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[somber music playing]
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[newscaster 1]
Guys, we should probably mention,
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AP led with a story a few moments ago.
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[newscaster 2] Bernie Madoff,
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the architect of the largest
Ponzi scheme in American history,
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died today in prison. He was 82.
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[somber music continues]
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I understand that
when Bernie died, he was cremated.
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[Leonid Feldman]
Judaism is against cremation.
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We believe very strongly
that our body does not belong to us.
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It belongs to God who gave it to us,
so we're supposed to return it.
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From earth you come,
to the earth you return.
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But then the real twist of the story
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is that the remains of this man
are still around
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and are sitting on a shelf
of a lawyer's office in some box,
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because the family refuses
to receive the ashes.
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[Bette Greenfield]
I guess I can understand it, but it hurts.
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There must have been good times with him.
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They're so angry with him that
that anger will stay forever.
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Everybody gets buried, even murderers.
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They get buried.
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This should have happened with him,
as bad as I think he is.
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And was.
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[evocative music playing]
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[Feldman] Nobody in the family,
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they don't want to be
connected to him in any way.
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Who wants to be connected
to the ashes of this vicious monster,
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who did not have any compunctions
destroying people's lives?
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[theme music playing]
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[Diana B. Henriques]
By the time 2007 dawned,
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Bernie Madoff must have looked back
over the previous two years and said,
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"I never thought
I'd make it through, but I did."
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With the help of the feeder funds,
with the help of inept SEC investigators,
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he had managed to reach 2007
with his slush fund fat.
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He regularly flies his private jet
to his townhouse in the south of France,
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where he has a new boat to play with.
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He lives large,
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but Bernie and Ruth Madoff
were not the only ones
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benefiting from this
extraordinary year of extravagance.
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Back in New York,
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Madoff made sure that
his trusted minions on the 17th floor
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shared in this wealth.
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He doubled Frank DiPascali's salary
from $2 million to $4 million.
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Frank bought a new fishing boat,
everything he ever dreamed of having.
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Annette Bongiorno
is given a substantial raise,
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and that year unfolds
with more and more luxury.
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That sense of exuberance
of having arrived at last
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at a pinnacle of Wall Street success.
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The basic concept of Wall Street,
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which sometimes the regulators
lose sight of, as do the academics,
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is it's a for-profit enterprise.
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By benefiting one person,
you're disadvantaging another person.
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[Jim Campbell] In 2008, all of a sudden,
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the global economy
was teetering on the brink.
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[bell ringing]
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[newscaster]
Problems with the housing market
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are making news tonight,
and now there is even more stark evidence
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of how serious
things are getting in this country.
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[Campbell] Mortgage brokers
were selling homes based on liar loans,
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which mean no documentation of income,
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to people that couldn't afford them
with mortgages they didn't understand.
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And then the investment banks
were taking these lousy loans
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they knew were going to crater,
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packaging them into securities,
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getting AAA ratings
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from the Wall Street rating agencies,
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and selling them
to investors on Wall Street.
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[brokers shouting]
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And then, boom, fell off a cliff.
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[reporter] Hundreds of thousands of
homeowners are defaulting on their loans.
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It literally was like
the world was falling off its axis.
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Every bank was falling to pieces.
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[reporter] Lehman Brothers reeling
because of these bad real estate loans.
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[Sorkin] Lehman Brothers
had filed for bankruptcy.
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Merrill Lynch, AIG was teetering.
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Morgan Stanley and Goldman Sachs
had to be bailed out.
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[reporter] We're talking
about investment banks,
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these are the smartest money
on Wall Street.
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How have they been
getting it wrong for so long?
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Bernie and Ruth
are in the south of France,
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but Bernie can't tear himself away
from what's happening back home.
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The stock market
is dropping precipitously.
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We are faced with the prospect
of a global meltdown.
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So that was the environment
that Bernie finds himself in
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when he and Ruth get
back on that jet for the last time
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and arrive back in New York.
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[ominous music playing]
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[phones ringing]
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At this point, all anybody cared about
was getting their cash quickly.
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Where could they turn?
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They could turn to Bernie Madoff.
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And they did.
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Phones ringing from Frankfurt,
from London,
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Madrid, Vienna, Abu Dhabi.
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"We want our money back."
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[phones continue ringing]
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[Henriques] And the withdrawal notices
start to flow in, and then pour in,
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and then avalanche in.
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[phones continue ringing]
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[Erin Arvedlund] September-October,
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that is when the screws begin to tighten.
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[phones continue ringing]
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[Henriques] Bernie by now
is tap dancing as fast as he can.
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He's badgering, he's bullying,
he's cajoling many of his oldest clients
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to stop pulling out money,
start putting money back in.
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[Arvedlund]
He calls his mainstay investor,
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Fairfield Greenwich,
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run by Jeffrey Tucker
and Walter Noel, and says,
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"This is a great time to buy." "No."
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Then he calls Sonja Kohn of Bank Medici,
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makes the same plea.
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She doesn't take the bait either.
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[Henriques] By the 2nd of December,
the writing's on the wall.
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Bernie is facing about $1.5 billion
worth of withdrawal requests.
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And he only has roughly
$300 million left in his bank account.
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If he writes checks to those clients
who want to withdraw their money,
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the checks will bounce.
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[Madoff] But obviously, you know,
I couldn't keep doing that
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because of the nature of the Ponzi scheme.
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So I knew that... that the game was over.
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[Henriques] At this point,
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he and Frank DiPascali
have a conversation about,
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where do they go from here?
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Bernie makes it clear to Frank
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that they're too far underwater
to ever get out again.
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[Campbell]
Frank has an immediate recognition
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that he's gonna go
to jail for a long time,
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and Frank just went ape shit.
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[Henriques] DiPascali will later claim
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that this was the moment
when he first realized
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that Bernie didn't actually have
a whole bunch of assets
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set away somewhere else
that would bail everybody out.
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That this was when he realized
it was really a fraud.
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[inaudible]
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[Henriques] What Bernie wants to do with
the money he has left, he tells Frank,
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is he wants to write checks to some
of his biggest long-term investors,
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for some of the faithful employees,
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for extended family members
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who had trusted him with their money
and now were going to be wiped out.
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After all, the fraud is up now.
The fraud is done.
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[somber music playing]
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[Henriques] As Frank DiPascali
is preparing these checks
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that Bernie plans to use
to distribute the last of his slush fund,
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he portrays it to his sons
as early bonuses for employees.
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Well, Mark and Andrew
are deeply disturbed by this.
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It makes no sense to them
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to be writing bonus checks,
given the state of the market.
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So on the morning of December 10th
of 2008, I was sitting at my desk,
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and things hadn't
been going well for weeks now.
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Bernie was acting very peculiar,
and I was trying not to disturb him.
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You know, I felt he was fragile.
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And I saw Peter just sitting there,
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and I remember
Mark and Andy coming into his office.
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Ordinarily, they would
check with me and say,
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you know, "What's my dad doing?
What's going on in the office?"
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They didn't this time, they just walked
right past me and went into the office.
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[Henriques] Mark and Andrew
attempt to change his mind
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about issuing all of these checks.
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They say, "Dad, you know, how do you know
what the rest of the year is gonna bring?"
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"Wouldn't it be safer
to hang on to this cash
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until we see how the year ends up?"
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[inaudible]
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[Henriques]
After a few attempts to deflect,
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Bernie loses his composure.
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[inaudible]
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[Squillari] I had mail for Bernie
and I went to go bring it to his office.
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[dramatic music playing]
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[Squillari] I obviously startled them,
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and they all jumped out of their chairs
and stared at me.
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And shortly after that,
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Mark and Andy, they put Bernie's coat on,
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and they escorted him out.
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And Bernie never went anywhere
without telling me where he was going,
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and he just walked past me.
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He never looked at me.
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And Mark came over to my desk
and leaned over and whispered,
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you know, "We're going to go
do a little Christmas shopping."
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I never saw Bernie again.
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[compelling music playing]
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[Campbell] Mark and Andrew take him
back to the penthouse in Midtown.
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Ruth is there,
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and this is the first time
that Bernie comes clean.
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[Madoff] I was in a mental state
that I could no longer continue it.
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So it was almost like
a relief to say, "This is it."
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"I just can't continue
this charade any longer."
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And that's what caused me
to acknowledge to my family,
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uh, that I had been committing this fraud.
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Bernie continues to explain how big it is.
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Billions of dollars.
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And all he has left is that 300 million
that he was trying to give away.
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Andrew just slides down the wall
until he's sitting on the floor in tears.
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[Campbell]
As soon as he hears the confession
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that the entire business
has been destroyed,
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there's no money,
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Mark is totally devastated.
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[Henriques] Ruth finally is able
to say something, and what she says is,
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"What's a Ponzi scheme?"
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It must have been one of those moments
when your world just turns upside down
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and everything you thought
was true before is no longer true.
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[inaudible]
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[Henriques]
Madoff's sons get up and leave.
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Before they reach the lobby, they have
decided that they must consult a lawyer.
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00:13:14,877 --> 00:13:19,048
Mark's father-in-law
is a noted lawyer in Manhattan.
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They arrange to meet with him
at his apartment.
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Mark and Andrew tell him
what their father has said,
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and their lawyer makes it clear to them:
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"This is a fraud in progress."
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"Your father is writing checks
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to distribute what will soon be called
the ill-gotten gains of his fraud,
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and if you do not report it,
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you will be accessories
to that continuing crime."
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They had to turn their father in.
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[tense music playing]
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[knocking on door]
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[Henriques] The FBI go
to the Madoff apartment
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early the following morning.
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Bernie's in his bathrobe.
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"You know why we're here?"
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"Yes."
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[Campbell] They ask him,
"Is there an innocent explanation?"
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And Bernie says, "No."
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[Henriques]
He tells them, "It's a Ponzi scheme."
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What he told his sons was true.
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One of the agents calls the office
and quickly briefs them on the outcome,
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00:14:38,586 --> 00:14:40,754
and is told, "Bring him in."
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00:14:42,673 --> 00:14:47,177
So they brief Bernie
on the dress code for being arrested.
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[tense music continues]
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[Henriques]
No shoelaces, no belts, no tie.
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He sheds his wedding band and his watch.
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Bernie's taken downtown
to the FBI building on Foley Square,
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and processed as
any criminal would have been.
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And then he calls Ike Sorkin.
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00:15:15,915 --> 00:15:16,999
[Ira Sorkin] "Hello?"
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00:15:17,958 --> 00:15:20,920
"Ike, it's Bernie. I'm handcuffed
to a chair at FBI headquarters."
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"I need your help."
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I then immediately tell Madoff,
"If you're talking, stop talking."
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[inaudible]
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[Ira Sorkin] I didn't know at the time,
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but for two hours, he told the FBI
everything he knew before he called me up,
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00:15:37,019 --> 00:15:41,398
and he told them
that he was the only one involved.
