that they knew
what they were getting into.
We're talking about
the big four investors.
Norman Levy,
Jeff Picower,
Stanley Chais,
and Carl Shapiro.
I had a very special relationship
with the big four clients, all right?
They didn't want to screw me either,
generally, because, number one,
we had a close
family type of relationship,
and also I made them a lot of money.
They didn't wanna kill
the goose that laid the golden egg.
Picower was a little bit different.
Picower behaved as a co-conspirator.
I don't think
Bernie's billion-dollar Ponzi scheme
could have survived without him.
Bernie needed Picower to help
keep the money flowing,
and it is my opinion that Bernie Madoff
helped Jeffry Picower commit tax fraud.
They used each other.
Moreover, Picower made more money
off of Madoff's fraud than anyone else,
and Irving Picard knew what was going on.
So after Madoff was arrested,
Irving Picard starts
chasing him for money.
Irving Picard,
the trustee in charge of recovering
money lost in the scheme,
sued the publicity-shy
Picower and his wife,
citing outrageous annual returns
as high as 950% on Madoff investments
at a time average returns on the market
were only about 9%.
I've always believed that Picower
knew a lot more about the fraud.
Unfortunately, we will never know.
Investigators are trying to figure out
how Jeffry Picower wound up dead
at the bottom of his swimming pool
in Palm Beach County.
Police are investigating
his death as a drowning,
but apparently are not
ruling anything out.
Obviously, they knew he was
in the midst of being held accountable
for his role in the Ponzi scheme,
and that he might have
tried to commit suicide.
But the general consensus from the autopsy
was that it was a heart attack.
Had Jeffry Picower lived,
I believe he would have been indicted.
While Jeffry Picower
certainly should have gone to prison,
Picard was able to claw back the money.
So Jeffry Picower's wife Barbara
is forced to return $7.2 billion
of the ill-gotten gains
from the Ponzi scheme.
We are hopeful
that positive and fair outcomes,
like that of the Picower negotiations
and several of our other settlements,
can and will be repeated.
As for the other longtime investors,
Norm Levy's estate
is forced to return $220 million.
The estate of Stanley Chais
agreed to settle for $277 million.
And Carl Shapiro
forfeited $625 million.
Irving Picard had recovered
more than 14 billion
of the roughly 19 billion in cash
that had flowed into the fraud.
No one would ever have dreamed that
you would recover that amount of money.
But the methods
that the law required him to use
were just heartbreaking.
Going after innocent Madoff victims,
many of which the average age was 70,
some of these folks
had to go work in Walmart...
Suing them for their IRAs
and their houses,
and the amount of fees they took
I consider unconscionable.
Irving Picard's law firm,
over the course of many, many years,
billed over a billion dollars
to oversee the Madoff trusteeship.
So Irving Picard became a very wealthy man
as a result of the Madoff debacle.
I don't think the process was fair at all
because we were innocent,
and to put us through all that...
Yeah. I feel victimized for sure.
But I feel differently.
Um, I mean, looking at it analytically,
it was the only way
to pay the other victims,
is to take money back
from people that took more money out,
because there's no other money.
I don't like the law,
but I don't have a better alternative.
I think it was a necessary evil
that we had to go through,
and he was doing his job, the trustee.
For the last three months,
Bernie Madoff has spent his days
in a 7.5x8-foot jail cell
here in Lower Manhattan,
not far from this court.
Today he'll find out how he will spend
the rest of his life.
I wake up every morning and my wife...
The things that matter, I have.
And he can't take them away.
It says a lot about America's history
of punishing white-collar crime
that the biggest fear Madoff's victims had
as he approached his sentencing date
was the slap on the wrist.
That he would somehow
get patted on the head
and sent off to some
fairly pleasant prison environment
to spend, you know,
a fairly lenient sentence.
I mean, this had happened.
People had seen that.
When I went
to the sentencing in June of 2009,
there were a lot of Bernie Madoff's
victims in the courtroom.
They were really captivating,
talking about how
they had lost everything.
I was in the process of retiring.
That will never happen,
the way things are right now.
I go to the grocery
and have to watch what I'm buying.
A whole different ball game now.
I wake up in the middle
of the night, dreaming about this,
and how... The damage
that he's done to my entire family.
The vastness of the financial pain
was something I had never seen before.
The defense lawyer, Ike Sorkin,
pleaded for mercy, for leniency.
He said, "This is a 70-year-old man!"
"He's obviously not going to commit
a crime like this again."
And then Bernie said,
"I will turn to my victims and apologize."
The strange part was that
Bernie Madoff really had no expression.
He didn't show any remorse.
He wasn't emotional.
He was like a financial serial killer.
He was able to look widows in the eye
and take their money and say,
"You are taken care of. You can trust me,"
and screw them over in the next breath.
And he did that
over and over and over.
And then the judge began to talk.
He announced that
he was required to impose a sentence
that would reflect
the magnitude of Madoff's crime.
