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Madoff Talks- An Interview with Author Jim Campbell — Transcript

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0:00[Music]
0:09hello friends
0:10thanks for tuning in to another episode
0:12of the kadarna podcast
0:13i'm your host brian kadurna so this
0:16week's episode was one of the most
0:18intriguing interviews i've done yet on
0:20the show
0:20and i don't say that lightly our guest
0:23today is jim campbell
0:24for those of you who do not know jim
0:26he's the host of the nationally
0:27syndicated radio show
0:29business talk with jim campbell and a
0:31crime show forensic talk with jim
0:34campbell
0:34he's known for hard-hitting interviews
0:36on some of the biggest stories in
0:38business
0:38sports and politics he's particularly
0:41known for having the first interview
0:43with former governor elliot spitzer
0:45after his resignation
0:47the first interview with tycho ceo
0:50dennis kozlowski after his release from
0:52prison
0:53and the first extensive interview with
0:55rumi khan a government informant in one
0:57of the biggest
0:58insider trading bus in american history
1:01however jim's latest first is one that
1:04trumps them all
1:05so jim recently released his new book
1:07made off
1:08talks subtitled uncovering the untold
1:11story behind
1:12the most notorious ponzi scheme in
1:14history
1:15it's now available wherever books are
1:16sold so jim was granted over several
1:19years
1:20exclusive access to bernie madoff while
1:22he was still living in prison
1:24and they shared over 400 pages of
1:26letters and emails together
1:28he also had access to bernie's widow
1:31ruth madoff
1:32his sons and bernie's personal attorney
1:35ira sorkin
1:37so this book tells the story the why and
1:40the how
1:41of how bernie madoff orchestrated a 65
1:44billion dollar
1:45scam like i said the biggest in history
1:49so join me as we dive right into it and
1:51really get into the nitty-gritty details
1:54and truly untold story and unfettered
1:56access to the family
1:58and to the man himself behind this evil
2:01empire
2:01without further ado jim campbell is
2:03going to require work
2:05and time and sweat and toil
2:08if money wasn't an issue what would i be
2:10doing don't worry about it
2:12you'll figure it out change the only
2:15constant
2:18podcast thank you for having me brian
2:22it's my honor and uh we're very excited
2:24about madoff talks uncovering the untold
2:26story behind the most notorious
2:28ponzi scheme in history yeah that's uh
2:31i i saw the title of the book and i was
2:33like man this ought to be an
2:34entertaining read
2:36how how long was that a work in progress
2:38that you were putting that together for
2:40believe it or not in december of 2011
2:45i got to speak with andy andrew madoff
2:48who
2:48by then obviously was uh not only
2:50vilified but not talking to any media i
2:52got to talk to him off the record
2:54and um he was i found him very open to
2:58taking brutally tough questions from me
3:00so we developed kind of a rapport i was
3:03doing a live show then
3:05and he um said that he was actually
3:07going to listen to see if he
3:08i was saying the same things i was
3:10saying to him and
3:12in return for that i had the coincidence
3:15of um and this is also in december uh
3:18his mother had to be moving from florida
3:20to old greenwich connecticut where i
3:22live
3:22and i had lunch with her and um
3:25that led to her introducing me to bernie
3:28so
3:28actually the story i started talking to
3:31them in 2011
3:33and the book came out in april of 2021
3:37uh about a month ago okay
3:40great so that was quite a work in
3:42progress and
3:44how did you get into that was that just
3:46because of the the work you're doing now
3:48interviewing and writing books and so on
3:49or did you have a any history uh with
3:52those circles
3:53yeah no though it was literally i was
3:55interviewing for my business talk show
3:57laurie sandell who wrote a book on the
4:00madoff family that they cooperated with
4:02andrew and his and his girlfriend
4:04katherine hooper
4:06and um so i had it was purely fortuitous
4:09she said you know for your prep i'll
4:11hook you up with andy off the record and
4:13that's how it happened
4:14and um and the same thing with ruth
4:16after she you know
4:18you know she trusted andrew obviously
4:20and uh we also hit it off
4:22although when we walked out of the
4:23restaurant no greenwich i said can we
4:25get a picture
4:26and she turned to me and she said you're
4:28wired aren't you she thought i'd set her
4:30up
4:30but after she was calmed down about that
4:33um
4:34bernie said to me that you know andrew
4:37and ruth have vouched for you
4:39so i'm gonna talk to you and hopefully
4:42you can
4:42dispel some of the perceptions of the
4:45misperceptions that are out there and
4:47of course it didn't exactly work out
4:49once i finished the way he had
4:50anticipated
4:51but i think he had kind of hoped that i
4:54would be
4:54sort of conned if you will into
4:56representing his side of the story
4:58um as well as uh the families and so
5:02that's how it happened i mean both of
5:04those were coincidences that i got to
5:05talk to andy that ruth happened to be
5:07moving
5:07to old greenwich ruth and i then had a
5:09series of lunches over several years
5:12we texted a lot uh we emailed a lot
5:15um so you know we got to know each other
5:18uh quite well
5:19when mcgraw-hill gave me the contract
5:22and she had supported the book
5:24she'd helped keep it going when the
5:25warden was blocking bernie and i
5:28um she said that she no longer wanted to
5:30talk so
5:31i had what i had from her but she didn't
5:33want to talk once the book contract was
5:35signed
5:36i think related to the fact they were
5:38trying to get bernie out on
5:39compassionate
5:40release um just so he could spend the
5:43last months of his life
5:44and so they didn't really want any
5:46publicity she also asked bernie to stop
5:48talking
5:50gotcha this is ruth made off the the
5:52widow of bernie madoff
5:54giving you all this information and so
5:56that's i mean that's unique that was
5:58going to be my question
5:59is everybody knows who bernie madoff is
6:02one of the most
6:03notorious crimes probably in the history
6:05of mankind
6:06at least from a financial standpoint um
6:09and that's what i was going to say why
6:11would they want to talk to just one more
6:13media source
6:14and that was that they thought that they
6:16might have a chance to
6:17get some public opinion on their side
6:19with all of this
6:21well um when you say they
6:25andrew and ruth were clearly in the camp
6:29that bernie was guilty
6:30and that there were no excuses for it
6:32they were of course interested in
6:34clearing their name because everybody
6:36even including the fbi who i talked to
6:38several laters were convinced that they
6:40knew
6:41or had to know so i mean that was their
6:44take bernie's i think bernie if you
6:47understand his
6:48ego um he had to be the guy
6:51had to be the guy in control he he ran
6:55and a lot of people don't know this um
6:57one of the most successful market making
6:59firms on wall street
7:01that basically broke down the doors of
7:03the new york stock exchange
7:05and was number three in volume and
7:08was worth three billion dollars in and
7:10of itself he ran it
7:12completely clean ethics above the norm
7:15on wall street
7:16and so he was just obsessed
7:19with protecting the name of that firm
7:22that it was legitimate
7:23and then in his hedge fund business
7:25which he hidden for so long and where
7:27the ponzi scheme was he was obsessed
7:30with telling me that the strategy really
7:32did work
7:32it wasn't fake it wasn't you know um
7:36managed and in a way that you know he
7:38created results out of the air et cetera
7:40et cetera
7:41even when he'd go through a whole
7:43logical explanation and say
7:44yeah jim i realized i wasn't doing any
7:46real trading you know was almost
7:48delusionally
7:50wanting to justify and rationalize
7:52everything he did
7:55that's incredible but i guess when you
7:57get in so deep you kind of
7:59your mind starts playing tricks on you
8:00maybe but um
8:02when did you first hear about bernie
8:04madoff can you remember
8:06even before you were introduced or had
8:08contact with him
8:09well you mean about the ponzi scheme you
8:11know this was in 2011.