241
00:15:41,482 --> 00:15:46,362
I was thinking that, [chuckles]
"Quite frankly, he's in a lot of trouble."
242
00:15:46,904 --> 00:15:49,239
"The government's not
walking away from this."
243
00:15:50,324 --> 00:15:52,660
But the bail was set at $10 million,
244
00:15:52,743 --> 00:15:58,832
so Bernie goes back to the apartment,
and that's when it all blew up.
245
00:15:58,916 --> 00:16:00,042
All hell broke loose.
246
00:16:00,125 --> 00:16:02,836
If you work on a trading desk,
stop what you're doing
247
00:16:02,920 --> 00:16:05,464
before you walk out
and clean your desk out for the day.
248
00:16:05,547 --> 00:16:07,800
Bernie Madoff has been arrested.
249
00:16:07,883 --> 00:16:09,803
[newscaster 1]
Federal authorities are calling it
250
00:16:09,843 --> 00:16:12,346
one of Wall Street's
biggest Ponzi schemes.
251
00:16:12,429 --> 00:16:16,100
Police say the man behind it was one
of the most admired men on Wall Street.
252
00:16:16,183 --> 00:16:17,768
[newscaster 2] Bernard Madoff,
253
00:16:17,851 --> 00:16:19,895
a former chairman
of the NASDAQ Stock Exchange.
254
00:16:19,979 --> 00:16:22,398
[atmospheric music playing]
255
00:16:22,481 --> 00:16:24,984
[Frank Casey]
My cell phone rings, and it's Harry,
256
00:16:25,067 --> 00:16:28,612
and he's screaming
at the top of his lungs,
257
00:16:28,696 --> 00:16:30,781
"Madoff just capitulated."
258
00:16:30,864 --> 00:16:32,282
We had it right on!"
259
00:16:32,783 --> 00:16:34,284
I said, "Hold on, Harry."
260
00:16:34,785 --> 00:16:39,415
And I put down that phone,
and I had such fists of rage.
261
00:16:39,498 --> 00:16:41,258
[Ellen Hales]
I just felt dirty and violated,
262
00:16:41,333 --> 00:16:46,296
like, "How could this be? How could I be
so wrong about someone's character?"
263
00:16:46,380 --> 00:16:51,802
Everything that I thought about this man,
Bernie, was completely wrong.
264
00:16:52,886 --> 00:16:54,638
It felt like a betrayal.
265
00:16:59,476 --> 00:17:03,272
After Bernie was arrested,
it was complete chaos.
266
00:17:06,442 --> 00:17:11,155
There was the FBI coming in,
there was the SEC coming in.
267
00:17:11,655 --> 00:17:13,490
There were people who took off.
268
00:17:13,991 --> 00:17:17,870
I had absolutely no direction,
but I knew we had to answer the phones.
269
00:17:17,953 --> 00:17:19,288
[phones ringing]
270
00:17:19,371 --> 00:17:21,540
[Squillari] A gentleman called in.
271
00:17:21,623 --> 00:17:25,127
We had a nice relationship, we would
always talk, you know, and he said,
272
00:17:25,210 --> 00:17:26,545
"Eleanor,
273
00:17:26,628 --> 00:17:28,130
did you know?"
274
00:17:28,797 --> 00:17:30,966
It was like somebody hit me in the chest,
275
00:17:31,050 --> 00:17:34,303
because I didn't even think
people were going to think I was involved.
276
00:17:34,887 --> 00:17:38,223
That was just like, now another blow.
I was like, "Holy shit."
277
00:17:39,933 --> 00:17:42,144
And I said, "No. No, I didn't."
278
00:17:42,644 --> 00:17:46,398
And Pete is standing there,
and I hung up the phone and I'm going,
279
00:17:46,482 --> 00:17:48,317
"What am I supposed to do here?"
280
00:17:48,400 --> 00:17:51,070
"You know, what is going...
What am I supposed to do?"
281
00:17:51,153 --> 00:17:53,030
Peter just walked away from me.
282
00:17:53,864 --> 00:17:56,116
And I was just like, "You're on your own."
283
00:17:58,577 --> 00:18:00,704
There were people
down in the lobby, calling up,
284
00:18:00,788 --> 00:18:03,665
demanding that somebody
comes down and talks to them.
285
00:18:04,208 --> 00:18:08,921
I would go down to reception,
and I got some of the other ladies,
286
00:18:09,004 --> 00:18:11,173
and we would do it
for 20 minutes at a time
287
00:18:11,256 --> 00:18:14,468
because it was too much. It was sickening.
288
00:18:15,844 --> 00:18:19,431
People were scared. You could hear it
in their voices. They were scared.
289
00:18:20,015 --> 00:18:22,142
[phones ringing]
290
00:18:25,062 --> 00:18:28,816
[Keith Kelly] Typically, in any
investigation, drug, organized crime,
291
00:18:28,899 --> 00:18:31,985
you're starting with
the lower-level figures,
292
00:18:32,069 --> 00:18:34,071
working your way up the organization.
293
00:18:34,154 --> 00:18:38,283
Well, here we have the top guy, and
we just know a lot of money is missing.
294
00:18:38,367 --> 00:18:39,618
[inaudible]
295
00:18:39,701 --> 00:18:44,414
[Kelly] All the employees had been
basically corralled on the 19th floor,
296
00:18:44,498 --> 00:18:49,586
and you don't know
which one of them is a co-conspirator,
297
00:18:50,379 --> 00:18:52,297
potentially a cooperator,
298
00:18:52,381 --> 00:18:55,467
or another person
that has nothing to do with it.
299
00:18:56,093 --> 00:18:57,427
We had to start somewhere.
300
00:18:57,511 --> 00:19:01,431
So we start interviewing
all the employees.
301
00:19:02,266 --> 00:19:07,229
After talking to employees, the FBI
uncovers there's a whole another floor.
302
00:19:07,312 --> 00:19:10,357
[ominous music playing]
303
00:19:10,440 --> 00:19:12,860
[Campbell]
And after being led to the 17th floor,
304
00:19:12,943 --> 00:19:15,737
a key card is swiped
that gets them access.
305
00:19:16,822 --> 00:19:20,117
[ominous music continues]
306
00:19:21,994 --> 00:19:24,496
[Steven Garfinkel]
We went in, and we were like,
307
00:19:26,248 --> 00:19:27,249
"Holy shit."
308
00:19:29,751 --> 00:19:34,089
[Kelly] And there's just
rooms and rooms full of boxes,
309
00:19:34,631 --> 00:19:37,467
papers and documents everywhere.
310
00:19:38,552 --> 00:19:42,306
And I realized that
if we start moving this evidence,
311
00:19:42,890 --> 00:19:45,309
we're going to lose a lot of context.
312
00:19:46,768 --> 00:19:50,856
So I declared
the 17th floor a crime scene,
313
00:19:50,939 --> 00:19:54,526
and we just started the investigation
right then and there.
314
00:19:57,821 --> 00:20:00,574
[Garfinkel] Now, you talk about
the proverbial needle in a haystack.
315
00:20:00,657 --> 00:20:02,492
How do you figure all this out?
316
00:20:03,202 --> 00:20:07,706
The key is a source, informant,
or cooperating witness
317
00:20:07,789 --> 00:20:10,751
who could shepherd you through that.
318
00:20:11,585 --> 00:20:13,128
And that was Frank DiPascali.
319
00:20:13,837 --> 00:20:17,799
He knew that he had
a lot of criminal exposure.
320
00:20:17,883 --> 00:20:20,844
He had a family he cared deeply about.
321
00:20:21,637 --> 00:20:25,140
He had to think of,
what could he do for himself?
322
00:20:26,850 --> 00:20:29,937
And Frank provides us with the roadmap
323
00:20:31,021 --> 00:20:34,149
to figure out how the scheme worked.
324
00:20:36,652 --> 00:20:39,571
It was really kind of amazing to see.
325
00:20:40,489 --> 00:20:44,701
There was no real investing
ever happening.
326
00:20:44,785 --> 00:20:46,370
There were no trades.
327
00:20:46,995 --> 00:20:53,085
In other Ponzi schemes, you've had guys
who would trade stocks, and they'd lose.
328
00:20:53,168 --> 00:20:57,214
I mean, they were bad traders,
and they were always trying to catch up.
329
00:20:57,297 --> 00:21:00,467
I had never seen anything like this,
where there was absolutely
330
00:21:01,134 --> 00:21:02,594
no investing going on.
331
00:21:02,678 --> 00:21:04,554
[reporters clamoring]
332
00:21:04,638 --> 00:21:07,808
[reporter] Mr. Madoff, what would you say
to all those people who lost money?
333
00:21:07,891 --> 00:21:11,019
[newscaster] Pushing and shoving,
that's what Bernard Madoff came home to
334
00:21:11,103 --> 00:21:15,023
after making a brief appearance
in a Manhattan federal court Wednesday.
335
00:21:15,107 --> 00:21:21,321
I was in the back of that whole scrum
of television cameras and reporters.
336
00:21:22,322 --> 00:21:23,532
Don't touch me.
337
00:21:23,615 --> 00:21:28,578
[Arvedlund] There is that famous scene
of him pushing a television camera,
338
00:21:28,662 --> 00:21:30,914
and that was a daily occurrence.
339
00:21:30,998 --> 00:21:34,060
[reporter] Mr. Madoff, what would you say
to all those people that lost money?
340
00:21:34,084 --> 00:21:35,419
What would you say to them?
341
00:21:35,502 --> 00:21:38,505
Bernie Madoff's fraud
was like a nine-alarm fire
342
00:21:38,588 --> 00:21:40,465
in the world of business journalism.
343
00:21:41,466 --> 00:21:44,011
It was a fire hose of news.
344
00:21:44,094 --> 00:21:45,387
It was wall-to-wall,
345
00:21:45,470 --> 00:21:50,309
because what it represented
was so much larger than this one man.
346
00:21:50,934 --> 00:21:53,729
When you think about the financial crisis,
347
00:21:53,812 --> 00:21:56,273
it was this moment
where everybody's losing their home,
348
00:21:56,356 --> 00:21:58,108
they're losing their 401K.
349
00:21:58,191 --> 00:22:00,527
The unemployment rate is skyrocketing.
350
00:22:01,695 --> 00:22:04,698
People wanted to point fingers,
but they were all big institutions,
351
00:22:04,781 --> 00:22:07,492
they were buildings,
in many people's minds.
352
00:22:08,702 --> 00:22:11,788
And then all of a sudden,
Bernie Madoff arrives on the scene,
353
00:22:11,872 --> 00:22:15,959
and he becomes
the personification of this crisis,
354
00:22:16,043 --> 00:22:20,255
he becomes the face
for the financial crisis.
355
00:22:20,339 --> 00:22:22,841
All of the hate,
all of the venom, all of the anger
356
00:22:22,924 --> 00:22:26,345
that was being focused on Wall Street,
on everything,
357
00:22:26,428 --> 00:22:28,722
they could put it onto him
all of a sudden.
