With Ruth taking notes, Madoff turns to the agenda—fund-raising efforts and plans for the big annual dinner in the spring. A fund-raising committee is needed. “Who will take this on?” Madoff asks. Fred Wilpon agrees to do so. The rest of the discussion is routine, except that some members recall Feinberg passing around copies of the foundation’s conflict-of-interest policy and getting a signed copy from each member for the file.
By six o’clock, they are done. Madoff escorts his wife and friends through the private nineteenth-floor exit. They head out into the winter night.
TUESDAY, DECEMBER 9, 2008
Things are starting to slip. Madoff has planned to meet with the son of his friend J. Ira Harris, one of the wise lions of Wall Street and now a genial philanthropist in Palm Beach, but the visit is cancelled.
Instead, Madoff sits down with his older son, Mark, and explains that, despite the recent collapse in the market, he’s had a very strong year with his private investment advisory business. He’s cleared several hundred million dollars, and he wants to distribute bonuses to some employees a little earlier than usual. Not in February—now, this week. He tells Mark to draw up a list of the trading desk employees who should get cheques.
Troubled, Mark consults his brother, Andrew. The two men have seen their father tense up a little more every day as the market crisis has wrung them all out. Just a little liquidity strain on the hedge fund side, he told them last month. But he is clearly more than just worried; they’ve never seen him like this. And now he wants to pay out millions in early bonuses—it doesn’t make sense. Shouldn’t he be conserving cash, with things as rocky as they are? He should wait to see how things look in two months, when bonus season arrives. But Bernie Madoff is an autocrat—he is in charge, and he brooks no opposition. Still, the brothers decide they must talk with their father on Wednesday about their concerns.
After the markets close and the firm starts to empty out, Madoff walks across the oval area where the secretaries sit and enters Peter’s office. Peter has aged and pulled inward in the two years since his only son died. He still carries Roger’s photo in his wallet, one taken after leukemia had already left its stamp on his once-handsome face. For decades before that bereavement, Peter had been Bernie’s right hand, his confidant, the technological guru of the firm, the “kid brother.”
If Peter has not previously known about his brother’s crime—his lawyers will insist later that he did not—he is going to learn about it now. Bernie takes a deep breath and asks his brother if he had “a moment to talk.” Peter nods, and Bernie closes the door.
“I have to tell you what’s going on,” he says.
People speak glibly about “life-changing” moments. Some truly qualify. You propose marriage and are accepted. You hear “You’re hired” or “You’re fired,” and your future shifts instantly. The doctor says “malignant,” and everything is different. But anyone who has ever lived through it will tell you: It is profoundly shattering to learn, in one instant, that everything you thought was true about a loved one is actually a lie. The world rocks on its axis; when it is finally steady again, you are in a strange place that resembles but is totally unlike the place you were in just a moment earlier.
So if this is the moment Peter Madoff learns of his brother’s crime, it seems unlikely that he immediately contemplates the ruin of his career and his family’s fortune, or worries about the chain saw of civil lawsuits and criminal investigations that will chew through the years ahead. Those thoughts will surely come. But if this news has hit him from out of the blue, it is far more likely that his mind just stops and tries to rewind an entire lifetime in a split second, to get back to something real and true.
Peter is a lawyer and the firm’s chief compliance officer—they’ve always been too casual about job titles here, and now it matters. He listens as Bernie explains that he’s going to distribute the bonuses and send redemption cheques to those closest to him—to make whatever amends he can before he turns himself in. He needs just a few days more, he says. He’s already made a date with Ike Sorkin for Friday.
Perhaps still waiting for the world to stop rocking, Peter blurts out, “You’ve got to tell your sons.”
Mark and Andrew had both talked with their uncle Peter about how worried they were about their father, who had grown increasingly preoccupied in recent weeks. They kept asking, “Is Dad all right?” They are frightened, Peter says. Again, he tells Bernie, “You have to tell them.”
He would, he would. He just couldn’t decide when.
WEDNESDAY, DECEMBER 10, 2008
Sometime during the morning, Eleanor Squillari sees Ruth Madoff make a quick visit to the office. On Bernie’s instructions, she is withdrawing $10 million from her Cohmad brokerage account and moving the cash into her bank account at Wachovia so she can write cheques on it if he needs the money. It would not be surprising if she thought her husband needed cash to help cover redemptions from his hedge fund—perhaps she remembers the run on Bear Stearns in February and fears that Bernie is in the same kind of trouble. The distress in the market is apparent to everyone.
Madoff has been at his desk since about nine o’clock, quietly working on what looks like a bunch of figures. In fact, he is probably signing three dozen of the one hundred cheques DiPascali prepared last week—cheques totalling $173 million, made out to friends, employees, and relatives, cashing out their accounts.
Peter Madoff comes in early, pressing him again to share his dreadful news with his sons. Bernie agrees that he will, but he still isn’t certain about when to do it. Tonight is the office holiday party. Perhaps it’s not the right moment. Once he tells them, they will need time to get their bearings. Maybe the weekend would be better.
He calls Ike Sorkin and asks to reschedule their appointment until 10:00 AM next Monday, December 15. Sorkin says, “Sure,” and changes his calendar.
