Frenkel Says Madoff NYT Interview Is `Self Serving' — Transcript

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1. 0:00in his first interview since his arrest
2. 0:01in December of 2008 Bernard Midol tells
3. 0:04the New York Times that the banks and
4. 0:06hedge funds he dealt with at the time of
5. 0:08his fraud were in some ways quote
6. 0:10complicit in his Ponzi scheme he makes
7. 0:13light of their quote willful blindness
8. 0:15adding again quoting they had to know
9. 0:18joining me now to discuss what mof's
10. 0:19allegations could mean for those
11. 0:21institutions and the victims of his
12. 0:23scheme is Jacob Frankle a partner at
13. 0:25Schulman Rogers he's a former Federal
14. 0:26prosecutor and former SEC attorney and
15. 0:29he joins us from Washington Jacob
16. 0:31welcome back to Bloomberg's bottom line
17. 0:32always good to have you on good to see
18. 0:34you mark thank you Jacob I posed this
19. 0:36during the commercial break but I guess
20. 0:37it's it's well enough to pose again
21. 0:39what's wrong with Bernard mid off I
22. 0:42think only a doctor could answer that
23. 0:43question but in terms of this interview
24. 0:46there's only one thing I think that's
25. 0:47really believable in the interview and
26. 0:49is what Bernard maof said which is that
27. 0:51he is not credible it was a very
28. 0:54self-serving interview and I think you
29. 0:56know it really did nothing to advance
30. 0:59claims for anybody except somebody who
31. 1:02was very accustomed to being in the
32. 1:05Limelight an opportunity to get some
33. 1:07attention in that New York Times article
34. 1:10made off is quoted as saying of the
35. 1:11banks they had to know and he continued
36. 1:14but the attitude was sort of if you're
37. 1:16doing something wrong we don't want to
38. 1:19know and all we'll the short answer is
39. 1:23that the TR first of all the trustee has
40. 1:25brought civil lawsuits against a good
41. 1:29number of of the financial institutions
42. 1:32large investors to claw back funds so
43. 1:34from an evidentiary standpoint we are
44. 1:36going to find out but when he makes when
45. 1:38Bernard ma off or anybody else makes
46. 1:40that allegation when you start talking
47. 1:42about this concept of willful blindness
48. 1:45there three terms in the law that are
49. 1:47used interchangeably one is willful
50. 1:49blindness the second is deliberate
51. 1:51ignorance and the third is conscious
52. 1:54avoidance they all mean basically the
53. 1:56same thing which is when somebody has an
54. 1:58affirmative duty to to act to inquire
55. 2:01they they they shun they Sherk that Duty
56. 2:04and and basically move move forward and
57. 2:08ignore their
58. 2:09responsibilities that even in the law is
59. 2:11a substitute for Criminal Intent we're
60. 2:14not looking here at cases where they
61. 2:15criminal indictments and in fact he
62. 2:18acknowledges in the interview that the
63. 2:20trustee likely has given this
64. 2:21information to criminal prosecutors the
65. 2:24only value that Bernard M off likely has
66. 2:27brought in this entire process from a
67. 2:29semi credible perspective is providing
68. 2:32leads to the trustee as to where assets
69. 2:36may be anything else is fundamentally
70. 2:39not believable well it's interesting
71. 2:41because I I got a message from one of my
72. 2:42producers Vanessa Wares and she says she
73. 2:44points out correctly that mid could have
74. 2:46gotten this type of attention at any
75. 2:48time since his arrest is there anything
76. 2:50else for him to gain by making these
77. 2:53allegations well I mean in terms of is
78. 2:56there anything to gain by making the
79. 2:58allegations I mean that's really
80. 3:01right it's it's not going to affect his
81. 3:03sentence he's not going to be called he
82. 3:05he's not going to be called as a witness
83. 3:07we don't know what he was thinking we
84. 3:08don't know what the timing is in terms
85. 3:10of in terms of the book such that it
86. 3:12gave rise to a reason at this point to
87. 3:16provide you know to provide this this
88. 3:18information the fact is this is what
89. 3:20Bernard maid off says and for 20 years
90. 3:23or 15 years this is somebody you know
91. 3:25who lied to his investors who misled uh
92. 3:29inst institions who actively took active
93. 3:32steps to conceal a fraud and now he's
94. 3:35saying that oh well they really should
95. 3:38have known better and I just don't think
96. 3:40that's something that really uh
97. 3:42resonates well or is likely to make any
98. 3:45difference and certainly will have no
99. 3:46influence on the decision of the
100. 3:48institutions in their defenses of the
101. 3:50claim or even influence uh Mr Picard or
102. 3:54the government in terms of the advance
103. 3:56of the civil litigation or the criminal
104. 3:58cases if are one of the victims of this