358
00:22:29,389 --> 00:22:34,061
[Garfinkel] And people want to know,
how come Madoff got bail?
359
00:22:35,228 --> 00:22:36,772
How come he's living in his penthouse,
360
00:22:37,439 --> 00:22:40,859
unlike some other
less fortunate individual
361
00:22:40,942 --> 00:22:42,736
who doesn't have his monetary means
362
00:22:42,819 --> 00:22:46,573
who's, you know, being held
without bail on Rikers Island.
363
00:22:47,824 --> 00:22:50,035
It just didn't, you know, seem right.
364
00:22:54,122 --> 00:22:57,250
[Sorkin] In the beginning,
you'd hear about Bernie Madoff.
365
00:22:57,334 --> 00:22:59,211
Then you'd hear about some investors.
366
00:22:59,294 --> 00:23:02,798
[newscaster] Filmmaker Steven Spielberg,
Mets owner Fred Wilpon...
367
00:23:02,881 --> 00:23:07,344
The bold-faced names
in his investor list surfaced first.
368
00:23:07,427 --> 00:23:11,014
Elie Wiesel, the Nobel Peace Prize winner
and Holocaust survivor...
369
00:23:11,098 --> 00:23:12,391
For the first moment...
370
00:23:13,517 --> 00:23:14,893
[stammers]
371
00:23:14,976 --> 00:23:16,728
...I felt a kind of,
372
00:23:18,105 --> 00:23:22,567
not physical, but spiritual,
mental nakedness.
373
00:23:23,652 --> 00:23:25,112
That everything was taken.
374
00:23:25,195 --> 00:23:30,158
It took several more days,
weeks in some cases, to put together
375
00:23:30,242 --> 00:23:32,369
the retired corrections officer,
376
00:23:32,452 --> 00:23:35,789
the retired teachers,
the retired dentists.
377
00:23:36,998 --> 00:23:39,126
[Sorkin] These were, like, real people,
378
00:23:39,209 --> 00:23:43,213
and you could see them and you knew them
and you'd see their faces.
379
00:23:43,839 --> 00:23:47,008
I think all of a sudden
it made this human. It made it real.
380
00:23:49,719 --> 00:23:52,931
[Greenfield] When my father passed away,
my younger brother says,
381
00:23:53,014 --> 00:23:58,103
"Well, all of Dad's money was in Madoff,
we might as well leave it."
382
00:24:00,605 --> 00:24:04,025
I decided to retire because I said,
383
00:24:04,734 --> 00:24:07,279
"My God, there's money there."
384
00:24:07,362 --> 00:24:12,909
"I could draw on that money.
I could take my money and live on it."
385
00:24:12,993 --> 00:24:17,456
And I moved to Florida,
and I used my money,
386
00:24:17,539 --> 00:24:20,417
money that I had saved, to buy the house,
387
00:24:20,500 --> 00:24:24,171
and I figured, "This is gonna be terrific
because I'll get my distribution,
388
00:24:24,254 --> 00:24:27,591
that'll pay back the money
that I put into the house,
389
00:24:27,674 --> 00:24:31,094
and then I'll have
some money to retire on."
390
00:24:32,220 --> 00:24:34,514
I said. "This is the last place
I'm gonna live in."
391
00:24:34,598 --> 00:24:35,974
And I was very happy.
392
00:24:37,142 --> 00:24:41,771
I was in the house four months,
that's all, when my brother called,
393
00:24:42,647 --> 00:24:48,695
and he said, "Bernie Madoff
was just arrested for fraud."
394
00:24:51,198 --> 00:24:53,742
And it was such a shock.
395
00:24:56,495 --> 00:24:57,935
[Jeffrey R. Werner] I often thought,
396
00:24:57,996 --> 00:25:00,057
"What would have happened
if my father had been alive
397
00:25:00,081 --> 00:25:01,875
and had heard the news?"
398
00:25:02,918 --> 00:25:07,088
And I think it would have killed him
even faster than the cancer.
399
00:25:08,131 --> 00:25:11,801
My father was with Madoff
since at least the early '80s.
400
00:25:11,885 --> 00:25:17,224
All the accounts together,
we had somewhere around $30 million,
401
00:25:17,933 --> 00:25:21,645
and then the money in Madoff went "Poof!"
402
00:25:21,728 --> 00:25:22,854
Like that, gone.
403
00:25:22,938 --> 00:25:25,982
It was 30 million Monopoly dollars.
404
00:25:27,067 --> 00:25:31,488
[Richard Schwartz]
I felt stupid that I had been conned,
405
00:25:31,571 --> 00:25:33,114
which obviously I was.
406
00:25:33,198 --> 00:25:35,492
Also, my family said,
407
00:25:35,575 --> 00:25:37,744
"Well, Rich has had
some Wall Street experience,
408
00:25:37,827 --> 00:25:39,663
so he understands what's going on."
409
00:25:39,746 --> 00:25:42,332
And shouldn't I have known better?
410
00:25:43,416 --> 00:25:47,462
So, it was definitely a thing
that really affected me personally.
411
00:25:49,673 --> 00:25:52,592
[Greenfield] Initially,
when I heard about what happened
412
00:25:52,676 --> 00:25:54,511
and knew I wasn't getting any money,
413
00:25:54,594 --> 00:25:57,514
I was very upset, scared.
414
00:25:58,765 --> 00:26:01,851
You know, what am I going to do?
I can't try to look for work.
415
00:26:01,935 --> 00:26:04,145
I was in my mid-seventies already.
416
00:26:06,231 --> 00:26:12,070
But I really felt terrible for my father,
even though he had passed away.
417
00:26:12,946 --> 00:26:17,325
There's an expression that
my mother used to use, called,
418
00:26:17,409 --> 00:26:19,619
"It's a shanda for the neighbors,"
419
00:26:20,328 --> 00:26:27,127
which means your neighbors will know
that you made that bad decision.
420
00:26:27,210 --> 00:26:28,545
It's a shame.
421
00:26:30,297 --> 00:26:31,631
He was fooled.
422
00:26:33,091 --> 00:26:36,553
And that made me very angry.
423
00:26:37,220 --> 00:26:40,557
[Schwartz] We had made certain
financial decisions, my wife and I.
424
00:26:40,640 --> 00:26:43,435
We have a son with disabilities,
425
00:26:43,518 --> 00:26:46,438
and we said, "Well,
we really don't need the life insurance
426
00:26:46,521 --> 00:26:49,566
because we have this asset with Madoff,
427
00:26:49,649 --> 00:26:53,278
this nest egg, which would
eventually be used for his care."
428
00:26:53,361 --> 00:26:54,446
That got blown to bits.
429
00:26:56,072 --> 00:27:00,035
[Werner] My mission was
to try to keep my mother in her house,
430
00:27:00,910 --> 00:27:03,997
the house that
my father built in Palm Beach.
431
00:27:04,873 --> 00:27:09,794
But I knew eventually the house,
which was our biggest asset,
432
00:27:09,878 --> 00:27:11,463
was going to have to go.
433
00:27:12,839 --> 00:27:15,175
My mother was devastated by it.
434
00:27:17,927 --> 00:27:19,888
But don't cry me a river.
435
00:27:20,680 --> 00:27:24,476
A lot of people
lost everything altogether.
436
00:27:26,519 --> 00:27:30,231
[Harry Markopolos] A white-collar crime
is different than a blue-collar crime.
437
00:27:30,315 --> 00:27:34,444
A blue-collar crime,
the bodies drop before you investigate.
438
00:27:35,987 --> 00:27:38,782
And a white-collar crime,
they drop afterwards.
439
00:27:40,367 --> 00:27:42,911
[newscaster]
A French investment fund manager
440
00:27:42,994 --> 00:27:47,666
who had $1.5 billion of his clients' money
with Bernie Madoff
441
00:27:47,749 --> 00:27:52,045
was found dead in his Manhattan office
today, an apparent suicide.
442
00:27:52,128 --> 00:27:54,798
René-Thierry de la Villehuchet.
443
00:27:56,800 --> 00:27:58,320
[Markopolos] It was all over the news.
444
00:27:58,843 --> 00:28:00,178
Thierry's suicide.
445
00:28:00,261 --> 00:28:03,848
It happened 11 days after
Bernie turned himself in.
446
00:28:07,560 --> 00:28:10,438
Thierry locked himself
in his office that night,
447
00:28:10,522 --> 00:28:13,358
and he sliced his arms open
and bled into a trashcan
448
00:28:13,441 --> 00:28:15,652
so he wouldn't make a mess
for the cleaning lady.
449
00:28:17,195 --> 00:28:21,116
[Casey] He chose
the methodology of death that he did,
450
00:28:21,991 --> 00:28:23,451
a painful solution,
451
00:28:23,952 --> 00:28:26,746
to atone for his sins of omission.
452
00:28:27,914 --> 00:28:29,666
What a waste of a man.
453
00:28:31,084 --> 00:28:33,586
[Markopolos] He was a man of honor,
and he was betrayed.
454
00:28:34,796 --> 00:28:37,132
It was traumatic for me personally.
455
00:28:37,215 --> 00:28:38,925
I cried for three days straight,
456
00:28:39,926 --> 00:28:42,011
because I was thinking of calling Thierry.
457
00:28:42,095 --> 00:28:44,180
I knew he had lost a lot personally.
458
00:28:44,264 --> 00:28:46,182
I knew his firm was done for.
459
00:28:47,016 --> 00:28:50,520
I wish I had reached out.
Maybe I could have prevented that.
460
00:28:59,696 --> 00:29:01,698
[newscaster]
For what might be the last time ever,
461
00:29:01,781 --> 00:29:05,660
Bernie Madoff left his $7 million
Manhattan penthouse early this morning
462
00:29:05,744 --> 00:29:07,829
and made his way to federal court.
463
00:29:07,912 --> 00:29:11,541
Bernie essentially decided
to plead guilty because he was guilty.
464
00:29:12,125 --> 00:29:15,545
He had very little to gain
by going to trial.
465
00:29:15,628 --> 00:29:18,131
It would have prolonged a process
466
00:29:18,214 --> 00:29:21,926
that was subjecting his family
to a relentless,
467
00:29:22,010 --> 00:29:25,430
scalding degree of public attention.
468
00:29:25,513 --> 00:29:28,393
[Ira Sorkin] He made the decision,
in effect, "Let's get this over with."
469
00:29:28,433 --> 00:29:29,976
"I gotta get rid of those cameras,
470
00:29:30,059 --> 00:29:32,187
I've gotta protect Ruth,
I gotta protect the boys."
471
00:29:32,270 --> 00:29:33,563
[camera shutter clicking]
472
00:29:33,646 --> 00:29:36,983
[Henriques] They came up with
an array of securities fraud
473
00:29:37,066 --> 00:29:40,236
and money laundering charges against him,
474
00:29:40,862 --> 00:29:42,572
and it's a long process.
