He again insists that his family knew nothing about his crime, but he dodges any discussion of his son’s suicide, saying only that he never expected his arrest would cause so much personal devastation. For the first time, he discloses that he is working with a therapist to dig into the psychological roots of his life of lies.
“I always wanted to please people; that was a weakness that I had,” he says. “I had been successful in a business, taking on the New York Stock Exchange—so, I figured, why can’t I manage money? Why can’t I do this, too?” He shakes his head and gazes down at the bare floor. “How did I live with myself? My counselor says people ‘compartmentalize’. I never believed that I was stealing. I thought I was taking a business risk, like I did all the time. I thought it was a temporary situation.”
He adds: “It starts as a very simple thing and then becomes complicated.”
When the associate warden calls time, Madoff stands and moves towards the courtyard door. He pauses to comment bleakly on a recent People magazine article about his wife. “I was sorry to see they used that photo of her with Mark when he was a boy,” he says, shaking his head. Then he bids an awkward good-bye and follows a uniformed guard out of the room.
The Madoff case demonstrated with brutal clarity another truth that we simply do not want to face about the Ponzi schemer in our midst: He is not “other” than us, or “different” from us. He is just like us—only more so.
Even the lawyers at the SEC thought that an apparently trustworthy, apparently successful Wall Street statesman like Bernie Madoff did not fit the profile of a Ponzi schemer. But that is exactly the profile of a Ponzi schemer. Any number of crimes may be committed by a seedy-looking, shifty-eyed, inarticulate grifter in a cheap suit and scuffed shoes, but a Ponzi scheme is never going to be one of them. Yet almost every Madoff victim, including the SEC, trusted him precisely because he seemed so trustworthy, a mistake that Ponzi scheme victims make over and over again.
Why? Perhaps because they refuse to accept the exposed Ponzi schemer as fully human.
Of course it’s comforting to think that only a soulless, heartless monster could have inflicted such pain on those he knew and supposedly cared about, that no human being could construct a life of such brazen, destructive lies.
We flatter ourselves. All human beings have the capacity for deceit. We all damage and disappoint people we love. We all delude ourselves about ourselves, every single day. I’m not going to get cancer even though I smoke. I can drive better after a few drinks. I’ll pay off that credit card debt next month. Most of us are born knowing how to tell lies. By definition, we cannot see our own blind spots.
So to insist, as so many of his victims have, that Bernie Madoff was not fully human, that he was a beast, a psychopath, is a facile cop-out, one last comforting delusion that will leave us forever vulnerable to the seductive spells that all Ponzi schemers cast.
Madoff was not inhumanly monstrous. He was monstrously human. He was greedy for money and praise, arrogantly sure of his own capacity to pull it off, smugly dismissive of sceptics—just like anyone who mortgaged the house to invest in tech stocks, or tapped an off-limits university fund to gamble on a new business, or put all the retirement savings into a hedge fund they didn’t understand, or cheated a little on the tax return or the expense account or the spouse.
Just like us—only more so. His imagination constructed a soaring scaffold of deceit that towered over the simple cover stories we occasionally hammer together. His lies were massively larger than ours, and they lasted longer, survived more scrutiny, were more ambitiously conceived and elaborately documented. As a result, tens of thousands of trusting victims believed that Madoff’s genius could defy markets, year in and year out.
And they sustained their belief in exactly the same way he sustained his belief that he could get away with it; the belief was reinforced by daily experience, selectively observed. He ignored the fact that he didn’t have any investment earnings to pay to his customers. His customers ignored the fact that his results were increasingly implausible and his operations were suspiciously secret. While the money was rolling in, the victims did not torture themselves daily, minute by minute, wondering if it was somehow possible that all their wealth and status would vanish in a puff of smoke on a single day. While the money was rolling in, Madoff probably didn’t either.