8:14and the even further like he's mentioned
8:16at the outset that there was a time
8:18where he ran
8:19a legitimate business in a clean
8:21business yeah
8:23you know was were you aware of him on
8:26the street at all that he was
8:27yes yeah good yeah good question no i
8:29was not
8:30and you know he had a very high regard
8:32amongst the regulators which of course
8:34was a perfect setup
8:35for pulling this off but he was an
8:37inside kind of guy
8:39um he always kept his hedge fund
8:41obviously completely under the table
8:43and his business you know he he would
8:45tell me you know he was the guy
8:47that executed for discount brokers back
8:50when nobody on wall street obviously
8:51wanted to touch them but they were
8:53a very lucrative form of business and
8:56he did touch them and he loved dealing
8:58with them he hated the hedge fund
9:00clients for obvious reasons
9:02but um i did not know of him then so
9:05this was um
9:05you know surprised me and you know the
9:07book has you know the untold components
9:10um which it's stunning how little people
9:14know of the whole
9:15story even though they think they do but
9:17the thing on bernie of course was
9:18the people not knowing that he ran such
9:20a big legitimate business worth three
9:22billion bucks at the same time
9:24he ran the biggest criminal enterprise
9:26the other side of that which we could
9:27talk as we go on
9:28is the complete systemic failure on the
9:30regulatory and wall street sides
9:32that basically allowed him to do this
9:35for 40 years because he was not a guy
9:37acting alone behind a curtain he was a
9:40guy
9:40the only guy that knew was a ponzi
9:42scheme but he couldn't have gotten away
9:44with it for so long without being
9:45enabled
9:46by a whole series of different uh
9:49entities and people
9:52wow and if if you can maybe even just
9:54and i'm glad we're starting here with
9:56your brand new book because this is it's
9:58such an exciting
9:59topic that i think people can't get
10:01enough of and we'll learn more about
10:03some of your other work as we go here
10:05but sticking with madoff what was what
10:08was really the genesis
10:10uh that you found from your interviews
10:12and such of this whole
10:13criminal empire like how did it begin is
10:16there something that you can go point
10:18back to is like the very onset of
10:20uh what was this ponzi scheme yeah it's
10:23a good question too because um
10:26i even i started off with it's logical
10:28to assume oh you're running a very
10:30legitimate business and so
10:32something must have happened that you
10:34lost some money or something and you
10:36decided instead of doing the right thing
10:38to double down like a gambler might do
10:41and you know you try to make it back
10:44however you can and then you get it back
10:47and no one will ever notice and
10:48everything looks like it's fine
10:50he actually told me that story um one
10:53that he hadn't told anybody else
10:54publicly and one he hadn't even told
10:56uh his lawyer who he told a different
10:58story to and bernie
11:00uh for some reason waved attorney client
11:02privilege so i could talk to his lawyer
11:04who was like
11:05like short and very noted guy but here's
11:08the thing
11:09bernie represented to me that the ponzi
11:11scheme didn't start along with this
11:13story
11:14one day before 1992 and
11:17at that point he admitted you know jim i
11:20got into this thing and
11:22you know became a ponzi scheme and on
11:23and on and on he would admit the ponzi
11:25scheme
11:26now i had to go vet everything he said
11:29after he said it and lo and behold
11:33and this is the most unfathomable part
11:35of his mind he had a very
11:37compartmentalized mind
11:38which you have to do to run two
11:40businesses at once
11:42but he would looks to have actually
11:45started running
11:46the criminal side of his business which
11:48was on the 17th floor
11:50of the lipstick building behind loch t
11:53um
11:53that even his sons who ran the market
11:55making business did not have access to
11:59the legitimate business was two floors
12:00above on the 19th floor
12:02and so what happened was he was actually
12:05running them side by side
12:07basically since the start which was the
12:09late 60s early 70s
12:11so he's got a legitimate business and
12:13his brain is managing a criminal
12:14business side by side
12:16and that that's the part that's really
12:19um
12:19the most uh confusing to deal with now
12:22what kind of psychological mindset
12:25did he have that might have been
12:27underlying this
12:28and as i looked into it the market
12:30making business fit
12:32his psyche really well in his psychology
12:35it was whether the market was up or the
12:37market was down he made money on
12:39commissions
12:40he was very innovative on use of
12:42technology leading the street in many
12:44ways
12:45and he hired good people and he kept
12:48great cost control so it's a great
12:50formula for that business to be
12:51successful
12:52now he goes over he starts with only 24
12:55accounts mainly family and friends
12:57and he's going to manage some money for
12:59these folks and he's
13:00and he finds out oh my god i don't make
13:02money on every trade i could lose money
13:05he psychologically could not accept
13:09losses at all in fact his clients came
13:12to realize
13:13hey you don't lose money with bernie i
13:14don't know what he's doing but you don't
13:16lose any money
13:17he initially lost some money in an ipo
13:20when he was first starting off
13:22and the underwriters didn't stabilize
13:24the price they ran away
13:26and he was facing a thirty thousand
13:29dollar
13:30loss or his customers were and he was
13:32mortified
13:33he went and borrowed thirty thousand
13:34dollars from ruth's uh
13:36father and paid his clients back made
13:39them whole
13:40even though none of his clients would
13:42have expected that
13:43nor did they have where do they need it
13:45so in other words
13:47the business that didn't fit his psyche
13:49rather than
13:50close it down or accept that it didn't
13:53work
13:54he had to keep pleasing people he grew
13:56and he grew it and he grew it
13:57and the next thing he knew 65 billion
14:00dollars or what people thought they had
14:03wow and when was that that first
14:05incident like with the ipo that you
14:07mentioned where things went south
14:09and he said you know i'm going to have
14:10to bail out my customers here just
14:12roughly what time frame was that they
14:15the ipo loss was in 1962
14:17and that was fairly soon after
14:21he um opened the uh the overall business
14:24right where he began to make his name
14:26in in market making so in other words he
14:28was actually managing money
14:30from pretty much the start of the firm
14:32um and then
14:33it got bigger several years later uh
14:36when he was essentially
14:38an accounting firm that used to be run
14:40by his father that father-in-law
14:42whose father again um actually became
14:44sort of a feeder fund the model for how
14:47he got money
14:48and that's when uh it exponentially
14:50exponentially
14:52grew got it if i could just take a step
14:56back
14:56explain market making can you just kind
14:58of define what exactly that is for our
15:00listeners
15:01yes um what a market maker does
15:05is put together uh trades in this case
15:08for um customers
15:11discount brokers mainly but including
15:13merrill lynch
15:14uh for instance firms like that he was
15:17acting as a wholesaler
15:18and obviously merrill and schwab
15:22uh firms like that are retailed and what
15:25he did was
15:26take the execution over for them which
15:28offloaded it from them and gave him all
15:30the regulatory requirements
15:32and he built all the connections to the
15:34various exchanges
15:36and he beat the exchange in pricing uh
15:39better pricing
15:40and he ended up doing it so quickly that
15:43um schwab could advertise we can execute
15:46your trade right while you're on the
15:47phone
15:48and um that's that's how he got it done
15:51he got very close then to all of those
15:53customers and he treated them really
15:54well he even designed his system
15:57um to make sure that his customers got
16:00the best price
16:01in fact what wall street thought bernie
16:03was doing
16:05that allowed him to never have any
16:07losses was to front run his clients
16:10now that means jumping right ahead of
16:12orders that you know are coming
16:14so if brian's going to buy a hundred
16:16shares of ibm
16:18that's a bullish sign and in some little
16:20way it'll it'll increase the market
16:22and then the assumption was he would
16:24jump right in before and by
16:26ibm knowing it was going to go up right
16:27behind him and that's what they thought
16:30he was doing
16:31and he built a system uh that wouldn't
16:34allow that to happen he never screwed
16:36his clients
16:37but it kept the regulators and wall
16:39street chasing the wrong rabbit
16:41all the time interesting and so when
16:44does he transition from doing a lot of
16:46this market making in the 60s to
16:48eventually managing people's money
16:51uh when did that occur where he started
16:54going out and getting the rich and the
16:55famous and all of these folks that
16:56eventually we heard about on the news
16:58that were actually individual clients of
17:01bernie madoff
17:02yeah that was built really uh over the
17:0570s to the 90s in the 90s
17:07um it started to become
17:11you know more public um and you know
17:14basically admitting
17:15although he always tried to cover up he
17:17what he basically tried to say was
17:19you know we don't manage money we
17:21execute trades
17:23which is what he did in his regular
17:25business and that allowed him
17:27to say that i was only making
17:29commissions and what did he do
17:30he started getting all this money that
17:32you're talking about from
17:34hedge funds that were feeder funds and
17:36these are hedge funds of hedge funds
17:37essentially
17:38who allocate their investors money based
17:41on their um
17:43you know their risk their risk curves
17:45and what they're looking for
17:46in their investment objectives and what
17:49he did essentially was
17:50to buy these guys not doing any due
17:53diligence was to pass on
17:55his asset management fees
17:58that come that hedge fund guys take
18:00which is normally two percent of fees
18:02under management
18:03and 20 of gains that's an incredible
18:06amount of money