475
00:29:42,655 --> 00:29:48,161
He had to not only say "guilty,"
he had to explain what he'd done.
476
00:29:49,871 --> 00:29:55,293
At the end, his attorney asks
for a continuance of bail
477
00:29:55,376 --> 00:29:59,255
until Bernie could be sentenced,
which would happen several months later.
478
00:30:00,632 --> 00:30:01,674
The judge says no.
479
00:30:01,758 --> 00:30:03,676
[inaudible]
480
00:30:03,760 --> 00:30:07,680
[Henriques] "He's pleaded guilty,
he is a confessed felon,
481
00:30:07,764 --> 00:30:09,265
he's going to be locked up."
482
00:30:10,642 --> 00:30:11,893
[strike echoes]
483
00:30:11,976 --> 00:30:17,190
And at that moment, you know,
Bernie is going to jail that day.
484
00:30:20,276 --> 00:30:22,946
Could have heard
a pin drop in that courtroom.
485
00:30:23,029 --> 00:30:24,864
[handcuffs rattling and clicking]
486
00:30:24,948 --> 00:30:29,244
[Henriques] And you could hear the click
of the handcuffs around his wrists.
487
00:30:29,327 --> 00:30:32,497
[tense music playing]
488
00:30:32,580 --> 00:30:36,209
[Henriques] He was housed
in the Manhattan Correctional Center
489
00:30:36,292 --> 00:30:37,961
until he could be sentenced.
490
00:30:38,044 --> 00:30:40,338
[Madoff] The government wanted,
the prosecutor wanted me
491
00:30:40,421 --> 00:30:43,299
to plea bargain with them, to, uh...
492
00:30:45,385 --> 00:30:47,470
you know, make some sort of a deal
493
00:30:47,554 --> 00:30:51,891
by providing information as to
who else was involved in this fraud.
494
00:30:51,975 --> 00:30:57,522
Uh... I mean, the belief was that
I couldn't be doing this all myself,
495
00:30:57,605 --> 00:30:59,983
that there had to be
other people involved.
496
00:31:03,152 --> 00:31:06,072
[Arvedlund] When Bernie Madoff said,
"I did it all by myself,"
497
00:31:06,155 --> 00:31:10,618
I knew that he was protecting
mostly his family,
498
00:31:11,244 --> 00:31:12,745
and of course, his employees.
499
00:31:14,080 --> 00:31:18,084
There was no way that one person
can pull off such a complicated fraud.
500
00:31:20,295 --> 00:31:25,842
[Campbell] The 17th floor employees are
what I call the witless co-conspirators,
501
00:31:25,925 --> 00:31:28,761
all of whom were hired
as high school graduates,
502
00:31:28,845 --> 00:31:31,139
knowing nothing about
how the Street operated,
503
00:31:31,222 --> 00:31:34,767
and were able to basically enable
504
00:31:34,851 --> 00:31:39,063
the operations of this Ponzi scheme,
undetected, for years.
505
00:31:39,147 --> 00:31:41,190
[Kelly] During our investigation,
506
00:31:41,274 --> 00:31:44,319
the big defense of all the employees,
507
00:31:45,236 --> 00:31:46,988
and even Frank DiPascali,
508
00:31:47,071 --> 00:31:51,159
was they didn't know
it was a Ponzi scheme.
509
00:31:51,242 --> 00:31:55,079
When they said they didn't know
it was a Ponzi scheme,
510
00:31:55,163 --> 00:31:58,708
they also said, "Well,
we knew the trades weren't legitimate,
511
00:31:59,375 --> 00:32:02,629
but that somehow Bernie had
the assets somewhere in Europe
512
00:32:02,712 --> 00:32:05,798
and gold and real estate to cover it."
513
00:32:07,133 --> 00:32:09,093
Well, that's still illegal.
514
00:32:09,177 --> 00:32:12,639
[newscaster] Federal investigators
are ripping apart 20 years of fraud
515
00:32:12,722 --> 00:32:15,725
inside Madoff's firm,
moving beyond Bernie,
516
00:32:15,808 --> 00:32:19,312
looking at sons Andrew and Mark
who directed trading activities.
517
00:32:20,271 --> 00:32:23,316
[Kelly]
Andrew and Mark Madoff certainly knew
518
00:32:23,399 --> 00:32:26,277
that the investment advisory business
519
00:32:26,361 --> 00:32:30,073
was not like
your typical brokerage account.
520
00:32:30,865 --> 00:32:33,576
Maybe they didn't know
it was a Ponzi scheme,
521
00:32:33,660 --> 00:32:36,663
but they knew
it wasn't what it appeared to be.
522
00:32:37,580 --> 00:32:39,707
[Squillari] I worked there for 25 years.
523
00:32:40,333 --> 00:32:42,335
Those boys grew up in front of me.
524
00:32:43,002 --> 00:32:47,340
They never went downstairs
to the investment advisory side.
525
00:32:47,882 --> 00:32:50,259
They didn't work there.
There was no connection.
526
00:32:51,219 --> 00:32:54,931
[newscaster] Also under the microscope,
Madoff's wife of 49 years, Ruth,
527
00:32:55,014 --> 00:32:56,724
who has not been charged in the case.
528
00:32:56,808 --> 00:32:59,978
I have no comments at this time
on any subject.
529
00:33:01,104 --> 00:33:05,149
[Garfinkel] I'm often asked the question,
"Do you think Ruth knew?"
530
00:33:05,233 --> 00:33:07,610
I looked really closely at Ruth.
531
00:33:07,694 --> 00:33:09,112
[delicate music playing]
532
00:33:09,195 --> 00:33:13,950
[Garfinkel] Ruth had an office kind of
around the corner from Bernie's office.
533
00:33:15,702 --> 00:33:19,455
Go into her office, open the file cabinet,
534
00:33:20,039 --> 00:33:23,418
and I was like,
"Whoa! We hit pay dirt here!"
535
00:33:24,669 --> 00:33:27,755
If Ruth Madoff had,
you know, a street name,
536
00:33:27,839 --> 00:33:33,011
it would be Ruthie Books, because she was
a bookkeeper and she was highly organized.
537
00:33:33,553 --> 00:33:36,889
Personal tax returns,
bank account statements,
538
00:33:36,973 --> 00:33:39,934
information on Bernie's boats,
539
00:33:40,018 --> 00:33:41,269
property they owned...
540
00:33:41,853 --> 00:33:44,856
It was all laid out perfectly for us.
541
00:33:46,774 --> 00:33:50,194
So we learned a lot
about Bernie's lifestyle,
542
00:33:50,737 --> 00:33:56,200
but I never saw anything that pointed
to her knowing about the Ponzi scheme.
543
00:33:57,243 --> 00:34:00,872
Whatever Bernie shared with her,
we don't know.
544
00:34:06,919 --> 00:34:09,922
[gentle music playing]
545
00:34:10,006 --> 00:34:13,718
[Werner] You know,
my father was very money-conscious.
546
00:34:14,510 --> 00:34:18,765
He tried to bring me up
in a money-conscious kind of a way.
547
00:34:19,515 --> 00:34:22,977
And he would say, "You know,
if it looks too good to be true, it is."
548
00:34:27,106 --> 00:34:29,484
But he didn't follow his own advice.
549
00:34:30,860 --> 00:34:32,195
And I don't blame him either.
550
00:34:33,696 --> 00:34:35,114
I blame the government.
551
00:34:35,615 --> 00:34:38,034
The SEC, they believed the con.
552
00:34:38,117 --> 00:34:39,410
They were conned too.
553
00:34:40,328 --> 00:34:43,456
[H. David Kotz]
If you have the SEC going forward
554
00:34:43,539 --> 00:34:46,918
and conducting an exam
or doing an enforcement investigation,
555
00:34:47,001 --> 00:34:49,629
and instead of having
the appropriate effect,
556
00:34:49,712 --> 00:34:53,132
which is to relatively easily
uncover the fraud,
557
00:34:53,216 --> 00:34:58,179
you actually allow the fraud
and give the fraud credibility,
558
00:34:58,262 --> 00:35:03,392
and it grows because
of your exams and investigations,
559
00:35:03,476 --> 00:35:06,145
that's a very severe indictment
of the government.
560
00:35:07,230 --> 00:35:09,315
I think if it wasn't
for the financial crisis,
561
00:35:09,398 --> 00:35:10,858
he may never have been caught.
562
00:35:11,776 --> 00:35:14,487
[newscaster] "We are sorry,
and we're fixing the problem."
563
00:35:14,570 --> 00:35:18,157
That was the response today from
the Securities and Exchange Commission.
564
00:35:18,241 --> 00:35:21,661
Contrite regulators were
called on the carpet by Congress today
565
00:35:21,744 --> 00:35:25,456
after a scathing report said
the agency was incompetent.
566
00:35:28,751 --> 00:35:31,230
[Markopolos] There was an investigation
called for by Congress,
567
00:35:31,254 --> 00:35:32,505
and I had to give testimony.
568
00:35:33,089 --> 00:35:35,675
So when I showed up, I showed up early.
569
00:35:36,843 --> 00:35:38,886
Every seat for the press was full.
570
00:35:38,970 --> 00:35:42,473
I talked to everybody in the press,
let them know it would be a prizefight,
571
00:35:42,557 --> 00:35:44,725
and they could expect
some riveting testimony.
572
00:35:44,809 --> 00:35:47,562
And sitting there next to the press
was all the SEC staff.
573
00:35:49,147 --> 00:35:52,692
And I was signaling them a message
that I was going to pound them.
574
00:35:53,609 --> 00:35:55,903
As today's testimony will reveal,
575
00:35:55,987 --> 00:35:59,490
my team and I tried our best
to get the SEC to investigate
576
00:35:59,574 --> 00:36:01,784
and shut down the Madoff Ponzi scheme
577
00:36:01,868 --> 00:36:07,331
with repeated and credible warnings
to the SEC that started in May 2000,
578
00:36:07,415 --> 00:36:11,419
when the Madoff Ponzi scheme
was only a $3 to $7 billion fraud.
579
00:36:12,920 --> 00:36:16,215
We knew then that
we had provided enough red flags
580
00:36:16,799 --> 00:36:18,759
and mathematical proofs
581
00:36:18,843 --> 00:36:22,388
where they should have been able
to shut him down right then and there.
582
00:36:23,389 --> 00:36:24,724
Unfortunately,
583
00:36:24,807 --> 00:36:27,643
as they didn't respond
to my written submissions in 2000,
584
00:36:27,727 --> 00:36:32,982
2001, 2005, 2007, and 2008,
585
00:36:33,065 --> 00:36:34,233
here we are today.
586
00:36:34,317 --> 00:36:37,612
It was like an explosion
that you had never seen before.
587
00:36:37,695 --> 00:36:40,239
The agency literally shook.
588
00:36:40,323 --> 00:36:41,657
He was...