But the timing is taken out of his hands.
At midmorning, Mark and Andrew Madoff walk past Squillari’s desk and enter their father’s office. According to her, Peter Madoff goes in, too, and sits on the sofa beside the desk. Legs crossed and arms folded, Peter looks limp—“as if the air has been sucked out of him,” she will recall. Mark and Andrew sit in front of the desk, their backs to the door.
Madoff’s sons are not accustomed to challenging their father’s decisions about running the business. It is entirely his, after all; he owns every share of it. If their father wants to fire them today, he can. But they have to say something. Mark raises the issue of the bonuses, saying that he and Andrew agree that they are premature and unwise.
Madoff initially tries to reassure them. It’s just as he told them: he has had a good year, he has made profits through his money management business, and he thinks this is a good time to distribute the money.
The sons stand firm; they challenge their father’s explanation. Wouldn’t it be wiser to hang on to any windfall in case they need to replenish the firm’s capital? As they persist, their father grows more visibly upset. He rises from his chair, glances past them to the oval area beyond. His office is a fishbowl. How can a man with so much to hide wind up without a single spot in his office where he can talk to his sons in private?
He tells his sons that he isn’t going to be able to “hold it together” any longer. He needs to talk with them alone, and he asks them to come with him to his apartment on East Sixty-fourth Street. He calls Ruth to tell her that he and their sons are heading over.
Memories of their departure are illogically jumbled, shaken to fragments by the events that followed. Eleanor Squillari recalls asking Bernie where they were going and being told, “I’m going out.” Her memory is that Mark whispers something about Christmas shopping. One of the sons gets Madoff’s coat from the nearby closet and helps him into it. He turns its collar up, as if he is heading into a storm. Squillari thinks it is only about 9:30 AM when she calls down to the seventeenth floor for one of the drivers to go for a car. But the driver later recalls i
t took nearly ninety minutes to return with the sedan. It seems unlikely that father and sons stood in their winter coats and waited for the car for an hour and a half when they could have hailed a cab or walked to the apartment in less than twenty minutes. It is a detail no one will remember.
Finally, they climb into the big black sedan, Mark in front and Andrew and his father in the back. They seize on a safe topic to discuss in front of the driver: Bernie’s grandchildren. They reach the apartment and take the elevator to the penthouse.
Ruth meets them, and they all file into the study that Madoff loves so much, a dark refuge of rich burgundy leather and tapestry fabric, with vintage nautical paintings on the wood-panelled walls and cluttered bookcases embracing the windows.
Madoff breaks down as he talks with his wife and sons; as he begins to weep, they do, too. He tells them that the whole investment advisory business was a fraud, just one enormous lie, “basically, a giant Ponzi scheme.” He is finished. He has “absolutely nothing” left. The business—the family business, where his sons had worked all their lives and where they expected to spend the rest of their careers—is insolvent, ruined. He says the losses from the fraud could run to $50 billion. None of them can take in a sum like that, but they know that millions were entrusted to him by his own family, by generations of Ruth’s relatives, by their employees, by most of their closest friends.
Madoff assures them that he has already told Peter about the fraud and intends to turn himself in within a week. And he actually does have several hundred million dollars left, he says; that bit is true. Before he gives himself up, he plans to pay that money out to certain loyal employees, to family members and friends.
By now, Ruth and her sons seem to be in shock, almost unable to process the news. Mark is blind with fury. Andrew is prostrate. At one point, he slumps to the floor in tears. At another, he wraps his arms around his father with a tenderness that sears itself into Madoff’s memory. When Andrew’s world stops rocking, he will say that what his father has done is “a father-son betrayal of biblical proportions.”
The brothers leave the apartment and tell the driver to wait for their father. They stumble through some excuse about going together to have lunch. They head south down Lexington Avenue, towards the office, but go instead to see Martin London, a retired partner at the New York law firm of Paul, Weiss, Rifkind, Wharton & Garrison who is also the stepfather of Mark’s wife. London is a formidable litigator, a scholar of securities law, and a richly honoured attorney. He is also one of the people who has trusted Bernie Madoff. On Mark’s advice, he has invested with the family genius.
The sons tell him what the family genius has just revealed to them. London is stunned, too, but his legal instincts kick in. He immediately tries to reach a younger colleague at Paul Weiss named Martin Flumenbaum, one of the top trial lawyers in Manhattan.
Flumenbaum, a short, rotund man with a beaming face, is several hours away, at the federal courthouse in Hartford, Connecticut. Following courthouse rules, he had handed over his mobile phone when he went through courthouse security this morning. He retrieves it and sees the urgent messages from New York.
When he calls Mark Madoff, who has returned to his downtown loft apartment, he learns about the surreal conversation Mark and Andrew had with their father earlier. Flumenbaum promises to meet them late that afternoon at his Midtown law office, in a sleek tower just north of Radio City Music Hall.
Christmas lights are twinkling in the drizzling winter twilight when Mark’s driver pulls up in front of the building. Andrew is already waiting on the pavement, and they walk in together. The driver waits, but after about ninety minutes, Mark calls and tells him to go on to the office party.