18:07to pass to essentially what we're
18:08marketing vehicles
18:10funneling money to different hedge funds
18:13and
18:14that's how he started accumulating big
18:17assets along with his individual long
18:20time customers and the interesting
18:24thing was bernie will tell you
18:27and as he told me he didn't really go
18:29out and solicit clients
18:31he had this all fed in through networks
18:35the feeder funds um family and friends
18:38and it just came to him in what was
18:41essentially affinity crime
18:43meaning 85 in his case 85 percent of his
18:46clients
18:47um were jewish and a lot of jewish
18:50charities
18:50as well all of whom he wiped out and um
18:54that basically what happened was hey
18:56this guy's the jewish
18:57t-bill as they call them he's as safe as
18:59the u.s treasuries
19:00um we don't know how he he's doing it
19:02but it works he's trustworthy he's our
19:05guy
19:05and just give him your money you'll get
19:07your 11 a year which is what he got
19:10uh at the end and what a lot of people
19:12don't realize
19:13is that you know you think running a
19:16ponzi scheme the buy
19:17the guy behind the curtains making all
19:19the money actually
19:20bernie had what he called to me his big
19:23four
19:24and these were four long-time original
19:27investors
19:28who bailed him out when he had periodic
19:31cash crises and they came to have
19:35power to extort their returns from him
19:38the biggest of whom
19:39took out seven billion dollars out of
19:42that hedge fund that bernie was running
19:44under the table
19:45bernie himself only stole 800 million
19:49that he used to prop
19:50up the upstairs legitimate business when
19:52it started to
19:53uh have problems uh with insolvency
19:58so actually bernie wasn't even the
19:59biggest moneymaker he didn't do it for
20:01greed
20:02um but his big four uh did and
20:06they would literally have the power to
20:08call up bernie or his right-hand
20:10administrative assistant
20:11annette benjardo and say i want 40 gains
20:14x
20:14y and z and then call back a few months
20:17later and say
20:18i want these losses um for tax purposes
20:21and dictate those so he got the uh
20:24he got the clients over time from the
20:26feeder funds family and friends the
20:28affinity network
20:29and he uh some of his uh family and
20:32friends like the big four
20:34took advantage of the whole deal made up
20:36made most of the money
20:38and who who are these big for is that
20:40public knowledge now
20:41yes um jeffrey pickhauer is the guy to
20:45know he's the biggest guy that i told
20:47you about
20:48uh the second was norm levy who was
20:50actually very close to bernie bernie
20:52came to detest
20:53hightower um as you could understand
20:56thick hour had him
20:57um you know in a position where uh he
21:00could extort
21:01uh norm levy was one was a father figure
21:04to him
21:04although bernie ended up ripping him off
21:07um
21:08the third guy was carl shapiro who was a
21:10huge guy in the garment district
21:12and sold his business for a ton of money
21:15and the fourth guy was stanley chase he
21:17grew up in the bronx but he was out in
21:19uh hollywood where his wife was in
21:21scriptwriting or something
21:23and he had he made a lot of money and
21:27ernie turned him into a feeder fund guy
21:29so he
21:30in turn fed folks through his own fund
21:33to bernie and i always laugh at this
21:36stanley would
21:36had no conception of what bernie's
21:39strategy was which was called the split
21:41strike conversion strategy
21:44he had no idea what it was he didn't
21:46want to know what it was even though he
21:47was funneling clients to it
21:49but he had one stricture i don't want to
21:52ever have any losses
21:54so those are those are the big four the
21:56other three they took out a billion or
21:57two you know and uh big hour took out
22:00seven billion so
22:02you know they made about 10 billion
22:03bucks collectively um
22:05the losses on a principal original
22:08investment basis were 19.5 billion
22:11wow and so these these folks the big
22:13four the other
22:14you know really big players and all of
22:16this is there any inkling that
22:18they knew uh what was going on here
22:21you know did they have did they hold
22:23that over bernie in
22:24any way like hey we're kind of in we
22:27know what the deal is here
22:29yeah i think they did not know that it
22:32was a pure ponzi scheme because
22:33obviously they wouldn't have left their
22:35money there
22:36although i did notice at the end they
22:37were pretty close to having their money
22:39out
22:40but they obviously knew that he had
22:42periodic cash crises
22:44that he was allowing them to back trade
22:46trades remember bernie wasn't really
22:48trading
22:48so all the trades were made up and these
22:50guys knew they were back dating trades
22:52which is not kosher
22:54and um so that's how they came to have
22:57the power
22:58over him bernie of course knew that they
23:00were doing all kinds of tax fraud
23:02which the government by the way never
23:03even investigated or held them
23:05accountable for
23:06nobody went to jail and so
23:10they had to know uh that something was
23:12wrong they didn't know it was a ponzi
23:14scheme now let's go to the feeder fund
23:15guys
23:16because bernie is basically bribing them
23:20with all these asset
23:21management fees and not allowing in
23:24response
23:25any due diligence well remember their
23:27whole job is due diligence right
23:30brian's a very conservative investor
23:31they're going to look around these
23:33hedge functions they'll say brian my due
23:35diligence says this
23:36fund a is the one for you well bernie
23:39wasn't allowing that so obviously they
23:41knew
23:41something wasn't right there and
23:45they were what i call willfully blind
23:47which is a criminal offense
23:48but they were not charged with will for
23:50blindness they were gone after
23:52for clawbacks of money uh et cetera
23:56but um so and there were and then and
23:58then i'll say the third group
24:00there were folks on wall street that
24:02knew that
24:03something was wrong i told you they
24:05thought it was front running
24:06but there were folks on wall street that
24:08knew it didn't smell right
24:10and did not take any action such as
24:12turning them in
24:13uh to the sec and we haven't even gotten
24:15to how the sec screwed up
24:19and maybe that's kind of a good segue
24:20there i think everybody's
24:22question when you just look at average
24:24america and they see this guy talking
24:26about you know
24:27what was it 65 billion dollars i believe
24:29you said the size of this whole thing
24:32and they say how does this happen you
24:34know how does a guy
24:35get to that power kind of unchecked uh
24:38what i wanted to ask to kind of lead
24:40into this is was there something
24:42pre-2008 where it could have sparked
24:46an investigation or it could have
24:48sparked some questions
24:50that perhaps went ignored because lots
24:52of times in
24:53in these criminal uh incidents you hear
24:55about something was brought up and then
24:57it was
24:58you know well that guy is held in good
24:59regard let's why don't we just sweep
25:01that under the carpet for right now
25:03anything like that ever go on any kind
25:05of whispers of that
25:07yeah that by the way turns into a great
25:09segue to the sec
25:11because the sec actually did five
25:13separate examinations of bernie
25:16and never uncovered it and they cleared
25:19him of front running
25:20but each investigation that came along
25:22they reinvestigated front running
25:25they did not have the right examiners on
25:27site
25:28to detect the ponzi scheme which is
25:30relatively easy
25:31um and we'll get into the details but
25:33let me tell you from a overall point of
25:35view
25:35there were actually several ways that
25:38you could have solved this in under five
25:40minutes
25:42the first one is this split strike
25:44conversion strategy which sounds very
25:46complex
25:47opaque and that's how he wanted it on a
25:50simplified basis
25:52was a equity strategy
25:55that mirrored the market basically using
25:58s
25:58p index uh 100
26:02index and options and it should
26:05therefore have been highly correlated to
26:07the market
26:08so even before you check whether it was
26:10or not
26:11when you when it's represented as never
26:14taking a loss
26:15right off the bat there's never been an
26:17equity-based strategy that doesn't face
26:20market loss it doesn't it just doesn't
26:21make sense um
26:23and then of course the whistleblowers
26:25you know harry marcos i'm sure
26:27he determined within a couple of hours
26:29the correlation was five percent
26:31meaning the degree to which it matched
26:33the market it should have been 95
26:35the second example of five minutes or
26:37less
26:39one of the sec examinations um
26:42bernie and bernie told me this the
26:45depository trust clearing corporation
26:48clears and settles all the trades in his
26:51market making business
26:53every single market making trade could
26:55be traced
26:56going through there his account numbers
26:59bernie said was o
27:00six four six he told the sec
27:04that he had a sub account for his
27:06investment advisory
27:08business which is the ponzi business and
27:10he said jim i told him this on a friday
27:12night expected to be in handcuffs over
27:14the weekend
27:15um because a five minute phone call
27:17would have determined there was no
27:18investment advisory
27:20subaccount there were indeed no trades
27:22that could ever be traced
27:24and guess what the sec did not make the
27:27phone call
27:28it's kind of hard to believe and that's
27:29just one instance
27:31the third example really inexcusable was
27:34bernie's bank was jp morgan chase they
27:37were the
27:38only entity that actually could see into
27:41bernie's financials because they saw
27:44his bank account there which was known
27:46as the 703 account
27:48for the last three digits and
27:51the hedge fund guys nobody else that
27:54saw this account the sec didn't even
27:56know the account existed
27:58because he didn't report it on his
27:59regulatory form
28:01and not only did jp morgan not look
28:04inside it and figure it out
28:06because bernie admitted to me he never
28:08had more than 5.9 billion in the account
28:10ever
28:11um they didn't even know that it was the
28:14investment advisory account
28:16they thought it was the market making