589
00:36:42,658 --> 00:36:46,829
so, uh, specific about the failures
590
00:36:46,913 --> 00:36:49,665
and so, in some ways,
harsh about the failures.
591
00:36:49,749 --> 00:36:51,542
The SEC is over-lawyered
592
00:36:51,626 --> 00:36:54,086
and has too few staff
with relevant industry experience
593
00:36:54,170 --> 00:36:56,756
and professional credentials
to find fraud,
594
00:36:56,839 --> 00:37:00,468
even when a multibillion-dollar case
is handed to them on a silver platter.
595
00:37:00,551 --> 00:37:02,053
You have no excuses.
596
00:37:02,136 --> 00:37:04,889
You darn well better be
apologizing to the Madoff victims.
597
00:37:05,473 --> 00:37:09,185
The SEC continues to roar like a mouse
and bite like a flea.
598
00:37:10,102 --> 00:37:13,439
I was told it was the most heated
Congressional testimony since Watergate.
599
00:37:13,522 --> 00:37:17,109
I think I speak for everyone
when I say we hate fraud.
600
00:37:17,193 --> 00:37:19,570
We wish it never happened.
We wish we could get to...
601
00:37:19,654 --> 00:37:22,865
But your job is to prevent fraud,
not to hate it.
602
00:37:22,949 --> 00:37:27,161
One guy led you to this pile of dung
that is Bernie Madoff
603
00:37:27,245 --> 00:37:30,039
and stuck your nose in it,
and you couldn't figure it out.
604
00:37:30,122 --> 00:37:32,500
You could've shut Madoff down
in one half hour
605
00:37:32,583 --> 00:37:35,086
by just following up
on one of his allegations
606
00:37:35,169 --> 00:37:37,171
that they were not conducting trades.
607
00:37:37,255 --> 00:37:41,509
If you are the watchdog, you have totally
and thoroughly failed in your mission.
608
00:37:42,260 --> 00:37:43,511
Don't you get it?
609
00:37:43,594 --> 00:37:46,472
[Ed Perlmutter] Is the SEC
too cozy with the industry?
610
00:37:46,555 --> 00:37:48,432
Are they captive by this industry,
611
00:37:48,516 --> 00:37:51,560
or are they looking out for us?
Looking out for the taxpayers?
612
00:37:54,855 --> 00:37:57,525
[Madoff] When I started
doing business with all my clients,
613
00:37:58,192 --> 00:38:00,069
I was a little guy with nothing.
614
00:38:01,445 --> 00:38:03,656
I was this little kid from Queens.
615
00:38:04,532 --> 00:38:06,575
Didn't go to Harvard or... and so on.
616
00:38:06,659 --> 00:38:10,288
Why would anybody trust me
to give me business?
617
00:38:10,371 --> 00:38:11,789
Turn their money over to me?
618
00:38:13,291 --> 00:38:15,459
But the first thing I learned:
619
00:38:16,043 --> 00:38:18,713
Whatever you do in this business,
620
00:38:19,422 --> 00:38:20,923
never break your word.
621
00:38:22,174 --> 00:38:24,844
Your word was your bond,
literally, and that was it.
622
00:38:25,594 --> 00:38:26,887
You trusted everybody.
623
00:38:29,807 --> 00:38:33,644
But nothing in this industry
is what it looks like.
624
00:38:37,565 --> 00:38:40,484
[Arvedlund]
The fact that Bernie Madoff pled guilty,
625
00:38:40,568 --> 00:38:43,571
I think drew attention away from banks
626
00:38:43,654 --> 00:38:46,324
and maybe some other big investors
627
00:38:46,866 --> 00:38:49,118
who should have gone to jail,
but they didn't.
628
00:38:49,869 --> 00:38:54,874
[Campbell] In my opinion, the feeder funds
abrogated their responsibilities
629
00:38:54,957 --> 00:38:57,543
and had no criminal liability
630
00:38:57,626 --> 00:39:01,047
for the fact that all these folks
were wiped out innocently.
631
00:39:01,130 --> 00:39:07,261
Their culpability was a complete failure
to do due diligence, which was their job.
632
00:39:07,345 --> 00:39:10,139
And I think
the owners of Fairfield Greenwich,
633
00:39:10,222 --> 00:39:13,684
Sonja Kohn, all those folks,
they should have gone to jail.
634
00:39:15,061 --> 00:39:18,481
But Madoff could never have perpetrated
the fraud that he perpetrated
635
00:39:18,564 --> 00:39:21,108
had he not had
the complicity of JPMorgan Chase.
636
00:39:22,151 --> 00:39:25,613
[Campbell] JPMorgan is the only entity
637
00:39:25,696 --> 00:39:29,450
that had a view
into Bernie's Ponzi scheme:
638
00:39:30,576 --> 00:39:31,577
The checking account.
639
00:39:32,328 --> 00:39:33,788
The 703 account.
640
00:39:35,081 --> 00:39:37,917
[investigator] The bank
stipulated that during the period
641
00:39:38,000 --> 00:39:42,046
from 2003 to 2008,
642
00:39:42,129 --> 00:39:45,174
you maintained on deposit
at JPMorgan Chase
643
00:39:45,257 --> 00:39:47,593
$3 to $6 billion.
644
00:39:47,676 --> 00:39:49,261
- Is that correct?
- Yes.
645
00:39:50,179 --> 00:39:53,724
[Chaitman] That's enough to draw
the bankers' attention to the fact
646
00:39:53,808 --> 00:39:56,310
that this is not
a normal banking relationship.
647
00:39:56,394 --> 00:39:59,688
They had a statutory obligation
under the Bank Secrecy Act
648
00:39:59,772 --> 00:40:01,315
to monitor that account
649
00:40:01,399 --> 00:40:03,859
and to gain an understanding
of what his business was.
650
00:40:05,403 --> 00:40:09,782
[Casey] When you move more
than $10,000 through a banking system,
651
00:40:09,865 --> 00:40:13,786
and the banker cannot see
the logic of that transaction,
652
00:40:14,453 --> 00:40:19,500
it generates something
called a suspicious activity report.
653
00:40:20,084 --> 00:40:22,420
And then the Feds start looking at it.
654
00:40:22,503 --> 00:40:23,503
FBI.
655
00:40:24,338 --> 00:40:26,215
How do you transfer
656
00:40:26,298 --> 00:40:32,430
billions of dollars on phony transactions
back and forth at major banks
657
00:40:33,639 --> 00:40:35,516
and not generate a SARs report?
658
00:40:37,768 --> 00:40:40,020
[Kotz] People knew
not to ask too many questions.
659
00:40:40,104 --> 00:40:43,399
If you're getting good returns
and you're getting lots of money,
660
00:40:43,482 --> 00:40:46,694
and you're not to ask any questions,
you don't ask any questions.
661
00:40:46,777 --> 00:40:49,572
And, you know,
greed has a way of doing that to people.
662
00:40:50,865 --> 00:40:53,993
[Markopolos] JPMorgan paid
a few billion dollars in criminal fines
663
00:40:54,076 --> 00:40:55,995
for their role in the Madoff case.
664
00:40:56,078 --> 00:40:59,707
Yet no one went to jail. Not one person
at the bank was found guilty of anything.
665
00:40:59,790 --> 00:41:01,750
In fact, no one was even charged.
666
00:41:01,834 --> 00:41:03,627
I ask you, how is that possible?
667
00:41:05,004 --> 00:41:06,881
[Chaitman]
This is their way of doing business.
668
00:41:07,548 --> 00:41:12,553
JPMorgan Chase has pled guilty
to five massive criminal conspiracies
669
00:41:12,636 --> 00:41:16,265
involving billions of dollars
within the last six years.
670
00:41:16,807 --> 00:41:17,892
When they get caught,
671
00:41:17,975 --> 00:41:21,562
they're never required to disclose
the profits they made on the scheme.
672
00:41:21,645 --> 00:41:23,397
They just pay a fine and they go on.
673
00:41:24,732 --> 00:41:27,693
So JPMorgan Chase financially profited
674
00:41:28,486 --> 00:41:29,945
from Madoff's crimes.
675
00:41:31,280 --> 00:41:32,615
And I have to believe that
676
00:41:32,698 --> 00:41:34,909
they absolutely understood
what was going on.
677
00:41:36,452 --> 00:41:39,872
[Bruce Dubinsky]
The Madoff fraud dwarfed so many frauds.
678
00:41:39,955 --> 00:41:42,958
It's the largest Ponzi scheme
in the world to date.
679
00:41:43,501 --> 00:41:47,421
The statement value at the end,
when the music stopped in 2008,
680
00:41:47,505 --> 00:41:50,925
was $64 billion
people thought they had with Madoff.
681
00:41:53,969 --> 00:41:56,263
[Henriques] Sixty-four billion dollars.
682
00:41:57,056 --> 00:41:58,849
But that was imaginary money.
683
00:41:58,933 --> 00:42:01,060
Bernie had created it out of thin air.
684
00:42:01,810 --> 00:42:04,772
[Madoff] The $64 billion, don't forget,
685
00:42:04,855 --> 00:42:08,984
was the false profits
that were being generated.
686
00:42:09,068 --> 00:42:11,388
[Henriques] But there's
another number that was real money.
687
00:42:12,613 --> 00:42:15,950
The real money that
people handed to Bernie in cash
688
00:42:16,033 --> 00:42:19,286
totaled about $19 billion.
689
00:42:22,081 --> 00:42:26,085
[Dubinsky] Nineteen billion dollars
of cash actually invested with Madoff.
690
00:42:26,168 --> 00:42:29,171
That's a staggering number, $19 billion.
691
00:42:29,255 --> 00:42:32,633
From nonprofit organizations
that had invested money,
692
00:42:32,716 --> 00:42:35,219
to foundations, to individuals,
693
00:42:35,302 --> 00:42:37,638
to people that had sold
a mom-and-pop business
694
00:42:37,721 --> 00:42:39,807
and invested their life savings in it.
695
00:42:40,724 --> 00:42:44,103
A lot of people put their money
with Madoff, all of their money,
696
00:42:44,186 --> 00:42:45,396
and lost it all.
697
00:42:48,065 --> 00:42:51,402
[Henriques] After the shocking discovery
that Bernie had made no investments,
698
00:42:51,485 --> 00:42:55,281
there were no stacks of securities
tucked away in a bank vault somewhere,
699
00:42:55,364 --> 00:42:56,615
there was despair.
700
00:42:56,699 --> 00:43:01,495
But despair brightened when
the ruling was made from Washington
701
00:43:01,579 --> 00:43:06,375
that Bernie was a member of the Securities
Investors Protection Corporation.
702
00:43:06,458 --> 00:43:08,836
SIPC, as it's called.
703
00:43:08,919 --> 00:43:10,963
[Chaitman] SIPC was established
704
00:43:11,046 --> 00:43:16,135
pursuant to the Securities Investor
Protection Act in 1970 by Congress,
705
00:43:16,218 --> 00:43:22,224
and its purpose is
to operate an insurance fund
706
00:43:23,058 --> 00:43:27,021
to provide up to $500,000 per account
707
00:43:27,104 --> 00:43:30,482
if the broker takes the money
and doesn't buy the securities.