Flumenbaum greets them when they arrive. As they settle down to talk, Mark and Andrew repeat the story of their shocking day, adding a few explanatory details. Madoff’s money management business operates from a small office on a separate floor, they said. It has always seemed successful—they know he has a lot of big hedge fund clients, has turned rich potential clients away—but their father has kept it very private, virtually under lock and key. Dozens of family members have let Bernie manage their savings, trust funds, retirement accounts. Mark and Andrew know he hasn’t used their trading desk to buy or sell investments for his private clients—he’s always said he used “European counterparties.” He has a London office and spends time there, so it made sense.
Now nothing makes sense. Their father, a man they have looked up to all their lives, has plunged them instantly from wealth to ruin. He is not the financial genius and Wall Street statesman they always believed he was; he is a crook, a thief, a con artist of almost unimaginable dimensions. How could they have been so deceived about their own father?
These are not Marty Flumenbaum’s immediate concerns. Madoff has indicated to his sons that he intends to continue his criminal behaviour for one more week, distributing what prosecutors will soon be calling “ill-gotten gains” to his relatives, employees, and friends. This vast crime isn’t over; it is a work in progress. Madoff’s sons have no choice, Flumenbaum tells his new clients. They must report this conversation—this confession—to the federal authorities immediately.
Flumenbaum knows very senior people at the US Attorney’s Office in Manhattan and at the New York office of the Securities and Exchange Commission. He makes some calls. When he reaches his contact at the SEC, he sketches out the afternoon’s events, the Ponzi scheme allegations, the estimate from Bernie himself that the losses could reach $50 billion.
There is a pause at the other end of the line, then the taut question: Is that billion, with a B?
Yes. Billion, with a B.
The investigative machinery grinds into motion. The FBI musters its financial crime team. The SEC, not for the first time, opens a case file labelled “Madoff, Bernard L.”
It’s not precisely clear how Madoff spends the rest of this day, the last day he will be able to go anywhere unrecognized. He recalls returning to the office; he remembers Andrew being there and telling him that he and Mark would be consulting a lawyer. As Eleanor Squillari remembers the afternoon, he does not return to his office on the nineteenth floor; she recalls trying to reach him on his mobile phone numerous times but getting only his voice mail.
Mismatched memories also distort what happens on the rest of this bizarre day. For Bernie Madoff and his family, today is already etched in acid in their minds, in their hearts—but for the drivers and other junior office employees, it is simply the day of the annual office Christmas party. For them, its devastating significance will not emerge for another twenty-four hours. So, inevitably, some pieces of this puzzle simply won’t fit.
Still, Squillari feels sure she would have seen her boss if he had returned to his own office. There is a hand-delivered letter waiting for him there from Jeffrey Tucker at Fairfield Greenwich. In it, Tucker apologizes for not keeping Madoff better informed about pending redemptions and promises to do better in the future. “You are our most important business partner and an immensely respected friend. . . . Our mission is to remain in business with you and to keep your trust,” the letter says.
Perhaps Madoff simply goes directly from the lobby to the seventeenth floor, where Frank DiPascali and some of his small crew are working on the cheques Madoff plans to distribute.
After the long meeting with Flumenbaum, Andrew Madoff returns to his sleek, airy apartment on the Upper East Side. Without even removing his coat, he lies motionless on his bed for hours—waiting, perhaps, for his world to stop reeling.
It never occurs to Mark or Andrew to attend the Christmas party already under way at Rosa Mexicano, a cheery Mexican restaurant where the firm held last year’s party. Tonight’s party is happening in the world they used to live in. They can’t get there from the world they live in now.
It does not occur to Bernie and Ruth not to attend the party. They are on autopilot, trying just to function. What possible explanation could they give for not showing
up? Neither of them could even phone in their regrets without breaking down. Perhaps attending the party is simply the path of least resistance, the only option that will keep reality at bay for a few more hours, a few more days.
Like the images of the day, the memories of this evening’s party will collide and conflict, shift and shatter.
One person recalls that Madoff surprised the staff by holding the party a week earlier than usual. But it is being held the same week, almost on the same date, as last year’s—and not even Bernie could commandeer a popular restaurant on short notice during the holidays.
Some say Madoff never says a word tonight, just huddles silently with Ruth at a corner of the bar and avoids the crowd. Others say he has “a look of death on his face,” with “that thousand-yard stare,” and seems stunned, very tense, “out of it.” But Squillari remembers the Madoffs as their normal selves, “as if they didn’t have a care in the world.” Two other guests and longtime friends agree, except they say Madoff seems maybe a little more emotional, hugging and kissing family members and friends a little more than usual. Ruth chats with a few employees, too, going awkwardly through the familiar party rituals. But it must be a strain—after a half hour or so, she is ready to leave. Madoff recalls that they stay on “for a couple of hours.”
Everyone recalls “a taco station, a guacamole station, a buffet bar, and waiters walking around with frozen pomegranate margaritas, two of which could put a person out for the night”—and one of which could put clear, orderly memories of this ephemeral evening out of reach forever.
Bernie Madoff, The Wizard of Lies Page 3