28:17account which was at a bank of new york
28:20for 30 years
28:21so they didn't know what the account was
28:22but here's a simple thing brian
28:24another five minute thing you're running
28:26an equity strategy
28:28you've got to have payments to
28:29counterparties right because somebody's
28:31trading with you
28:32and b you've got to have deposits of
28:34dividend checks
28:35because you own equities in fact there
28:38should have been 4.4 billion dollars
28:41of dividend deposits over 30 40 years
28:45and not only was there not one dime
28:47there was never
28:48one counterparty payment so
28:51you can see before we even get into the
28:53details of these examinations
28:56um how this thing uh could have been
28:59and should have been solved very quickly
29:02yeah it's i mean as you just rattle
29:04these things off it just seems
29:05mind-boggling
29:06it does it's scary because it almost
29:08seems like common sense and even the
29:10very first one that you mentioned
29:12that supposedly his strategy was just
29:14tied to equities
29:16to i believe you said the s p 100 yeah
29:19so yeah all your your classic blue chips
29:22how to in and so his fund i guess it
29:24never technically had a down year
29:26correct
29:28it never had to be what it never had a
29:30down year
29:32not only that it never had a down year i
29:34i'm not sure
29:35uh how many uh down months it was very
29:38rare
29:39and in fact i mean that's how it was so
29:41easy for harry markopoulos to figure it
29:43out because
29:44um you know five percent correlation
29:46when it should be 95
29:48means it's almost the uh the opposite of
29:51the uh
29:51of the strategy and the funny thing was
29:54is that um
29:55um you know that i talked to victims
29:59and i talked to the sophisticated
30:01traders on
30:02the um in the market making business i
30:05could never find anyone who understood
30:07the strategy
30:08or who could explain it and as i said
30:10conceptually it's it's pretty simple
30:12the um the statements were completely
30:15fake
30:16and very realistic looking because i
30:18said the s p
30:19100 index but initially he started off
30:22with a basket of 15
30:24large cap stocks which also should have
30:26you know reflected
30:28uh the you know the uh index the overall
30:31the nissi pretty closely um but
30:34these statements would then have a list
30:37of tons of um
30:38trades and stocks of all these big
30:40well-known companies
30:42so it looked all looked very um official
30:46but you know the fact that nobody
30:50really could explain the strategy that
30:52was basically very conceptually
30:54um simple is just uh you know
30:57it's mind-boggling from from the most
30:59sophisticated you know hedge funds
31:02uh who had strong risk management down
31:04to these poor individuals
31:06who saw these beautiful looking
31:08statements that assumed that everything
31:09was perfect
31:11yep and roughly like at its peak i mean
31:14how many
31:14uh parties were invested in this fund
31:17which it was just called
31:18made off securities right the fund were
31:20talking about
31:23what was the fund called yeah was it
31:25just called made off securities that was
31:27the name
31:30the firm was known as blmis bernard l
31:32madoff investment securities
31:35and that was a mistake he made by the
31:37way that
31:38what underlying your question if he had
31:40set up
31:41uh the hedge fund investment advisory
31:43business in a separate subsidiary
31:45like most wall street firms did he could
31:48have sold
31:49that legitimate business for three
31:50million bucks and gotten away with it
31:53um obviously since it was part of it he
31:55could never allow due diligence
31:58done but remember since he's never
32:00really admitting
32:02that he's running a hedge fund he didn't
32:05like to have any kind of public name
32:07on it and he did not even you know you
32:10talk about all these things that's
32:11that are stunning here's a guy running
32:14you know at that time maybe the biggest
32:16or
32:16top three hedge fund uh sizes in the
32:19world
32:20he hadn't even registered as an
32:21investment advisory
32:23at the sec which is the adv form that
32:25you have to fill out
32:27if you get beyond beyond a relatively
32:29small number of clients
32:31he registered in 2006
32:34two years before the uh
32:37thing went down unbelievable and so how
32:40many
32:40parties were invested in this at its
32:43peak individuals and
32:44and funds um you know how many people
32:47were in this
32:48oh the um on the u.s side there were 16
32:52000 um investors
32:56and uh most of those were were bundled
32:59through hedge funds uh
33:00feeder funds and um internationally
33:04uh another big number there were 720
33:07000 uh all invested basically
33:10through banks and feeder funds um
33:13and so there were a lot of people wiped
33:15out my university i went to tufts
33:17undergraduate
33:18lost 20 million dollars with bernie
33:22through a hedge fund of a really corrupt
33:24guy and ezra merkin
33:28so maybe that kind of leads into what i
33:30was going to get at is that you have all
33:31these
33:32you know that the number sounds huge
33:34when you say 16 000 i think domestic 720
33:37000 folks overseas
33:39but a lot of them really are just being
33:40represented by funds
33:42that they're invested in but
33:44nevertheless i mean you've got
33:4665 billion dollars here of real people's
33:48money and no one
33:49ever looked at what you were just
33:51debunking in five minutes
33:53of you know just gain after gain and
33:55ever said
33:56huh you know what's what's going on yeah
33:59you know um
33:59first off i mean when the when the
34:02money's coming into the feeders exactly
34:04as you say and are bundled up
34:07and the feeders have basically abdicated
34:10any
34:10due diligence uh investigation i mean
34:13there's your answer on that side
34:14on the sec side how do you have five
34:17investigations
34:18which you know a lot of these individual
34:19investors said hey the sec is
34:21giving this guy the good household uh
34:24seal of approval so obviously he's
34:25trustworthy
34:26he brilliantly exploited the silos at
34:30the sec now what do i mean by that
34:32the examiners who look at the broker
34:35dealer side
34:36are separate from those that look at the
34:38investment advisory side
34:40and a ponzi scheme is easy to detect in
34:42terms of where's the money
34:44where's the assets who are you trading
34:46with what's your footprint and
34:49the market-making guys didn't really ask
34:50those questions they
34:52they traced the trades in the
34:54market-making business which were
34:55obviously all there
34:57and they um they did not know
35:00how to ask the questions um on the ponzi
35:03sc
35:04seat which is why they focused on front
35:06running because front running they
35:08understood
35:09and bernie didn't register as an
35:11investment advisory so he didn't have to
35:13fear
35:14those folks ever setting foot in his in
35:16his uh
35:17in the lipstick building in fact he did
35:20register in 2006
35:22and still never investigated him from
35:23the investment advisory side
35:25uh in the final two years um
35:28the other thing he did was and this is
35:30again nobody on wall street did this
35:32these examiners would come in most of
35:34whom are young guys right out of law
35:36school who don't even understand wall
35:38street
35:38and he'd lock him in a room and they
35:40were only allowed to talk to him
35:43and his right-hand man on the 17th floor
35:45who ran the ponzi scheme operationally
35:48so they never got to talk to anybody
35:50else in the firm really
35:51and he fed them whatever they wanted
35:53they
35:54dumped dreams of phony reports on them
35:57which by the way the sec never followed
35:59up on
36:00and um so he controlled the uh
36:03relationship 100 percent he bullied them
36:06he brow beat them
36:08basically misrepresented to them and
36:11so they just were stuck looking at front
36:13running every time
36:14and um never really got down to the 17th
36:18floor the 194 was run like a pristine
36:20business
36:20now the examiners started to figure out
36:24that
36:24you know bernie was sometimes not
36:26telling him the truth he
36:27would change the amount of assets he
36:29would admit to managing left and right
36:31all the time
36:32and they never really closed the loop on
36:35the contradictions
36:37um so he basically
36:40ran circles around them his his
36:43right-hand man had a high school
36:45education
36:46and was dealing with all these law
36:48school geniuses out of sec and
36:50and he just totally blew them away
36:54who was the right-hand man that you said
36:56was responsible for operations
36:58frank frank d pascali whose own lawyer
37:01referred to him as madoff sammy the bull
37:03gravano
37:04and the chief fraud perpetuating officer
37:07this guy
37:08um literally this this whole crime was
37:11programmed brian
37:12on obsolete ibm as400
37:16that were out of business in 1980s
37:19and he had them programmed by two
37:22programming guys
37:23um to do all this fraud they basically
37:26um
37:27you know have the accounts and they
37:30would say
37:31um ryan has fifty thousand dollars in
37:33cash showing on his estate
37:35on his statement so we're going to buy
37:37him two bundles
37:38of the when it became this the essence
37:41uh s
37:42p index uh 100's we're going to shove
37:44those into his account
37:46all backdated all made up completely
37:49and he ran all of that and i mean it was
37:51meticulous in some ways down to
37:54um they they were back dating trades
37:57sometimes ten years
37:58so they would make sure that the fonts
38:00on the printer
38:02matched what the statements should look
38:04like um
38:05in an era say when they only had matrix
38:07uh dot matrix printers not
38:09inkjet and laserjet so there was that
38:12level on the other hand
38:14um if you looked at the trade
38:15confirmation sometimes
38:17you know here's bernie saying i don't
38:19take any management fees
38:21i charge commissions well these trade
38:24con firms were stuffed in all the
38:25statements for the month so there'd be
38:2750 of them 100 of them
38:28a huge number and often the trade
38:31conflicts
38:32the trade confirm commission box would
38:35be empty
38:36there would be no no charge in it so um
38:39it was both amazingly complex and then
38:43some very simple things
38:44that could have been detected and you
38:46know what