708
00:43:30,566 --> 00:43:33,944
[Henriques] That $500,000 dollars
is coming out of Wall Street's pocket.
709
00:43:34,028 --> 00:43:38,449
Wall Street finances SIPC
through dues that its members pay.
710
00:43:39,867 --> 00:43:41,493
[Chaitman] But the Madoff case,
711
00:43:41,577 --> 00:43:44,121
the courts decided that
712
00:43:44,204 --> 00:43:49,585
there should be what's called
a Ponzi scheme exception to statutes.
713
00:43:49,668 --> 00:43:53,297
Basically SIPC insurance
wouldn't apply to a Ponzi scheme.
714
00:43:53,380 --> 00:43:54,757
But this is just nonsense.
715
00:43:54,840 --> 00:43:58,844
It's exactly when there's a Ponzi scheme
that customers need the insurance.
716
00:43:59,345 --> 00:44:00,554
The irony of it is,
717
00:44:01,138 --> 00:44:06,685
the insurance fund had been woefully
inadequate for almost two decades.
718
00:44:06,769 --> 00:44:10,522
In 1990, SIPC decided
719
00:44:10,606 --> 00:44:13,651
that the amount that
each member firm should contribute
720
00:44:13,734 --> 00:44:15,694
to fund the Insurance fund
721
00:44:16,654 --> 00:44:19,239
was $150 a year,
722
00:44:19,323 --> 00:44:22,660
not per customer,
which still would have been a joke,
723
00:44:22,743 --> 00:44:23,952
but per firm.
724
00:44:24,536 --> 00:44:28,207
That's less than they spend on flowers
in the Executive Suite every week.
725
00:44:28,791 --> 00:44:31,418
[Arvedlund] Ultimately, there were
so many Madoff victims
726
00:44:31,502 --> 00:44:35,839
that if they were to compensate everyone,
SIPC would have gone bankrupt.
727
00:44:37,966 --> 00:44:40,386
So that's where Irving Picard stepped in.
728
00:44:40,886 --> 00:44:42,721
He became the Madoff trustee.
729
00:44:44,473 --> 00:44:47,768
[Chaitman]
A trustee is the person who's responsible
730
00:44:47,851 --> 00:44:52,815
for liquidating a registered
broker-dealer that becomes bankrupt.
731
00:44:53,315 --> 00:44:57,361
Picard is appointed by the Securities
Investor Protection Corporation.
732
00:44:57,444 --> 00:45:01,115
His fees are paid by the Securities
Investor Protection Corporation.
733
00:45:01,782 --> 00:45:07,246
[Arvedlund] Irving Picard has to
figure out exactly who is owed what.
734
00:45:07,913 --> 00:45:13,293
There's a formula that
Picard decides is the simplest one.
735
00:45:13,377 --> 00:45:15,170
It's called the net equity formula.
736
00:45:15,254 --> 00:45:19,174
We're continuing to get money out,
and we're trying to be fair.
737
00:45:19,675 --> 00:45:21,802
Some are net losers,
738
00:45:21,885 --> 00:45:26,432
which means that they weren't able to
get their money out of the Ponzi scheme.
739
00:45:27,182 --> 00:45:30,394
But let's say
I'm an early Madoff investor.
740
00:45:32,271 --> 00:45:34,898
And all the while
I've been taking money out,
741
00:45:35,399 --> 00:45:39,486
not knowing it's a fraud,
and I've made more than I've put in.
742
00:45:39,570 --> 00:45:42,990
According to the trustee,
I'm a net winner,
743
00:45:43,073 --> 00:45:45,159
and I need to give that money back.
744
00:45:45,701 --> 00:45:47,327
That's what's known as a claw back.
745
00:45:47,411 --> 00:45:50,330
[tense music playing]
746
00:45:50,414 --> 00:45:55,127
[Henriques] These clawback lawsuits
were filed by the trustee
747
00:45:55,210 --> 00:45:59,423
against hundreds and
hundreds and hundreds of investors.
748
00:46:00,299 --> 00:46:03,552
But it was quite a contentious issue,
749
00:46:03,635 --> 00:46:08,432
because the net winners
were many of the smaller, older investors
750
00:46:08,515 --> 00:46:11,727
who had been with Bernie from the get-go.
751
00:46:11,810 --> 00:46:16,273
They had invested money with him
and then lived off the profits
752
00:46:16,356 --> 00:46:19,610
that he was supposedly
generating for them over the years.
753
00:46:20,944 --> 00:46:22,112
[Chaitman] For example,
754
00:46:22,196 --> 00:46:25,032
if my grandfather had opened
an account with Bernard Madoff,
755
00:46:25,115 --> 00:46:27,743
and that account
was inherited by my mother,
756
00:46:27,826 --> 00:46:30,454
and then upon her death,
I inherited the account,
757
00:46:30,537 --> 00:46:33,290
you'd be asking me as the granddaughter
758
00:46:33,373 --> 00:46:36,710
to pay back for withdrawals
my grandfather made 45 years ago.
759
00:46:37,753 --> 00:46:41,006
[Arvedlund] So you can imagine
that people were furious,
760
00:46:41,089 --> 00:46:44,551
particularly those who had been
taking money out every year,
761
00:46:44,635 --> 00:46:49,306
say, to fund their retirement
or to send their kids to college.
762
00:46:49,389 --> 00:46:52,351
And by the way,
they were paying taxes on that.
763
00:46:52,434 --> 00:46:56,104
People were saying, "How can I give back
money I've already given to the IRS?"
764
00:46:57,481 --> 00:47:01,401
Basically, Picard took money
from one set of Madoff investors
765
00:47:01,485 --> 00:47:04,029
to pay off another
set of Madoff investors,
766
00:47:04,112 --> 00:47:06,114
which I call the reverse Ponzi scheme.
767
00:47:07,115 --> 00:47:09,701
The victims were victimized again.
768
00:47:11,495 --> 00:47:15,082
[Gordon Bennett] I had been
in Madoff for so long, since 1992,
769
00:47:15,165 --> 00:47:17,459
and we took out
more money than we put in.
770
00:47:17,543 --> 00:47:21,713
So the trustee came back at us
and said, "Fork it over."
771
00:47:21,797 --> 00:47:22,881
We didn't have it,
772
00:47:22,965 --> 00:47:26,093
because we took out the money
and spent it every year.
773
00:47:26,176 --> 00:47:29,137
[Kate Carolan]
And our claw back case went on for years.
774
00:47:29,221 --> 00:47:33,392
Years of calling the lawyers
and saying, "What's going on?"
775
00:47:33,475 --> 00:47:35,727
[delicate music playing]
776
00:47:35,811 --> 00:47:38,105
[Carolan]
We could not plan the rest of our life.
777
00:47:38,981 --> 00:47:40,566
It was just horrible.
778
00:47:40,649 --> 00:47:41,859
Just horrible.
779
00:47:42,526 --> 00:47:48,198
At one point, we were told we'd
probably be better off getting a divorce,
780
00:47:48,282 --> 00:47:53,745
because we had heard that
they're not taking the wife's assets.
781
00:47:53,829 --> 00:47:57,791
But you just don't know,
and now you don't trust anybody anymore.
782
00:47:58,584 --> 00:48:00,919
But then we said, "Hell, no."
783
00:48:01,003 --> 00:48:03,797
And we thought
we'd fight it a different way,
784
00:48:03,881 --> 00:48:06,425
which was through
the Hardship Application.
785
00:48:08,886 --> 00:48:11,446
[Bennett] They give you
a form to fill out and say, "You know..."
786
00:48:11,471 --> 00:48:15,017
[Carolan] Yeah, they said,
"If you had to go into your closet
787
00:48:15,100 --> 00:48:19,980
and sell all your clothing right now,
what would you get for it?"
788
00:48:20,063 --> 00:48:22,482
And, you know, I had six pairs of jeans.
789
00:48:22,566 --> 00:48:24,276
What's the value of jewelry?
790
00:48:24,359 --> 00:48:25,962
- Jewelry...
- I don't wear jewelry. [laughs]
791
00:48:25,986 --> 00:48:28,780
We didn't have that.
They wanted to know your artwork...
792
00:48:28,864 --> 00:48:29,865
We don't have artwork.
793
00:48:30,866 --> 00:48:35,495
We filled out the form showing you
what we have, which is not a whole lot.
794
00:48:35,579 --> 00:48:38,749
This is painful for us to go through this
795
00:48:38,832 --> 00:48:41,293
year after year,
not knowing what's going to happen.
796
00:48:43,086 --> 00:48:46,673
[Carolan] But in the end, it worked.
797
00:48:48,675 --> 00:48:53,430
Our attorneys in New York talked to them,
and the trustee ended up saying,
798
00:48:53,513 --> 00:48:54,640
"You're free."
799
00:48:55,515 --> 00:48:59,436
[Carolan] I kind of lost my husband
for several years,
800
00:48:59,519 --> 00:49:03,857
because all he did
was try to find a solution.
801
00:49:03,941 --> 00:49:08,195
And he got so absorbed
in finding the solution.
802
00:49:08,278 --> 00:49:11,448
There was part of him that was gone.
803
00:49:11,531 --> 00:49:13,867
And that takes its toll.
804
00:49:15,494 --> 00:49:17,814
[Bennett] I earned all the money,
I invested all the money,
805
00:49:17,871 --> 00:49:19,539
I did all the due diligence,
806
00:49:19,623 --> 00:49:21,500
and it all blew up in my face.
807
00:49:21,583 --> 00:49:24,378
[poignant music playing]
808
00:49:28,548 --> 00:49:29,716
You know, it's...
809
00:49:30,467 --> 00:49:35,222
[voice breaking]
...it's one thing to lose your life savings,
810
00:49:36,264 --> 00:49:37,432
and that's bad.
811
00:49:38,058 --> 00:49:40,519
But when you lose your house too,
it's terrible.
812
00:49:40,602 --> 00:49:41,602
[sniffles]
813
00:49:43,730 --> 00:49:46,566
[Garfinkel]
I think you have to distinguish
814
00:49:46,650 --> 00:49:48,777
who the victims are in this case.
815
00:49:49,444 --> 00:49:52,990
There are, you know,
the widows out there who...
816
00:49:53,073 --> 00:49:55,409
This was all their money.
They trusted it to Bernie.
817
00:49:56,368 --> 00:49:59,204
People who invested via feeder fund.
818
00:49:59,788 --> 00:50:01,206
They didn't know any better.
819
00:50:02,124 --> 00:50:05,585
But if you look at big investors,
820
00:50:07,045 --> 00:50:10,632
people who had hundreds of millions
or even billions of dollars
821
00:50:10,716 --> 00:50:12,217
on the books with Madoff,
822
00:50:12,884 --> 00:50:16,596
who are supposedly
very savvy, sophisticated,
823
00:50:17,139 --> 00:50:20,934
they entered into
this agreement with the devil, in effect.