But this wizard behind the curtain—pumping the bellows and pushing the buttons and working the microphone to create his utterly convincing illusions, even after the prison doors had clicked shut behind him—was able to build his Emerald City only because such an extraordinary number of people decided to believe him. His accomplices believed they could go along for the ride and enjoy the wealth without facing a day of reckoning. Add in the friends and family members, the bureaucratic or inexperienced regulators, the clever accountants and lawyers, the sleek feeder fund salesmen, the international bankers, the charity investment committee members, the brilliant hedge fund due-diligence experts—they all told themselves that while it didn’t exactly make a lot of sense and was a little unusual and possibly even a little suspicious, it would turn out fine.
Time and again, people caught Madoff in an obvious lie and gave him the benefit of the doubt. They didn’t do this because he seemed so different from them, but because he seemed so much like them, only better: more clever, more experienced, more confident, more in control. Because he was fundamentally human and seemed to live in the same world they did, they could believe that somehow it would all work out, that they could ignore unpleasant realities without incurring unpleasant consequences.
So, like every philandering spouse, every opportunistic cheat, every impulsive risk-taker—like so many of us, only more so—Bernie Madoff thought he could avoid the implacable dead-end finale of the Ponzi scheme and somehow get away with it.
The next Bernie Madoff expects to get away with it, too.
No matter when you are reading this, the next Bernie Madoff is working in secret, somewhere in the world. A world immune to Ponzi schemes is a world utterly devoid of trust, and no one wants to live in a world like that. Indeed, no healthy economic system can function in a world like that. So right now, some new Bernie Madoff is exploiting our need for trust to build another world of lies.
We will read about him next month or next year. Until then, his victims are telling themselves how generous and respected he is in the community. They are admiring his life of quiet luxury, they are flattered when he includes them, they are a little envious of the money he is making for their more successful friends, those sophisticated folks who speak so highly of him. They are telling themselves that he is an excellent person, a gentleman, a mensch.
Whatever their niggling doubts, they are reassuring themselves right this minute about how trustworthy he is, as he spins out his vibrant, beautiful web of fantasy.
Later, when that new world of lies is torn apart, they will rage at the pain and devastation he caused and brand him an evil, inhuman monster. But if they are honest with themselves, they will have to admit that he was recognizably, shamefully human every step of the way—just like the last Bernie Madoff and the first Bernie Madoff.
That is the most enduring lesson of the Madoff scandal: in a world full of lies, the most dangerous ones are those we tell ourselves.
NOTES
Except as specifically noted, all the civil lawsuits and criminal cases cited in the text and notes were still pending in the courts as of February 2011, the deadline for revisions before publication.
PROLOGUE
xx the guards here act “starstruck”: American Greed: Madoff Behind Bars, produced by Kurtis Productions (Mike West, executive producer) for CNBC (Charles Schaeffer, executive producer), premiered Aug. 25, 2010.
xx he was beaten up in an argument with another inmate: Dionne Searcey and Amir Efrati, “Madoff Beaten in Prison,” Wall Street Journal, Mar. 18, 2010.
xx he told a visitor he “didn’t give a shit” about his sons:
Joseph Cotchett, a lawyer, quoted in Brian Ross and Kate McCarthy, “First Madoff Interview: Can’t Believe I Got Away with It,” ABC News, July 28, 2009.
xx Madoff blurted out, “Fuck my victims”: Steve Fishman, “Bernie Madoff, Free at Last,” New York, June 14–21, 2010, p. 32.
xx he had hidden away billions of dollars: Dan Mangan, “Madoff’s Hidden Booty,” New York Post, June 21, 2010.
xxiii 50 percent bigger than the banking giant JPMorgan Chase: Based on Institutional Investor’s Hedge Fund 100 ranking for 2008, JPMorgan Chase topped the list with $44.7 billion in assets under management. Goldman Sachs ranked seventh, with $29.2 billion, and Soros Fund Management ranked eighteenth, with $17 billion.
xxiii he said in one prison interview: Interview with Bernard L. Madoff (hereafter BLM) on Feb. 15, 2011 (hereafter Second BLM Interview).
1. AN EARTHQUAKE ON WALL STREET
1 He is ready to stop now: This chapter draws on the author’s interviews with BLM, Eleanor Squillari, Irving H. Picard, David J. Sheehan, and Lee S. Richards III; on fourteen confidential interviews with people familiar with the events of the week; on e-mail messages and letters from BLM; on the author’s personal inspection of many of the scenes involved, including the FBI building and the Lipstick Building lobby and suite; and, where noted, on court records, actual transcripts, and other published accounts.