38:48i talked to the forensic investigators
38:50and both of us could
38:52would just would think and say bernie
38:54went to such
38:55unbelievable efforts to criminalize
38:59to cover up to keep this thing alive it
39:02would have been so much
39:03easier to run a legitimate hedge fund
39:06and
39:06earn the you know the market average is
39:08nine percent over 100 years
39:10and just do that and you know the fact
39:13that he spent
39:13all this effort um you know to keep this
39:17thing alive
39:18uh it's just it's just crazy all because
39:21of his ego and demons
39:23it truly is and if i can
39:26borrow a quote here from from the new
39:28book this was in an
39:29email to you to the author jim campbell
39:32from bernie madoff himself
39:34in which he said jim this certainly
39:36sounds strange coming from me
39:37but i was a constant critic of wall
39:39street i was a product of the corrupt
39:41culture
39:42of wall street now you you've spent
39:45quite a bit of time
39:46talking with bernie madoff was
39:49i mean can you ever say that there was
39:51kind of like a good bone in his body and
39:53he went awry
39:54or was this just an evil character from
39:57day one
39:58you know um i i i say that it's
40:02not a black and white sociopath
40:06financial syria or serial killer both of
40:08which he was
40:10but that legitimate business he also ran
40:13it as a family
40:14um they would pay for everybody's
40:17honeymoons
40:18they would pay for sudden medical crises
40:21that was all real now of course at some
40:23point it was paid for with other
40:24people's money
40:26but um it was legitimate and there were
40:29folks that stayed there just because he
40:30ran it like that
40:32there were other folks mind-boggling
40:34enough
40:35of those who stayed there because they
40:37so admired that they didn't screw their
40:39customers
40:40like happens a lot on wall street and um
40:43so that stuff was real
40:44on the other hand the guy did not have
40:48real remorse you just heard him saying
40:50he was a product of the corrupt culture
40:52on wall street
40:53he thought his investors were greedy
40:56these are guys he wiped out now
40:58they were greedy they were relentless
41:00they were constantly asking him for
41:02results
41:03they wouldn't accept anything but more
41:05and more gains even though he faked all
41:07this
41:08um and set it up he blamed them and
41:11he always rationalized that it was
41:14somebody else the big four were screwing
41:16him
41:17and forcing him to do this and you can
41:19go on and on and on
41:20the the remorse was never quite there
41:22and of course the most famous thing the
41:24thing that blew the cbs sunday
41:27morning uh correspond to jim axelrod
41:31was that at the same time that bernie
41:33was writing me seven
41:35eight-page single-spaced exquisite
41:37penmanship
41:38um letters rationalizing his behavior
41:41he sent a one sentence letter to andrew
41:44and his girlfriend
41:45saying i'm so sorry dad not even love
41:49dad
41:49but that was bernie trying to apologize
41:51to his son
41:53but here he is to a guy he doesn't even
41:54know writing seven page letters
41:58so you know clearly um you know the cbs
42:01guy
42:02said well jimmy's a monster in me and
42:03the answer is yeah he is a monster
42:05but it's just not black and white yeah
42:08and that's what i wanted to ask too i
42:09mean you got to know him a little bit
42:11what was this is funny but what was
42:13bernie like behind
42:14closed doors i'd have to say almost
42:17behind closed bars as well
42:19um you know anything that you can show
42:21us that maybe we didn't see
42:23as all this unfolded um
42:27first off he's not a gordon gecko
42:31type wall street guy he's more like your
42:33jewish grandfather
42:34he was he came across as low-key
42:37um and nice and um
42:41and that's and it was that kind of
42:43charisma a low-key kind of charisma
42:46um i would say he was brilliant i would
42:49say he had incredible recall
42:51i mean he would go through this stuff
42:53with me um it was just amazing
42:56um you knew
42:59you got to sense that it was like if i
43:02compare this to nixon in the sense that
43:04he was just obsessed with his reputation
43:07and getting it back
43:08and you know i was i ran a legitimate
43:11business i didn't get credit for that
43:13okay yeah i do i did run a ponzi scheme
43:15and it was the worst on wall street
43:17but why am i not getting credit for
43:19breaking down the new york stock
43:20exchange's monopoly
43:22for lowering the prices of commissions
43:24for so you know for getting uh
43:26legitimizing online brokers all of which
43:28was true
43:29and um and then of course
43:34bernie had no insight into himself now
43:37he would say
43:38jim madoff doesn't know why he did this
43:41and i would say well bernie aren't you
43:42madoff
43:43and um because the sec didn't know why i
43:46did it
43:47and um but he said his shrink at the
43:49prison told them
43:50that he had this compartmentalization
43:53comparable to what soldiers have in war
43:55which allows them to survive all this
43:58brutal killing
44:00he didn't know if i mean he had no
44:02relation to whether it was true or not
44:03but he repeated it
44:04and said you know it must be the way
44:07that i am
44:09the other thing is i would say is i
44:10asked uh i was going to ask
44:13a fraud a finance fraud psychologist try
44:16and dig one out so that i could put that
44:17into the book
44:18but by the end i understood him so well
44:20i only talked to one
44:22and you know she said that the important
44:25thing to understand is that fraudsters
44:27always cut corners even when they don't
44:30have to which is what bernie was doing
44:32and secondly that while everybody thinks
44:35that the family knew
44:36and other people knew and um you know
44:40this had to be known he said these guys
44:42run these things out of their mind
44:45and they don't tell anybody else it's
44:47set up exactly that way
44:49and you know what wall street was the
44:51perfect place for him
44:53because if you know how wall street
44:55firms are organized they're
44:56very byzantine in the sense they're very
44:59fractured
45:00there's chinese walls between investment
45:02bankers and traders so you can't find
45:04out about insider trading
45:06and so everybody's in their little
45:08bucket they don't know what anybody else
45:10is doing necessarily
45:11and that worked perfect for bernie
45:13because no one put the pieces together
45:14but bernie
45:17it's just incredible it's incred how did
45:19uh
45:20you know so this all came crashing down
45:23around the time of the great recession
45:26um
45:26in doing all of your research and
45:28everything else what when was the point
45:30that it really did
45:31bubble over because i can't recall it
45:32just kind of exploded but what was that
45:34first like
45:35tipping yes and and you're and you're
45:37right it was it was the great recession
45:39because
45:40without that bernie would still be in
45:41business i'm convinced and i calculated
45:44at his rates of returns he'd get 240
45:46billion this year
45:47um what happened was um lehman brothers
45:51uh went down uh then bear stearns um
45:55had to be bought by jp morgan the world
45:57looked like it was crashing there
45:59looked like there'd be a global economic
46:00collapse and seven billion dollars was
46:03taken out of bernie's fund
46:05so he actually knew the exact
46:08date that he was going to default on a
46:10payment
46:11which was going to blow everything up
46:14and that was around december 21st
46:16a hedge fund called optimal out of
46:19europe
46:20and it was going to be a 250 million
46:22dollar payment and he had this
46:24perfectly laid out it was going to be on
46:26a friday
46:27so they weren't going to notice that it
46:29wasn't in their bank account to a monday
46:32and then he was going to say well we're
46:33still in the trades uh
46:35so the assets will be got will be gotten
46:37to you as soon as the trade is complete
46:39and then that would have gotten them
46:40through christmas when banks were closed
46:43again
46:44but here's what hand in this interim he
46:48was going to confess to his family
46:50and he was going to go to his lawyer ike
46:54sorkin
46:54and asked how he turned himself in
46:57because above all
46:58else he did not want to be perp walked
47:00out of his firm in front of his sons
47:02and in front of everybody so bernie the
47:05control freak of all control freaks was
47:07going to control how he went down
47:10except he panicked and at the end he was
47:13almost catatonic with stress he would be
47:16lying on the floor in his office
47:18he'd be staring out the window at the
47:22same time he was desperately seeking
47:24money i just told you he was going to
47:25default on that money
47:27uh to optimal the hedge fund he actually
47:30tried
47:30thanksgiving to get optimal to put more
47:34money in
47:34at the same time that he was going to
47:36default on what he owed them
47:38so up until the day before
47:41he confessed ahead of schedule due to
47:45his
47:45quasi breakdown he was still getting
47:48money brought into the fund
47:50um so what happened was that basically
47:52the financial crisis
47:54um left he did not have any gates on his
47:57fund like a lot of hedge funds do
47:59he gave people their money the minute
48:00they asked for it and uh that's what
48:03became the problem
48:04in that seven billion that that started
48:06the whole thing in motion was that from
48:08the big four that you mentioned earlier
48:10uh what what sorry that's that again so
48:13the seven billion
48:14that was taken oh yes was that all the
48:16big four the usual
48:18uh no not all the big four no that was
48:20um
48:21people you know that that even you know
48:23he had um
48:25a whole bunch of individual investors
48:28that he had from the very beginning
48:30that um were totally trustworthy of them
48:33have been not high net worth investors
48:35like
48:35like those other investors they were a
48:38moderate means and it put money in
48:40periodically over 40 years
48:42it was some of them it was some of the
48:44the feeder funds trying to take money
48:46out
48:47and by the way in the past um there were
48:48times when fairfield greenwich for
48:50instance the biggest
48:51domestic heater feeder fund took a
48:53billion bucks
48:54out of the fund um when he had a cash
48:56crisis back in
48:58uh either 05 or the 90 uh