105. 4:01massive fraud and you're hearing this
106. 4:03information and reading this during the
107. 4:05times what are you thinking
108. 4:09today there's nothing about what he said
109. 4:12that will that will or or should in any
110. 4:16way change the level of anger and
111. 4:19disgust they all have and direct at
112. 4:23Bernard maof what's really an issue here
113. 4:26is is there information credible
114. 4:29information information that he has
115. 4:31given to Mr peard or to the government
116. 4:34really Mr peard to help with the
117. 4:36trustees cases and the only way we're
118. 4:39going to know that is when these
119. 4:41lawsuits actually progress get into
120. 4:44Discovery but the vehement
121. 4:46denials that we are hearing from these
122. 4:49institutions certainly suggest that this
123. 4:52is hot air coming from Bernard mid off
124. 4:54and Mr mof also continuing to insist
125. 4:57that his family had no knowledge of this
126. 4:58and wasn't involved
127. 5:00not both his family as well as his close
128. 5:02friends it's interesting he says well
129. 5:04the institutions you know should have
130. 5:06known better you or maybe were complicit
131. 5:09on the other hand people to who are his
132. 5:11friends his family are complicit even
133. 5:13people who have been indicted you know
134. 5:14they're wrongfully accused I think that
135. 5:16just highlights the complete lack of
136. 5:18credibility that attaches to Bernard
137. 5:21madeof statements at the end of the day
138. 5:23though what really is going to matter is
139. 5:25who was prosecuted criminally for what
140. 5:28uh were they convicted if they gone to
141. 5:30trial in the trustee actions are you
142. 5:33know was there recovery um it'll be very
143. 5:36interesting to see if any of them
144. 5:37actually go through litigation and
145. 5:40actually end up with a verdict as
146. 5:42opposed to a settlement and the short
147. 5:45answer to all of that is we're now in
148. 5:46February of 2011 and I have a feeling we
149. 5:49may be having this conversation again
150. 5:51the latter half of 2012 and Jacob you
151. 5:53know you and I have talked about this
152. 5:54quite a bit since this uh first happened
153. 5:56we talked a lot last year about this and
154. 5:58I hate to play the role of the obvious
155. 6:00pessimist but is something like this
156. 6:02going to happen again will anybody be
157. 6:04dissuaded by this by his jail sentence
158. 6:07by the lives that he
159. 6:09destroyed Mark that's an excellent
160. 6:11question because the fundamental
161. 6:14objective in criminal prosecutions
162. 6:17particularly of profile is in addition
163. 6:21to punishment for the wrongdoing is to
164. 6:23send a deterrent message and in some
165. 6:26ways you're it's almost an interesting
166. 6:27segue into the Raj of Platinum trial
167. 6:30which again we're not talking about a
168. 6:31Ponzi scheme now we're talking about
169. 6:32insider trading but there seems to be
170. 6:35and and I and I think I've mentioned
171. 6:37this before what I call a generational
172. 6:40evolution of this type of activity and
173. 6:43what happens is after a boom market
174. 6:46after a number of years where the
175. 6:49activities of the prior generation the
176. 6:50wrongs of the prior generation tend to
177. 6:53be forgotten all of a sudden is we see
178. 6:55some of these the inside of trading in
179. 6:57particular but we see some of these uh
180. 7:00circumstances some of these uh frauds
181. 7:03recur the fact of Bernard maid off going
182. 7:06to jail for his life the fact that
183. 7:09people took their own lives because of
184. 7:11what he did the fact that Close
185. 7:13Associates have gone to jail for people
186. 7:15who are bent on criminal activity it is
187. 7:19likely to have a a very limited if any
188. 7:23meaningful effect the real test is going
189. 7:26to be will the institutions that have
190. 7:29learned for the Bernard madeof lesson
191. 7:31really stick to their guns in terms of
192. 7:34enhanced compliance are you know are are
193. 7:37some of the smaller institutions
194. 7:39individuals who are functioning as
195. 7:40investment advisers broker dealers are
196. 7:43they saying you know what that only
197. 7:45applies to burn on maid off it does not
198. 7:47apply to me or are they saying you know
199. 7:48what we really should stand up and take
200. 7:50note right have we brought in compliance
201. 7:53and legal experts to make sure that we
202. 7:55have the right systems in place to
203. 7:57ensure that not only are we are our jobs
204. 8:00so that we don't get accused but so that
205. 8:02our investors are protected because
206. 8:04ultimately it's about the Integrity of
207. 8:06the system all right Jacob Frankle
208. 8:08partner at Schulman Rogers joining us
209. 8:09from Washington always good to talk to
210. 8:11you Jacob thanks thank you Mark