2 Fairfield Greenwich has to replace the redemptions: E-mail from Jeffrey Tucker, Dec. 8, 2008, 12:22 PM, In the Matter of: Fairfield Greenwich Advisors LLC and Fairfield Greenwich (Bermuda) Ltd., Commonwealth of Massachusetts, Office of the Secretary of the Commonwealth Securities Division, Docket No. 2009-0028 (hereafter Galvin Fairfield Greenwich Complaint), Exhibit 44. (Direct quotes are used only for those passages designated as such in the e-mail itself.) Without admitting or denying the state’s allegations, Fairfield Greenwich settled with Galvin on September 8, 2009, paying $500,000 in state investigative expenses and agreeing to pay an estimated $8 million in restitution to its Massachusetts investors.
2 “My traders are tired of dealing with these hedge funds”: Ibid.
2 Madoff scoffs at the notion: Ibid.
3 “Just got off the phone with a very angry Bernie”: Ibid.
3 can withdraw $35 million from one of his accounts: In re: Bernard L. Madoff Investment Securities, Debtor; Irving H. Picard, Trustee for the Liquidation of Bernard L. Madoff Investment Securities v. Stanley Chais, et al. (hereafter Picard v. Chais), filed as Adversary Proceeding No. 09-01172 (BRL) in U.S. Bankruptcy Court for the Southern District of New York, Declaration of Matthew B. Greenblatt, Oct. 1, 2009, p. 3.
3 Jay Feinberg, the foundation’s executive director: Interview with Squillari.
4 they manage to link in Norman Braman: Ibid.
4 Feinberg passing around copies of the foundation’s conflict-of-interest policy: Gift of Life Bone Marrow Foundation, Boca Raton, Fla., Internal Revenue Service Form 990 for 2008, Schedule O, p. 2.
4 Madoff has planned to meet with the son of his friend J. Ira Harris: Interview with Squillari; BLM appointment calendar; e-mail message from BLM, Feb. 20, 2011.
5 He tells Mark to draw up a list of the trading desk employees who should get cheques: Interview with BLM on Aug. 24, 2011 (hereafter First BLM Interview); David Margolick, “The Madoff Chronicles, Part III: Did the Sons Know?” Vanity Fair, July 2009, p. 72.
5 Troubled, Mark consults his brother, Andrew: Margolick, “Madoff Chronicles, Part III,” p. 72.
5 Madoff walks across the oval area where the secretaries sit and enters Peter’s office: First BLM Interview.
5 asks his brother if he had “a moment to talk”: Andrew Kirtzman, Betrayal: The Life and Lies of Bernie Madoff (New York: HarperCollins, 2009), p. 229.
5 “I have to tell you what’s going on”: First BLM Interview.
6 “You’ve got to tell your sons”: Ibid.
6 he still isn’t certain about when to do it: Ibid.
7 Madoff initially tries to reassure them: U.S.A. v. Bernard L. Madoff, criminal complaint by FBI special agent Theodore Cacioppi (hereafter Madoff Criminal Complaint), U.S. District Court, Southern District of New York, Dec. 11, 2008, p. 3.
7 The sons stand firm: Ibid.
7 he isn’t going to be able to “hold it together” any longer: First BLM Interview.
7 Eleanor Squillari recalls asking Bernie where they were going: Interview with Squillari; Mark Seal and Eleanor Squillari, “The Madoff Chronicles, Part II: What the Secretary Saw,” Vanity Fair, June 2009, p. 103.
8 it took nearly ninety minutes to return with the sedan: Kirtzman, Betrayal, p. 231.
8 Mark in front and Andrew and his father in the back: Brian Ross, The Madoff Chronicles: Inside the Secret World of Bernie and Ruth (New York: Hyperion, 2009), p. 20.
8 a dark refuge of rich burgundy leather and tapestry fabric: First BLM Interview; confidential interview, a U.S. Marshals video tour of the room, and the author’s inspection of its furnishings at auction in November 2010.