49:02uh 92 uh 2002 one sorry
49:05and at that time the the big guys the
49:07big four did bail that out
49:09but this was across the board kind of
49:11thing people tried to take
49:12the uh money out it wasn't that the big
49:16four
49:16forced him to crash um and they were
49:19held they were still trying to help
49:21remember they didn't know it was a ponzi
49:22scheme so they were still
49:24trying to help find out ways he was
49:26taking money from them right up into the
49:28end
49:28uh as well yeah and so
49:32was that uh that one default is that
49:35because i don't recall is that when he
49:37came forward
49:38and admitted everything or how did how
49:41did they actually say
49:42yeah what happened what actually
49:44happened is um
49:46what was supposed to happen what you
49:48just said was he was going to default
49:50and when when they finally figured it
49:52out which was in his mind going to be
49:53right after christmas
49:55actually and this is the good side of
49:56bernie that shows up every now and then
49:58he wanted to get his employees he didn't
50:00want them to destroy their christmas
50:02but anyway when he prematurely
50:06um basically collapsed and
50:09his right-hand man d pascali had planned
50:12to cover everything up they were going
50:13to destroy whatever they could
50:14and bernie obviously took that away so
50:17they were screwed there
50:19but how it happened in terms of getting
50:20turned in he um
50:22when his son saw him um appear to be
50:25having a nervous breakdown in his office
50:27they rushed in and they took him home
50:31and they got him home which is up on the
50:33upper east side in a penthouse apartment
50:35on east 67th street and he um confessed
50:40and the sons rather than
50:44yeah to confess to the sons and roof and
50:47rather than um
50:48moving their money or delaying a few
50:50days or
50:52helping bernie cover it up or whatever
50:55they left the apartment instantly they
50:58went to their lawyers
50:59to find out how they could turn them
51:01into the fbi and the fbi then showed up
51:04at the apartment
51:06actually here this is kind of funny um
51:08their lawyer called the um
51:10uh the sec and said
51:13uh we've got a report here of a 50 you
51:16use the number 50 50 billion dollar
51:19um financial fraud and um
51:22it was a friday night
51:26friday and um the sec guys said oh
51:30come in uh you know call us tomorrow
51:32about this 50 million dollar fraud
51:34the lawyer said no no 50 billion
51:37and the guy said oh my god and uh they
51:40sent the fbi up
51:42and the fbi actually arrested him the
51:44next morning
51:46took him downtown and booked him so
51:49remember he was supposed to
51:51uh talk to his his lawyer ike sorkin
51:54um to figure out how he'd turn himself
51:56in instead
51:57ike sorkin is in his granddaughter's
52:00classroom in washington dc
52:02sitting in those little mini chairs that
52:04they have in the classroom
52:06and bernie calls him and says um
52:09i'm i'm handcuffed to a chair and an f
52:11in the fbi
52:12uh new york city headquarters and he's
52:15going like my god
52:16and he got on the phone and told the fbi
52:18stop asking questions
52:20he hung up and he still had no idea why
52:23bernie had been arrested
52:24he still hadn't told him and when when
52:27he got back to new york
52:28the next day bernie had already
52:30confessed to the fbi
52:32before he asked his own lawyer uh what
52:35he should do
52:36so um that's basically how it happened
52:39so ultimately he went down in this thing
52:41i mean bernie madoff steals although i'm
52:43white
52:44you know it sounds like he had a
52:45right-hand man that was just as bad as
52:47he was
52:48you know if not worse in some ways
52:49orchestrating the whole thing
52:51who eventually got locked up and
52:54penalized
52:54in this whole scheme yeah there is
52:57another great question
52:58so on that um 17th floor that frank was
53:02the chief operation
53:03operating guy or what we call the chief
53:06fraud perpetuating officer
53:08there was this relatively small crew
53:10again all high school graduates
53:12ranging from annette bond journal who i
53:14mentioned earlier who was his right-hand
53:15administrative person
53:17and she handled the big four by the way
53:19all the back dating she had
53:20she he hired these women um and
53:24and the frank d pascali and two computer
53:26guys
53:27precisely because they had no idea how
53:29wall street worked and they were high
53:31school guys and they would do what they
53:32want
53:32now over time they obviously had to
53:34figure out something wasn't right they
53:36never figured out it was a ponzi scheme
53:38in 40 years
53:39but annette benzerno as an example who
53:42was his right-hand admin
53:44her last year she made 670 000
53:47and had a 585 sorry 58 million dollar
53:52fake ira she thought was real two floors
53:55up the
53:56equivalent job was held by eleanor
53:58spoleri
53:59who was the administrative assistant to
54:01madoff in the legitimate business
54:03she was making 125 000 a year including
54:06her bonus
54:07and had no ira okay what happened to
54:10these folks
54:11all of those guys on that floor of a
54:14handful
54:15were indicted and tried criminally
54:18and went to jail frankie pascali
54:22turned government's evidence against
54:24them and uh he was going to be sentenced
54:27after the trial after he testified but
54:29he died
54:30um bernie went to jail
54:33and guess what no one else went none of
54:36the hedge fund guys none of the big four
54:38guys the sec then grossly screwed up
54:42demoted eight people lower level and not
54:45one
54:46sec person lost their job no one on wall
54:49street went to jail
54:51and um basically
54:55no one was held accountable criminally
54:58jeez other than that small group and by
55:01the way
55:01bernie died in april as you know two
55:03weeks before my book came out
55:06by he was the last person in prison so
55:08there's nobody in prison now
55:10related to this scheme wow
55:13and so he he goes you know on that day
55:16when
55:17he has the breakdown and his kids take
55:19him home
55:20he makes this confession to them so that
55:22the even like that inner sanctum the
55:24family they didn't really know
55:26his own sons yeah you know
55:29that's what people find hard to believe
55:32um
55:33i asked ruth in fact um what's the first
55:36thing that you said after bernie told
55:37you and
55:38she claims that she said what's a ponzi
55:40scheme
55:41and um you got to remember
55:45that the boys ran the upstairs business
55:48with no access to downstairs
55:50and they ran it 100 um legitimate
55:53and bernie was somebody they idolized
55:56and ruth was
55:57had cult-like devotion um should they
55:59have known something was up yeah
56:01should they have asked harder questions
56:03yeah but bernie
56:05somehow didn't get the hard questions
56:07from the sec from the feeder funds
56:09from any of his investors he had this
56:12way of manipulating bullying
56:16and controlling andrew even wanted to
56:17quit to go to work for goldman sachs and
56:19bernie basically
56:20uh wouldn't let him here's what it comes
56:22down to though
56:24and what what may be more understandable
56:28for people
56:29if you know bernie's ego um and having
56:32to be the go-to guy
56:34you would know that he could never have
56:36told his family
56:38that he had to turn to a criminal
56:40enterprise to keep the business going
56:43and that's why um they didn't know
56:47now i always say you know it's nice that
56:50they didn't know
56:51um but they
56:54benefited from that firm like it was a
56:57piggy bank
56:58ruth was charging over 50 000 a month on
57:01the corporate credit card again
57:02she didn't know that it was being it was
57:04being paid off by ponzi money
57:06but um and the boys got millions of
57:09dollars of loans for buying co-ops and
57:11things like that which bernie claimed
57:13they repaid
57:14but uh the fact is that
57:17um that they the firm was pilfered it
57:21was a private firm
57:22and as you know people tend to do things
57:24like put their cars on it
57:26but what they were doing was excessive
57:28so they didn't know it was a ponzi
57:29scheme they did turn their father in
57:30right away
57:31they didn't even they were even totally
57:33upset with ruth
57:35because ruth initially stayed with
57:37bernie
57:38um so they didn't know it was a ponzi
57:40scheme and i'll add one thing brian
57:41that's interesting is um
57:43it's that it's hard for me to understand
57:47this
57:47but if you think about it catherine
57:51hooper
57:52um who's who was a source for this book
57:54and helped me get inside the firm she
57:56was andrew's girlfriend
57:58andrew madoff ruth madoff and bernie
58:01madoff
58:02all trusted their legacies with a guy
58:04they didn't know
58:05from adam and none of them saw the book
58:09before it came out and um
58:12i was investigating whether andrew knew
58:15right up into the end because there was
58:17a big question mark
58:18that i had a very hard time getting
58:20underneath and i was going after
58:22catherine at the same time and trying to
58:24figure out
58:25you know how i could get an answer on
58:27this to whether as a
58:28as it related to andy and mark and um
58:32so when the book comes out
58:35um and i sent it
58:38to katherine um
58:42she i had only told her that the book
58:44will say they did not know but i didn't
58:46tell her anything else in it
58:48um so when at that point she said uh i
58:51hope you sell
58:5265 billion a billion books and you know
58:54obviously where that number comes from
58:56and then during the cbs sunday morning
59:00interview she apparently watched it
59:03with her father and she said her father
59:06did play by play
59:07by everything i said because they asked
59:10me point blank did ruth know
59:12and um so apparently the family then
59:15obviously felt good about my findings
59:20and indeed i contacted reuse
59:23lawyer because ruth was no longer
59:24talking to me and ruth
59:26uh guy i sent ruth a book
59:30which i signed to her so ruth has the
59:32book catherine has read the book
59:34so it's one of the mind-boggling aspects
59:36people say well how did they get how did
59:38i get them to open up
59:39why did they talk to me and essentially
59:41why would people
59:42trust their legacy with some guy they
59:45have no idea
59:46what he's going to do other than that i
59:48made it clear i was going after the