824
00:50:21,601 --> 00:50:25,897
I think that they knew
what they were getting into.
825
00:50:26,690 --> 00:50:31,653
We're talking about
the big four investors.
826
00:50:31,737 --> 00:50:33,613
Norman Levy,
827
00:50:33,697 --> 00:50:35,532
Jeff Picower,
828
00:50:35,615 --> 00:50:37,242
Stanley Chais,
829
00:50:37,325 --> 00:50:39,077
and Carl Shapiro.
830
00:50:40,078 --> 00:50:44,041
[Madoff] I had a very special relationship
with the big four clients, all right?
831
00:50:44,833 --> 00:50:48,170
They didn't want to screw me either,
generally, because, number one,
832
00:50:48,253 --> 00:50:51,214
we had a close
family type of relationship,
833
00:50:51,298 --> 00:50:53,050
and also I made them a lot of money.
834
00:50:53,133 --> 00:50:55,719
They didn't wanna kill
the goose that laid the golden egg.
835
00:50:56,511 --> 00:50:58,263
Picower was a little bit different.
836
00:50:59,639 --> 00:51:02,517
[Arvedlund]
Picower behaved as a co-conspirator.
837
00:51:04,603 --> 00:51:07,981
I don't think
Bernie's billion-dollar Ponzi scheme
838
00:51:08,065 --> 00:51:09,775
could have survived without him.
839
00:51:11,777 --> 00:51:14,404
Bernie needed Picower to help
840
00:51:15,489 --> 00:51:17,157
keep the money flowing,
841
00:51:17,949 --> 00:51:24,164
and it is my opinion that Bernie Madoff
helped Jeffry Picower commit tax fraud.
842
00:51:25,040 --> 00:51:26,416
They used each other.
843
00:51:28,043 --> 00:51:33,381
Moreover, Picower made more money
off of Madoff's fraud than anyone else,
844
00:51:33,465 --> 00:51:37,260
and Irving Picard knew what was going on.
845
00:51:37,928 --> 00:51:40,138
So after Madoff was arrested,
846
00:51:40,222 --> 00:51:44,726
Irving Picard starts
chasing him for money.
847
00:51:44,810 --> 00:51:46,144
[newscaster] Irving Picard,
848
00:51:46,228 --> 00:51:49,064
the trustee in charge of recovering
money lost in the scheme,
849
00:51:49,147 --> 00:51:51,942
sued the publicity-shy
Picower and his wife,
850
00:51:52,025 --> 00:51:57,989
citing outrageous annual returns
as high as 950% on Madoff investments
851
00:51:58,073 --> 00:52:01,910
at a time average returns on the market
were only about 9%.
852
00:52:02,911 --> 00:52:08,125
I've always believed that Picower
knew a lot more about the fraud.
853
00:52:08,208 --> 00:52:10,127
Unfortunately, we will never know.
854
00:52:10,210 --> 00:52:12,210
[newscaster]
Investigators are trying to figure out
855
00:52:12,254 --> 00:52:14,256
how Jeffry Picower wound up dead
856
00:52:14,339 --> 00:52:16,883
at the bottom of his swimming pool
in Palm Beach County.
857
00:52:16,967 --> 00:52:19,327
[reporter] Police are investigating
his death as a drowning,
858
00:52:19,386 --> 00:52:21,721
but apparently are not
ruling anything out.
859
00:52:22,305 --> 00:52:25,642
[Campbell] Obviously, they knew he was
in the midst of being held accountable
860
00:52:25,725 --> 00:52:27,811
for his role in the Ponzi scheme,
861
00:52:27,894 --> 00:52:30,272
and that he might have
tried to commit suicide.
862
00:52:31,815 --> 00:52:36,361
But the general consensus from the autopsy
was that it was a heart attack.
863
00:52:36,444 --> 00:52:38,947
Had Jeffry Picower lived,
864
00:52:39,030 --> 00:52:40,949
I believe he would have been indicted.
865
00:52:44,411 --> 00:52:48,165
While Jeffry Picower
certainly should have gone to prison,
866
00:52:48,248 --> 00:52:51,710
Picard was able to claw back the money.
867
00:52:52,919 --> 00:52:57,716
So Jeffry Picower's wife Barbara
is forced to return $7.2 billion
868
00:52:57,799 --> 00:53:00,886
of the ill-gotten gains
from the Ponzi scheme.
869
00:53:01,386 --> 00:53:04,931
We are hopeful
that positive and fair outcomes,
870
00:53:05,015 --> 00:53:09,519
like that of the Picower negotiations
and several of our other settlements,
871
00:53:09,603 --> 00:53:11,730
can and will be repeated.
872
00:53:13,440 --> 00:53:15,775
[Campbell]
As for the other longtime investors,
873
00:53:15,859 --> 00:53:19,613
Norm Levy's estate
is forced to return $220 million.
874
00:53:19,696 --> 00:53:20,530
[cash register dings]
875
00:53:20,614 --> 00:53:25,118
[Campbell] The estate of Stanley Chais
agreed to settle for $277 million.
876
00:53:25,202 --> 00:53:26,119
[cash register dings]
877
00:53:26,203 --> 00:53:30,332
[Campbell] And Carl Shapiro
forfeited $625 million.
878
00:53:30,415 --> 00:53:31,583
[cash register dings]
879
00:53:31,666 --> 00:53:36,004
Irving Picard had recovered
more than 14 billion
880
00:53:36,087 --> 00:53:39,966
of the roughly 19 billion in cash
881
00:53:40,050 --> 00:53:43,011
that had flowed into the fraud.
882
00:53:44,346 --> 00:53:50,227
No one would ever have dreamed that
you would recover that amount of money.
883
00:53:50,310 --> 00:53:55,357
But the methods
that the law required him to use
884
00:53:55,440 --> 00:53:57,234
were just heartbreaking.
885
00:53:57,317 --> 00:54:00,987
Going after innocent Madoff victims,
886
00:54:01,071 --> 00:54:03,406
many of which the average age was 70,
887
00:54:03,490 --> 00:54:05,825
some of these folks
had to go work in Walmart...
888
00:54:05,909 --> 00:54:08,870
Suing them for their IRAs
and their houses,
889
00:54:08,954 --> 00:54:12,165
and the amount of fees they took
I consider unconscionable.
890
00:54:13,792 --> 00:54:17,170
[Arvedlund] Irving Picard's law firm,
over the course of many, many years,
891
00:54:17,254 --> 00:54:22,717
billed over a billion dollars
to oversee the Madoff trusteeship.
892
00:54:23,635 --> 00:54:28,139
So Irving Picard became a very wealthy man
as a result of the Madoff debacle.
893
00:54:29,933 --> 00:54:34,771
I don't think the process was fair at all
because we were innocent,
894
00:54:34,854 --> 00:54:37,232
and to put us through all that...
895
00:54:37,315 --> 00:54:39,818
Yeah. I feel victimized for sure.
896
00:54:40,318 --> 00:54:42,070
But I feel differently.
897
00:54:42,153 --> 00:54:45,949
Um, I mean, looking at it analytically,
898
00:54:46,032 --> 00:54:48,910
it was the only way
to pay the other victims,
899
00:54:48,994 --> 00:54:51,997
is to take money back
from people that took more money out,
900
00:54:52,080 --> 00:54:53,999
because there's no other money.
901
00:54:54,082 --> 00:54:56,876
I don't like the law,
but I don't have a better alternative.
902
00:54:56,960 --> 00:55:00,255
I think it was a necessary evil
that we had to go through,
903
00:55:00,338 --> 00:55:02,841
and he was doing his job, the trustee.
904
00:55:21,276 --> 00:55:24,037
[Keteyian] For the last three months,
Bernie Madoff has spent his days
905
00:55:24,112 --> 00:55:26,656
in a 7.5x8-foot jail cell
906
00:55:26,740 --> 00:55:28,033
here in Lower Manhattan,
907
00:55:28,116 --> 00:55:29,492
not far from this court.
908
00:55:29,576 --> 00:55:31,578
Today he'll find out how he will spend
909
00:55:31,661 --> 00:55:32,829
the rest of his life.
910
00:55:32,912 --> 00:55:35,123
I wake up every morning and my wife...
911
00:55:41,379 --> 00:55:43,631
[voice breaks]
The things that matter, I have.
912
00:55:45,258 --> 00:55:46,926
And he can't take them away.
913
00:55:47,010 --> 00:55:52,515
It says a lot about America's history
of punishing white-collar crime
914
00:55:52,599 --> 00:55:58,188
that the biggest fear Madoff's victims had
as he approached his sentencing date
915
00:55:58,271 --> 00:56:00,398
was the slap on the wrist.
916
00:56:01,983 --> 00:56:04,652
That he would somehow
get patted on the head
917
00:56:04,736 --> 00:56:08,239
and sent off to some
fairly pleasant prison environment
918
00:56:08,323 --> 00:56:11,659
to spend, you know,
a fairly lenient sentence.
919
00:56:11,743 --> 00:56:14,996
I mean, this had happened.
People had seen that.
920
00:56:16,289 --> 00:56:20,210
[Arvedlund] When I went
to the sentencing in June of 2009,
921
00:56:20,293 --> 00:56:24,422
there were a lot of Bernie Madoff's
victims in the courtroom.
922
00:56:25,256 --> 00:56:26,758
They were really captivating,
923
00:56:26,841 --> 00:56:29,219
talking about how
they had lost everything.
924
00:56:29,302 --> 00:56:31,022
[victim 1]
I was in the process of retiring.
925
00:56:31,054 --> 00:56:33,431
That will never happen,
the way things are right now.
926
00:56:33,515 --> 00:56:36,434
[victim 2] I go to the grocery
and have to watch what I'm buying.
927
00:56:36,518 --> 00:56:38,019
A whole different ball game now.
928
00:56:38,103 --> 00:56:41,356
[victim 3] I wake up in the middle
of the night, dreaming about this,
929
00:56:41,439 --> 00:56:45,151
and how... The damage
that he's done to my entire family.
930
00:56:50,407 --> 00:56:55,412
The vastness of the financial pain
was something I had never seen before.
931
00:56:56,788 --> 00:56:59,541
[Henriques]
The defense lawyer, Ike Sorkin,
932
00:56:59,624 --> 00:57:02,293
pleaded for mercy, for leniency.
933
00:57:02,377 --> 00:57:04,879
He said, "This is a 70-year-old man!"
934
00:57:04,963 --> 00:57:07,674
"He's obviously not going to commit
a crime like this again."
935
00:57:08,842 --> 00:57:13,388
And then Bernie said,
"I will turn to my victims and apologize."
936
00:57:14,472 --> 00:57:17,016
[Arvedlund] The strange part was that
937
00:57:17,809 --> 00:57:20,645
Bernie Madoff really had no expression.