And he sentenced him to 150 years.
This was a purely symbolic sentence.
It was a judge saying,
"You have inflicted
so much harm on society."
"Society is going to inflict
a commensurate amount of harm on you."
It was a remarkable moment
in that courtroom.
Once Madoff himself
had pled guilty and been sentenced,
there was a real desire
by multiple government agencies,
by victims, by all of us,
to try to hold the people
who were criminally involved accountable.
And for a period of time,
I was a member of the team
prosecuting everything relating
to the Madoff Securities fraud.
It takes several years for them
to put the whole case together
based on everything that Frank told them,
and this leads to charges
against 17th-floor employees
that were complicit in the Ponzi scheme,
according to the government.
Annette Bongiorno
and Jodi Crupi got six years in prison.
Jerry O'Hara and George Perez
both got two and a half years.
What sometimes gets forgotten
is Peter Madoff remained
under scrutiny by prosecutors.
Peter Madoff pled guilty
and was convicted of two counts,
one of falsifying the records
of a broker-dealer,
and the other of engaging
in a criminal conspiracy
that actually had multiple criminal aims.
None of those charges accused him
of participating in the Ponzi scheme,
and he insisted that
he had known nothing about it.
Nevertheless, he was sentenced
to ten years in federal prison.
Frank DiPascali,
he's charged with securities fraud.
But because Frank cooperates
with the government,
his sentence isn't given until
after the government case is finished.
Government case finishes,
we're now talking years.
Frank has lung cancer
and dies within four weeks,
and is never sentenced.
This was a fraud of epic proportions,
and each of the people
that was convicted at trial
was involved in that fraud
for a period of decades,
And their hands weren't just
a little dirty, they were totally dirty.
At the same time, they plainly
were not the prime movers of the fraud.
So, you know,
was the sentence imposed on them
fair?
You know, that's not for me to say.
If I were the judge,
would it have been more severe?
It would have been.
After Bernie was arrested,
so many people hated Mark and Andy.
They hated these lovely young men,
who they saw as monsters.
Since the scandal broke,
the pressure has not let up
on Mark or his brother Andrew.
I want his family to feel the pain
that they've inflicted on our family.
They were subjected
to the most unrelenting, fierce,
hostile public and media coverage
I've ever seen.
Mr. Madoff?
The sons were shocked
and horrified by their father's crime.
And they confronted Ruth
with the need to choose.
In fact, they insist that
she break off all contact with Bernie.
"It's him or us," they told her.
And even worse,
"It's him or your grandchildren."
"Choose."
But she could never totally let go of him.
She'd been with him
since she was 13 years old,
she couldn't walk away from him
in his hour of need.
And that set up
what became months of conflict
between Ruth and her beloved sons.
They'd refuse to see her.
The family just shattered.
It was as if
you'd smashed it with a hammer.
What he did to me, to my brother,
and to my family, is unforgivable.
What he did to thousands of other people,
destroyed their lives, um...
I'll never understand it
and I'll never forgive him for it,
and I'll never speak to him again.
Andy found a way
that he wanted to move on,
and Mark didn't.
He just didn't.
It was too much.
Have you talked to your dad?
I have no comment.
I'm sorry. I can't help you.
He went into a dark place.
And I don't know if there was anything
anybody could have done for him, because
he was constantly being accused.
The innuendos from people.
There was no relief.
There was nowhere he could go.
It's hard for me
to talk about Mark. Anyway.
The Madoff scandal
took a tragic twist on Saturday
when the oldest son
of the disgraced imprisoned financier
was found hanging from a pipe in his
fashionable New York City apartment,
dead of an apparent suicide.
Police said 46-year-old Mark Madoff
was discovered by his father-in-law
shortly after 7:30 a.m.,
a black dog leash wrapped around his neck,
Madoff's two-year-old son
asleep in his room.
He leaves behind
four children from two marriages.
I remember thinking at the time that
that was an "F you" to his father.
He did it on the two-year anniversary
of his father
telling him about the Ponzi scheme,
and I think he purposely
planned it for the anniversary
as a way to tell his father,
"This is what you did to me."
I just can't get over
what he did to him... what happened.
I can't.
It's because I have a son
who's close in age to him, you know,
and I can't imagine him
suffering like that.
And he suffered, he really suffered.
I think that's why I cry.
We were very close.
He was my best friend.
And, uh, I wanted to help him.
I just wish until my dying day
that I had done what he wanted.
I don't know if it would have
made a difference or not, but...
If I could change things,
at least if I had tried.
In the aftermath of Mark's death,
Ruth had grown increasingly close to Andy.
There was some kind
of rapprochement between them,
and he became a great source
of support and encouragement for her.
And then just almost
too much sorrow to believe,
the cancer that Andrew
had defeated a decade earlier
came back...
and in a virulent form.
It was terrible,
but Andy was fighting it.
I said, "Do you think it would help you
to talk to him? To talk to Bernie?"