59:49truth
59:50if i found and by the way this is
59:51another great tribute to
59:53catherine's character she told me jim to
59:56the
59:57depth of my soul i don't believe andrew
59:59knew but if you find out he did
1:00:01i will accept it
1:00:04and have they read the book now have you
1:00:06spoken to him since
1:00:08as i said catherine has read the book
1:00:10and sent me a handwritten note you know
1:00:12and um i don't know if uh ruth has read
1:00:15it but she i know she has the book
1:00:17because her her lawyer guaranteed that
1:00:20they would put it in her hands
1:00:22um they watched the the fam they watched
1:00:24the cbs sunday
1:00:26morning news thing too and he said the
1:00:27family was vastly relieved
1:00:29because remember the fbi even up to the
1:00:32end believes
1:00:33that that the family knew i knew stuff
1:00:34the fbi didn't know
1:00:36but the fbi uh believes if the sun's new
1:00:40um so you know i was sort of going out
1:00:43on a limb but um
1:00:44uh you know i was comfortable with it
1:00:46with my finding but again
1:00:47it doesn't excuse the way they piggy
1:00:50bank
1:00:51money out of that firm so it sounds like
1:00:53the the fbi believes
1:00:55that they knew it it sounds like you may
1:00:57think that they knew but there's
1:00:58nothing that we can actually show to
1:01:01prove that they did know
1:01:03um would i yes exactly right there's
1:01:06like five million pieces of evidence
1:01:07that no one has ever found that
1:01:09the reason the fbi the fbi told me
1:01:12that they were convinced that bernie was
1:01:15grooming the sons to run the firm
1:01:17okay so obviously therefore they had to
1:01:19know i know that wasn't true
1:01:22i know it wasn't true through several
1:01:24different ways um
1:01:25obviously you know i knew andrew wanted
1:01:28to quit i knew the boys
1:01:29knew nothing about it or claimed they
1:01:31knew nothing about it i knew
1:01:33and think about this that firm was taken
1:01:37down by
1:01:38the authorities anybody inside that firm
1:01:41that could identify the sons as as being
1:01:44complicit
1:01:44would have turned them into second
1:01:46because they would have gone to jail
1:01:47and that one person in that firm by the
1:01:50way frank d
1:01:51pascali was incredibly angry because
1:01:53bernie didn't play out the game plan and
1:01:55left him hanging
1:01:56okay frank d pascali said the kids did
1:02:00not know
1:02:01okay ike sorkin said the kids were so
1:02:04frustrated
1:02:05with the way bernie was running it they
1:02:06wanted the name change to made off
1:02:08securities
1:02:09so there was a succession strategy that
1:02:12broadened the firm behind bernie and
1:02:14obviously bernie would not allow that
1:02:16so i am completely comfortable the fbi
1:02:20was wrong in that assumption and
1:02:22obviously
1:02:23the southern district of new york and
1:02:25the civic bankruptcy trustee
1:02:27all thought that they were complicit and
1:02:30none of them have ever
1:02:31been able to make an arrest now civic uh
1:02:34went after clawback money
1:02:35um which was money that was um
1:02:37ill-gotten gains
1:02:39and the family um ruth agreed to give
1:02:42100 million back to the justice
1:02:43department
1:02:44and um the rest upon her death will go
1:02:48to the trustee
1:02:49and the boys gave back money from their
1:02:51estates after they die
1:02:53and the only reason they didn't up front
1:02:54was that the trustee wanted all their
1:02:56money
1:02:57and um they felt that they they'd earned
1:02:58um you know some legitimate money from
1:03:01the regular business
1:03:03so um the authorities are not right that
1:03:05they knew
1:03:06or they don't have any evidence that
1:03:07they put it that way
1:03:09but the family still living ruth and the
1:03:12sons
1:03:13they uh they haven't been penalized
1:03:16they haven't gone to jail they've had to
1:03:18give back some of that callback money i
1:03:20believe you said
1:03:21but i guess what a lot of people want to
1:03:23know out there is
1:03:24are they still living the life of luxury
1:03:26you know well
1:03:27you you gotta you gotta remember uh mark
1:03:30committed suicide
1:03:31two years to the day after his father
1:03:33was arrested and andy died in 2014 from
1:03:37cancer
1:03:38and as andy put it to me my father
1:03:40killed my brother quickly and he's
1:03:41killing me slowly um
1:03:44so my son's pre-deceased bernie yep so
1:03:47both his sons predeceased him and ruth
1:03:49by the way
1:03:50um who was worth 800 million at her peak
1:03:53um gave away that all disappeared when
1:03:56the firm went down but she gave away 100
1:03:58million dollars to the government
1:03:59and she was left with an audited 2.5
1:04:02million dollars
1:04:04of which 500 000 went to lawyers
1:04:07so she was not left destitute by any
1:04:10means
1:04:11but she was living in an apartment in
1:04:13greenwich that
1:04:14cost her twenty nine hundred dollars a
1:04:16month driving a beat up used car
1:04:18and every single expenditure over a
1:04:20hundred dollars had to be submitted to
1:04:22the civic
1:04:22uh bankruptcy trustee now the boys
1:04:25estates
1:04:26returned um i think the final number was
1:04:28around
1:04:2916 million after their deaths and that's
1:04:32because
1:04:32you know um the fight went on the whole
1:04:34time because the very first phone call i
1:04:36had with andrew remember
1:04:38this is off the record he doesn't even
1:04:40know me
1:04:41it's it's at the point where the entire
1:04:43world believes that they knew
1:04:46and my first question to him was your
1:04:48dad gave you 2.2 million dollars for a
1:04:50co-op
1:04:51uh loan months before this thing went
1:04:55down why shouldn't why aren't you giving
1:04:56that back
1:04:57and he said you're 100 right i should
1:04:59give it back and the reason he wasn't at
1:05:01the time was that he was in a
1:05:03you know he was under litigation threat
1:05:06and they were trying to negotiate
1:05:08um uh what he felt was more fair
1:05:11but he i was stunned that he would admit
1:05:13to me
1:05:14on the very first question that that was
1:05:16not his money and that it should be
1:05:18returned absolutely
1:05:20yeah so you know
1:05:23that's the tragedy by the way is that um
1:05:26bernie wiped all these people out wiped
1:05:28this charity out
1:05:30um his wife had been with him since
1:05:33age 13 and was cult-like devoted
1:05:36destroyed that and killed both his sons
1:05:38for which he admitted that he had a lot
1:05:40of remorse to me and that
1:05:42he he knew that they couldn't forgive
1:05:44him he asked for their forgiveness
1:05:46but here's the thing that also um people
1:05:48don't know necessarily
1:05:50and which would point to andy not
1:05:51knowing
1:05:53i told you he left that apartment
1:05:55immediately to turn him in
1:05:58he never spoke a single word to his
1:06:00father ever again
1:06:02ever i would say you know when i met him
1:06:05you know a couple
1:06:05you know actually a couple months no
1:06:08couple years sorry
1:06:092011 um three years
1:06:12um i would say you know andy talk to him
1:06:16for your own closure not his
1:06:18he would and andy's response was never
1:06:20he's dead to me
1:06:22wow and you hear something like that and
1:06:26you almost want to believe what
1:06:29what your kind of assumption and that
1:06:30they did not know
1:06:32and you hear something like that like he
1:06:34never speaks to his father again how can
1:06:36you not believe it but
1:06:38on the other side of the coin it's like
1:06:40all those years being so close
1:06:42to this criminal empire you know
1:06:45maybe they're not guilty of knowing but
1:06:47they are guilty of not asking a question
1:06:49of how the heck is this thing working
1:06:51this way
1:06:52for all these years it's it's um it's
1:06:55hard to it's almost impossible to excuse
1:06:57yeah yeah let me yeah let me let me deal
1:06:59with that because first off as i said
1:07:01and as i say in the book
1:07:02ultimately there's no excuse that they
1:07:05didn't press
1:07:06i understand why they didn't because i
1:07:08understood how he treated the sec
1:07:11his i mean he was telling fairfield
1:07:13greenwich
1:07:14he was scripting their responses to the
1:07:16sec
1:07:17now these are wall street sophisticated
1:07:20risk managers
1:07:21okay how the hell is he getting them to
1:07:23script their responses
1:07:25and full of lies by the way uh here's
1:07:28one
1:07:29um you may not you do not tell the sec
1:07:32that i'm managing the money
1:07:33you say that i'm executing your trades
1:07:36okay meanwhile they had signed documents
1:07:38giving bernie 100 uh control
1:07:42of the uh assets on the suns now
1:07:45remembering this nobody knew how big
1:07:47this hedge fund was
1:07:48the sun's had no idea that it was 65
1:07:50billion he never represented that
1:07:52so they knew that it was successful they
1:07:55knew
1:07:56that a lot of their friends were
1:07:57clamoring to get into it they had no
1:07:59idea how big it was
1:08:00um but yes why didn't there's still
1:08:03there's never gonna be an excuse
1:08:04for why you didn't penetrate why you
1:08:06didn't quit even the way even
1:08:08that he was able to manipulate you and
1:08:11get this his sons would be humiliated
1:08:14because
1:08:14now all their friends would come up and
1:08:16they would say you know we've heard
1:08:17bernie's doing you know this incredible
1:08:19hedge fund it's a great deal
1:08:21um it's uh you know you don't lose money
1:08:23or anything
1:08:24can you get us in so the sons who were
1:08:28running the market making business would
1:08:30go to their dad
1:08:31and he would often say no i won't accept
1:08:33them they would have to go back
1:08:35and admit that even though they were
1:08:37running
1:08:39part of the firm they couldn't get their
1:08:41friends into the into the hedge fund
1:08:43now that was because bernie was doing
1:08:44him a favor and didn't want them to come
1:08:46blow themselves up
1:08:48but they didn't know that and so they
1:08:50were actually humiliated
1:08:52we talked about andrew i never talked to
1:08:55him
1:08:56talking to him again andrew was tough
1:08:59mark was not mark was a
1:09:00tortured soul and the
1:09:03day that this went down eleanor scullery
1:09:07who i mentioned as the um
1:09:09his legitimate secretary was driving
1:09:11home and her daughter sabrina called him
1:09:13in the car
1:09:14called her in the car this is the very