8 “basically, a giant Ponzi scheme”: Madoff Criminal Complaint, p. 4.
8 he plans to pay that money out to certain loyal employees: Ibid.
8 with a tenderness that sears itself into Madoff’s memory: First BLM Interview; confidential interviews.
8 “a father-son betrayal of biblical proportions”: Margolick, “Madoff Chronicles, Part III,” p. 68.
8 The brothers leave the apartment: Kirtzman, Betrayal, p. 233.
9 London is a formidable litigator: Margolick, “Madoff Chronicles, Part III,” pp. 72–73. London handled the criminal defence for the disgraced U.S. vice president Spiro Agnew when bribery accusations led to his resignation in 1973.
9 He immediately tries to reach a younger colleague at Paul Weiss: Ibid.; confidential interviews.
9 Mark calls and tells him to go on to the office party: Kirtzman, Betrayal, p. 235.
9 Mark and Andrew repeat the story of their shocking day: Madoff Criminal Complaint, p. 3.
10 Is that billion with a B?: Confidential interviews.
10 He recalls returning to the office: First BLM Interview.
11 “You are our most important business partner and an immensely respected friend”: In re: Bernard L. Madoff Investment Securities, Debtor; Irving H. Picard, Trustee for the Liquidation of Bernard L. Madoff Investment Securities v. Fairfield Sentry Fund LLC, et al. (hereafter Picard v. Fairfield Sentry), Amended Complaint, Adversary Proceeding No. 09-01239 (BRL) in U.S. Bankruptcy Court for the Southern District of New York, Exhibit 78.
11 Without even removing his coat, he lies motionless on his bed for hours: Margolick, “Madoff Chronicles, Part III,” p. 73.
11 They are on autopilot, trying just to function: First BLM Interview.
11 One person recalls that Madoff surprised the staff: Erin Arvedlund, Too Good to Be True: The Rise and Fall of Bernie Madoff (New York: Portfolio, 2009), p. 265.
11 “a look of death on his face”: Margolick, “Madoff Chronicles, Part III,” p. 73.
11 “out of it”: Jerry Oppenheimer, Madoff with the Money (Hoboken, N.J.: John Wiley & Sons, 2009), p. 11.
11 “as if they didn’t have a care in the world”: Seal and Squillari, “Madoff Chronicles, Part II,” p. 104.
12 “for a couple of hours”: First BLM Interview.
12 “a taco station, a guacamole station”: Kirtzman, Betrayal, p. 235.
12 He feels confident that he still has several days to settle matters: First BLM Interview.
13 Madoff had been about to get dressed for work: Ibid.
13 “There is no innocent explanation”: Madoff Criminal Complaint, p. 4.
13 “money that wasn’t there”: Ibid.
13 Squillari hears Ruth say to someone else: Seal and Squillari, “Madoff Chronicles, Part II,” pp. 104–5.
14 When Squillari first notices him: Ibid., p. 106.
14 DiPascali also tries to delete sensitive information: U.S.A. v. Frank DiPascali Jr., filed in the U.S. District Court
for the Southern District of New York (hereafter DiPascali Criminal Information), p. 32.
15 to take his granddaughter to her nursery school class: Confidential interviews; similar details are provided in Kirtzman, Betrayal, pp. 236–37; Ross, Madoff Chronicles, p. 1.
16 He quietly reports what has happened: First BLM Interview.
16 They quiz him as politely as they can: Ibid.
19 “took no extraordinary measures and sat there and waited to be arrested”: Mark Hamblett, “Dreier Remains Jailed as Court Imposes Bail Beyond His Reach,” Law.com, Jan. 23, 2009. The comments were made on the record at a subsequent bail hearing for Marc Dreier.
21 They arrange for guards to monitor the office: Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC (hereafter Initial SIPC Filing), 08-CV-10791 (LLS), U.S. District Court, Southern District of New York, “Report of the Receiver Lee S. Richards and Application to Terminate the Receivership” (hereafter First Richards Report), Feb. 26, 2009, pp. 8–10.
Bernie Madoff, The Wizard of Lies Page 44