He goes, "That's not gonna happen."
I saw him in the spring.
He came down to talk to a class
I was teaching at Princeton.
And over lunch with his fiancée,
he said to me,
"You know, my dad's crime...
it killed my brother quickly
and it's killing me slowly."
Andrew Madoff
died of lymphoma at the age of 48,
six years after father
Bernie Madoff's infamous
$65 billion Ponzi scheme collapsed.
He passed away with
his family around him, leaving Ruth alone.
Her husband locked up for life,
her sons both gone.
Bernard Madoff at least
knows he'll have a roof over his head.
His wife, Ruth, though,
doesn't have that assurance anymore.
Yesterday,
federal marshals seized
Bernard Madoff's
$7 million Manhattan penthouse.
The apartment is gone,
and so are the seized homes
in Palm Beach, Florida,
the south of France, and Long Island,
leaving his wife effectively homeless.
I was there when we basically
threw her out of her apartment.
We took everything and...
"You got to get out of here."
I was in the kitchen,
and I'm actually inventorying her jewelry.
She really seemed numb and shell-shocked.
And she was smoking a cigarette.
I said, "Ruth, that's gonna kill you."
And she said, "Oh, if only it would."
She seemed kind of resigned to this,
you know, bad ending.
Ruth Madoff
has vacated the residence.
She has surrendered all personal property
to the United States Marshal Service.
Suddenly, she was a nomad.
She lived out of two suitcases
in the back of her car.
And that was her life now.
She lost everything.
She lost her position in life,
she lost both her sons,
and she lost her husband
that she'd been with since she was 13.
When I visited
Bernie in prison in the years after,
there was very little authentic
about Bernie's descriptions of his fraud,
about how he felt about what he'd done,
but I felt that there was
that authentic evidence of grief
about what had happened to his family.
Noted psychiatrists
that I talked with about Madoff's case
hypothesized that what Bernie was grieving
was the loss of his family's adoration.
It was not so much that he loved them
as that he loved having them love him.
Which is, of course,
pure narcissism and pure sociopath.
But, whatever it was,
I could see the toll that it took.
Thank you.
Thank you. Please, everybody be seated.
It is an indisputable fact
that one of the most significant
contributors to our economic downturn
was an unraveling
of major financial institutions
and the lack
of adequate regulatory structures
to prevent abuse and excess.
A culture of irresponsibility took root
from Wall Street
to Washington to Main Street.
So the question is, what do we do now?
We did not choose how this crisis began,
but we do have a choice
in the legacy this crisis leaves behind.
I think the global financial crisis
showed us that
you can't trust Wall Street.
You can't trust the investment banks.
You can't trust the Wall Street analysts,
you can't trust the rating agencies,
and you certainly
can't trust the regulators.
Madoff was the scapegoat
for the financial crisis.
No one went to jail except for Madoff
and a few of his henchmen and henchwomen.
No one from the rating agencies
went to jail.
No one from the Wall Street
analyst community.
No one at the investment banks
went to jail.
The CEOs didn't go to jail.
They got to collect their bonuses.
Their banks were bailed out.
But no one bailed out Bernie's victims.
You can't
distance yourself from the victims.
To see what they went through,
it's difficult.
In the end, my mother passed away
before we had to sell the house.
That last day, leaving and packing up,
it was one of the worst days of my life.
I drove away through the gate at the end.
And I started crying like...
Couldn't hold back.
I wasn't just leaving
the house that my father built...
...that my mother lived in.
It was the end of Palm Beach life.
A big part of my life. Over. Gone.
I live in a rented condo,
so I don't own anymore.
I miss that house.
I would've liked
to have been able to hold on to it,
but I learned to live
without a lot of money.
Maybe that's the good thing that
my father taught us: how to survive.
So, I don't begrudge
having to move or doing new things.
Now I'm learning
all about Shakespearean plays,
and I thought,
Bernie Madoff's story
is very Shakespearean.
It fits with the way
Shakespeare liked to write,
and he's had a villain in it,
and he had children,
but he wanted power.
And it is a tragedy.
The fact that Bernie Madoff
had been turned in to the FBI by his sons
lifted it into something
more and more tragic in terms of betrayal,
and the more I studied the story,
the more I began to see it
as this parable of betrayed trust.
It's the monster in everybody's closet.
It's the terror under the bed.
It's what everyone knows
could happen to anyone.
The only people
who can deceive you completely
are people you trust completely.
And the price of trusting anyone
is that they can betray you like that.
People want to believe
in good returns without downside risk.
Everybody wants that in their portfolio,
but they're chasing the Holy Grail.
The Holy Grail doesn't exist in real life,
nor does it exist in finance.
Madoff was a fake.
There was nothing real there.
And so could there be
another Bernie Madoff in the future?
There will be another Bernie Madoff.
That will happen. Mark my words.
The Madoff case.
It's a record-breaking case as of 2008.
But remember...
records are made to be broken.