1:09:16day that bernie's arrested
1:09:18and she grew up with the madoff boys in
1:09:20the sense that they in in high school
1:09:22years they worked
1:09:23as interns in the firm so she knew them
1:09:26she told her mother
1:09:28hours after she'd heard of the arrest
1:09:30that mark was not going to be able to
1:09:31handle this and that he would kill
1:09:32himself and
1:09:34two years to the exact day of his
1:09:36father's arrest he killed himself
1:09:38and that that just gives me chills every
1:09:40time i heard that story
1:09:41i hear that i repeat that story
1:09:45it's almost i'm like almost speechless
1:09:48as you hear all these details of how
1:09:50this all unfolds
1:09:51uh it's one for the ages um it is
1:09:56it really is in one a couple questions
1:09:58here two-part question that i think will
1:10:00help wrap us up wrap this up
1:10:02okay what would you say changed uh
1:10:06in finance and specifically wall street
1:10:09after bernie and furthermore what do you
1:10:12think
1:10:12is changing or will change now after
1:10:14your book
1:10:17you know i think um the first thing is
1:10:20the sec
1:10:23had to realize um that the silos had to
1:10:26be broken down they had to bring the
1:10:28right they had to bring the right
1:10:29expertise to bear on these things
1:10:31and um has the
1:10:34has the sec changed which would get to
1:10:37the final part of your
1:10:38uh question and the answer from my
1:10:40perspective
1:10:42is that and then harry markopoulos um
1:10:44validated the first part
1:10:46they're very good now at handling ponzi
1:10:48schemes and
1:10:49harry feels that ninety percent of the
1:10:51time and ponzi schemes start every month
1:10:53that they'll mail you except he thinks
1:10:55that if you're offshore you could get
1:10:57away with another bernie
1:11:00the other thing that um that i feel
1:11:03is that people think the sec is a cop
1:11:07on the beat and is there to protect
1:11:09investors and by the way
1:11:11their website says we're here to protect
1:11:13investors
1:11:14but they're not what they are are folks
1:11:17that come in after the mess has been
1:11:19made
1:11:19and clean it up which by then is a
1:11:22little bit late if you've been the
1:11:23victim
1:11:24and that's what i think is a cultural
1:11:26change that needs to be
1:11:28uh it needs to happen is that they
1:11:30become more of an upfront cop and
1:11:31if you look at things going on right now
1:11:33like robin hood
1:11:35which has been sanctioned for abusing
1:11:37its customers with a business model that
1:11:38works against them
1:11:40for the archaegos hedge fund uh family
1:11:42office that went down
1:11:43they're these things out there that
1:11:45again are that
1:11:47provide leading signs that they're train
1:11:50wrecks
1:11:50and it would be better if the sec
1:11:55handled these things or moved to in
1:11:57front of the train
1:11:59and and tried to um you know
1:12:02handle these now wall street um there
1:12:05were no due diligence standards so i'm
1:12:07calling for
1:12:07you know due diligence standards to be
1:12:09legal requirements similar to what fafsa
1:12:11does in accounting
1:12:13because no one was held criminally
1:12:15responsible for the fact that these
1:12:16hedge funds
1:12:17completely ignored doing due diligence
1:12:21um and the bank has improved it's it's
1:12:24know your customer remember i said they
1:12:25didn't even know it was the market uh
1:12:27the
1:12:28hedge fund business and the anti-money
1:12:30laundering business
1:12:31i have even mentioned that all that
1:12:33money coming from abroad
1:12:35there was a huge money laundering scheme
1:12:37dirty money
1:12:38being taken from russian oligarchs
1:12:41eastern european oligarchs
1:12:43drug lords in colombia that money was
1:12:45fed through
1:12:46primarily through a bank in austria run
1:12:49by uh sonya cohen who was
1:12:50one of the biggest feeder funds uh
1:12:53around that money was funneled into
1:12:55bernie where it then looked like it was
1:12:56legitimate money
1:12:58and the never has that money laundering
1:13:01been gone after
1:13:02just as never has the tax evasion scheme
1:13:05by the big four
1:13:06and the oldest investors gone after so
1:13:10wow a lot of stuff you know
1:13:13doesn't change on wall street um but the
1:13:16book has 30 reforms suggested in there
1:13:18from the big to the
1:13:19for the to the to the smaller reforms
1:13:22and
1:13:22um i do hope that um
1:13:26the culture you know will change and
1:13:29that um you know that investors
1:13:32interest you know one of the things that
1:13:34that wall street could help on the sec
1:13:37can help on
1:13:38was that investors need to understand
1:13:40exactly what they're going into
1:13:42they shouldn't be allowed to enter stuff
1:13:44that they don't understand
1:13:45right or where the where there's a
1:13:47guarantee of return up front which
1:13:49bernie used to do
1:13:51um and you know as i say the
1:13:55hippocratic oath in the medical
1:13:56profession should be applied to the
1:13:58investment profession which is do no
1:13:59harm
1:14:00first and the market's gone up
1:14:03nine percent a year for a hundred years
1:14:05on average as i told you
1:14:06and an index fund which is what um
1:14:09warren buffett recommends
1:14:10periodically invest into an index fund
1:14:13don't trade excessively through robin
1:14:15hood which
1:14:16would say call fake trading which is uh
1:14:18free trading
1:14:19which it's not really um invest in that
1:14:23take the nine percent bernie was
1:14:25offering eleven percent at the end
1:14:27take the nine percent and sleep
1:14:30well said well said i mean this is just
1:14:32such a far-reaching
1:14:34evil empire that uh it seems the more
1:14:37you dig the more you could find here
1:14:38it's incredible
1:14:40um and i know we spent so much here on
1:14:42your new book made off talks which just
1:14:44sounds like such an
1:14:45entertaining read and a real eye-opener
1:14:48it sounds like a crown jewel for someone
1:14:50in your business with your talk show
1:14:52forensic talk
1:14:53uh you can't get bigger than bernie
1:14:55madoff
1:14:56but just on yourself real quick i know
1:14:58we spent so much time on the book
1:14:59would you mind sharing with our
1:15:00listeners maybe what's next on your
1:15:02agenda any
1:15:03how do you follow this one up yeah well
1:15:06um
1:15:06uh right now in fact um
1:15:10i had to get an agent with caa which is
1:15:12one of these hollywood agencies
1:15:14because even before the book came out
1:15:17four production companies
1:15:18uh came to us and want to make a
1:15:20documentary out of it and it turns out
1:15:22that what caa has done
1:15:24is they've gone directly to netflix
1:15:26normally the production companies go to
1:15:28netflix or hbo max
1:15:30and then netflix green lights it and
1:15:32funds it and then they go make it
1:15:34in this case because this is the only
1:15:36book
1:15:37that has done the complete madoff story
1:15:39in other words all that stuff we just
1:15:41talked about that failed on the
1:15:42in the system um and right now um
1:15:45netflix made an offer to make a
1:15:47documentary and
1:15:48we're going back on a counteroffer so
1:15:50the next step is hopefully
1:15:52to have a documentary made on the book
1:15:55myself myself the
1:15:56um the question you asked is a really
1:15:59good one because i don't have the answer
1:16:00yet
1:16:01what i'm gonna do next i mean i've
1:16:03thought of money this book ends on
1:16:05you know the government missed the money
1:16:06laundering aspect of this story
1:16:09and should i go look at money laundering
1:16:11which might get me killed but
1:16:12um or not i don't know yet what i'm
1:16:14going to do next i'm on the book
1:16:16tour and i want to get the documentary
1:16:19i'd like to you know
1:16:20nothing happens until it's signed so i'd
1:16:23like to see if we can sign a documentary
1:16:25because brian just to give you the
1:16:27perspective we're trying to sell books
1:16:28by the thousands right
1:16:30which would be really successful the
1:16:32director
1:16:33that they had me talk to through netflix
1:16:36um said that a hundred million people
1:16:38would view this documentary in the first
1:16:4028 days
1:16:42so it makes the book look like trivial
1:16:44pursuit
1:16:45yeah wow i believe it that's uh that's
1:16:48pretty cool
1:16:49uh anything else that you want to make
1:16:50sure you share with our listeners today
1:16:53no you know i i think people will find
1:16:55it um
1:16:56a riveting read as well as you know
1:16:58unveiling the whole thing
1:17:00and what i keep saying and your reaction
1:17:02has been this way too
1:17:03i think people will be stunned how
1:17:05little they know of the whole story
1:17:07because the perception is it was bernie
1:17:10everybody knows it
1:17:11we even need more madoff stuff now he
1:17:14died
1:17:15um right now which of course raised
1:17:16everybody's interest
1:17:18and he everybody a lot of people don't
1:17:21care about bernie anymore but everybody
1:17:23still wants to know
1:17:24how he pulled it off and um this book
1:17:27really is the first look
1:17:29at how he did it it's largely untold
1:17:32um the book is made of talks from
1:17:35mcgraw-hill it's at
1:17:36amazon barnes and noble independent
1:17:38bookstores around the country if you'd
1:17:40like to support those
1:17:41and walmart online and anybody can
1:17:44contact me
1:17:45if they have questions directly or if
1:17:48you want me to sign a book plate i can
1:17:49send to you
1:17:50but um i think you'll enjoy it and you
1:17:53know i
1:17:53really appreciate brian that you let me
1:17:55talk about it for over an
1:17:56hour which is really nice certainly well
1:18:00thank you for coming on the show today
1:18:01jim i think that was a great
1:18:02conversation
1:18:03and i can't tell you how many times i
1:18:05was just sitting back in my chair going
1:18:07you got to be kidding me
1:18:09it truly is unbelievable but uh ladies
1:18:11and gentlemen thank you for tuning in
1:18:13again i'm your host brian kadurna
1:18:15you've just listened to another episode
1:18:16of the kaderna podcast
1:18:18with our guest jim campbell in his
1:18:20latest book
1:18:21madoff talks go check it out let us know
1:18:24what you think
1:18:25and we will see you next week
1:19:29the condera podcast is for informational
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