938
00:57:21,354 --> 00:57:23,440
He didn't show any remorse.
939
00:57:23,523 --> 00:57:24,858
He wasn't emotional.
940
00:57:26,234 --> 00:57:30,321
He was like a financial serial killer.
941
00:57:30,905 --> 00:57:35,368
He was able to look widows in the eye
942
00:57:35,452 --> 00:57:37,704
and take their money and say,
943
00:57:37,787 --> 00:57:40,415
"You are taken care of. You can trust me,"
944
00:57:40,915 --> 00:57:44,711
and screw them over in the next breath.
945
00:57:44,794 --> 00:57:46,546
[inaudible]
946
00:57:46,629 --> 00:57:49,716
[Arvedlund] And he did that
over and over and over.
947
00:57:52,594 --> 00:57:54,512
And then the judge began to talk.
948
00:57:55,096 --> 00:57:59,350
He announced that
he was required to impose a sentence
949
00:57:59,434 --> 00:58:04,439
that would reflect
the magnitude of Madoff's crime.
950
00:58:05,148 --> 00:58:07,609
And he sentenced him to 150 years.
951
00:58:08,359 --> 00:58:10,111
- [strike echoes]
- [clamoring]
952
00:58:14,824 --> 00:58:18,244
[Henriques]
This was a purely symbolic sentence.
953
00:58:19,204 --> 00:58:21,164
It was a judge saying,
954
00:58:21,247 --> 00:58:25,043
"You have inflicted
so much harm on society."
955
00:58:26,044 --> 00:58:31,799
"Society is going to inflict
a commensurate amount of harm on you."
956
00:58:34,052 --> 00:58:36,721
It was a remarkable moment
in that courtroom.
957
00:58:40,892 --> 00:58:44,312
[tense music playing]
958
00:58:45,522 --> 00:58:48,900
[Matthew L. Schwartz] Once Madoff himself
had pled guilty and been sentenced,
959
00:58:48,983 --> 00:58:51,486
there was a real desire
960
00:58:51,569 --> 00:58:55,573
by multiple government agencies,
by victims, by all of us,
961
00:58:55,657 --> 00:58:59,869
to try to hold the people
who were criminally involved accountable.
962
00:58:59,953 --> 00:59:02,330
And for a period of time,
I was a member of the team
963
00:59:02,413 --> 00:59:06,042
prosecuting everything relating
to the Madoff Securities fraud.
964
00:59:06,626 --> 00:59:09,879
[Campbell] It takes several years for them
to put the whole case together
965
00:59:09,963 --> 00:59:12,382
based on everything that Frank told them,
966
00:59:12,465 --> 00:59:16,970
and this leads to charges
against 17th-floor employees
967
00:59:17,053 --> 00:59:20,473
that were complicit in the Ponzi scheme,
according to the government.
968
00:59:21,683 --> 00:59:27,313
[Matthew Schwartz] Annette Bongiorno
and Jodi Crupi got six years in prison.
969
00:59:28,856 --> 00:59:32,819
Jerry O'Hara and George Perez
both got two and a half years.
970
00:59:33,403 --> 00:59:35,405
[Henriques] What sometimes gets forgotten
971
00:59:35,488 --> 00:59:40,618
is Peter Madoff remained
under scrutiny by prosecutors.
972
00:59:41,619 --> 00:59:45,540
Peter Madoff pled guilty
and was convicted of two counts,
973
00:59:45,623 --> 00:59:49,335
one of falsifying the records
of a broker-dealer,
974
00:59:49,419 --> 00:59:52,505
and the other of engaging
in a criminal conspiracy
975
00:59:52,589 --> 00:59:54,465
that actually had multiple criminal aims.
976
00:59:54,549 --> 01:00:00,513
None of those charges accused him
of participating in the Ponzi scheme,
977
01:00:00,597 --> 01:00:05,018
and he insisted that
he had known nothing about it.
978
01:00:05,101 --> 01:00:08,938
Nevertheless, he was sentenced
to ten years in federal prison.
979
01:00:11,190 --> 01:00:14,444
[Campbell] Frank DiPascali,
he's charged with securities fraud.
980
01:00:15,111 --> 01:00:18,197
But because Frank cooperates
with the government,
981
01:00:18,281 --> 01:00:22,410
his sentence isn't given until
after the government case is finished.
982
01:00:22,493 --> 01:00:25,288
Government case finishes,
we're now talking years.
983
01:00:25,371 --> 01:00:27,665
Frank has lung cancer
and dies within four weeks,
984
01:00:28,458 --> 01:00:30,126
and is never sentenced.
985
01:00:32,712 --> 01:00:35,673
This was a fraud of epic proportions,
986
01:00:35,757 --> 01:00:38,676
and each of the people
that was convicted at trial
987
01:00:38,760 --> 01:00:41,554
was involved in that fraud
for a period of decades,
988
01:00:42,138 --> 01:00:45,933
And their hands weren't just
a little dirty, they were totally dirty.
989
01:00:46,017 --> 01:00:50,480
At the same time, they plainly
were not the prime movers of the fraud.
990
01:00:50,563 --> 01:00:54,400
So, you know,
was the sentence imposed on them
991
01:00:55,276 --> 01:00:56,277
fair?
992
01:00:57,570 --> 01:00:59,322
You know, that's not for me to say.
993
01:00:59,405 --> 01:01:02,700
If I were the judge,
would it have been more severe?
994
01:01:02,784 --> 01:01:03,785
It would have been.
995
01:01:06,871 --> 01:01:11,626
[Squillari] After Bernie was arrested,
so many people hated Mark and Andy.
996
01:01:12,710 --> 01:01:16,756
They hated these lovely young men,
who they saw as monsters.
997
01:01:16,839 --> 01:01:18,549
[newscaster] Since the scandal broke,
998
01:01:18,633 --> 01:01:22,011
the pressure has not let up
on Mark or his brother Andrew.
999
01:01:22,095 --> 01:01:25,682
I want his family to feel the pain
that they've inflicted on our family.
1000
01:01:26,349 --> 01:01:30,812
They were subjected
to the most unrelenting, fierce,
1001
01:01:30,895 --> 01:01:35,191
hostile public and media coverage
I've ever seen.
1002
01:01:35,274 --> 01:01:36,275
[reporter] Mr. Madoff?
1003
01:01:36,359 --> 01:01:37,359
[thud]
1004
01:01:37,402 --> 01:01:43,116
[Henriques] The sons were shocked
and horrified by their father's crime.
1005
01:01:43,199 --> 01:01:47,870
And they confronted Ruth
with the need to choose.
1006
01:01:47,954 --> 01:01:51,416
In fact, they insist that
she break off all contact with Bernie.
1007
01:01:51,499 --> 01:01:54,877
[Henriques]
"It's him or us," they told her.
1008
01:01:54,961 --> 01:01:56,254
And even worse,
1009
01:01:56,337 --> 01:01:59,340
"It's him or your grandchildren."
1010
01:02:00,675 --> 01:02:01,675
"Choose."
1011
01:02:02,802 --> 01:02:05,888
[Campbell]
But she could never totally let go of him.
1012
01:02:06,723 --> 01:02:09,034
[Henriques] She'd been with him
since she was 13 years old,
1013
01:02:09,058 --> 01:02:13,312
she couldn't walk away from him
in his hour of need.
1014
01:02:13,396 --> 01:02:17,191
And that set up
what became months of conflict
1015
01:02:17,275 --> 01:02:20,486
between Ruth and her beloved sons.
1016
01:02:21,571 --> 01:02:23,406
They'd refuse to see her.
1017
01:02:23,489 --> 01:02:25,908
The family just shattered.
1018
01:02:25,992 --> 01:02:28,286
It was as if
you'd smashed it with a hammer.
1019
01:02:28,369 --> 01:02:29,996
[tense music playing]
1020
01:02:30,079 --> 01:02:35,626
What he did to me, to my brother,
and to my family, is unforgivable.
1021
01:02:35,710 --> 01:02:38,421
What he did to thousands of other people,
1022
01:02:38,504 --> 01:02:40,548
destroyed their lives, um...
1023
01:02:41,424 --> 01:02:44,427
I'll never understand it
and I'll never forgive him for it,
1024
01:02:44,510 --> 01:02:46,721
and I'll never speak to him again.
1025
01:02:48,014 --> 01:02:51,642
Andy found a way
that he wanted to move on,
1026
01:02:51,726 --> 01:02:52,894
and Mark didn't.
1027
01:02:53,394 --> 01:02:54,562
He just didn't.
1028
01:02:55,188 --> 01:02:56,188
It was too much.
1029
01:02:57,023 --> 01:02:58,543
[reporter]
Have you talked to your dad?
1030
01:02:58,608 --> 01:03:00,777
I have no comment.
I'm sorry. I can't help you.
1031
01:03:01,319 --> 01:03:03,279
[Squillari] He went into a dark place.
1032
01:03:03,362 --> 01:03:07,784
And I don't know if there was anything
anybody could have done for him, because
1033
01:03:08,576 --> 01:03:12,038
he was constantly being accused.
1034
01:03:13,206 --> 01:03:15,416
The innuendos from people.
1035
01:03:15,500 --> 01:03:17,043
There was no relief.
1036
01:03:17,877 --> 01:03:19,712
There was nowhere he could go.
1037
01:03:22,423 --> 01:03:24,967
It's hard for me
to talk about Mark. Anyway.
1038
01:03:27,970 --> 01:03:30,348
[siren blaring]
1039
01:03:40,900 --> 01:03:43,861
[newscaster] The Madoff scandal
took a tragic twist on Saturday
1040
01:03:43,945 --> 01:03:47,698
when the oldest son
of the disgraced imprisoned financier
1041
01:03:47,782 --> 01:03:52,036
was found hanging from a pipe in his
fashionable New York City apartment,
1042
01:03:52,537 --> 01:03:54,288
dead of an apparent suicide.
1043
01:03:54,872 --> 01:03:57,208
Police said 46-year-old Mark Madoff
1044
01:03:57,291 --> 01:04:01,420
was discovered by his father-in-law
shortly after 7:30 a.m.,
1045
01:04:01,921 --> 01:04:04,382
a black dog leash wrapped around his neck,
1046
01:04:05,049 --> 01:04:08,052
Madoff's two-year-old son
asleep in his room.
1047
01:04:09,303 --> 01:04:12,557
He leaves behind
four children from two marriages.
1048
01:04:14,267 --> 01:04:18,479
[Hales]
I remember thinking at the time that
1049
01:04:18,563 --> 01:04:20,815
that was an "F you" to his father.
1050
01:04:21,440 --> 01:04:23,776
He did it on the two-year anniversary
of his father
1051
01:04:23,860 --> 01:04:26,070
telling him about the Ponzi scheme,
1052
01:04:26,153 --> 01:04:29,824
and I think he purposely
planned it for the anniversary
1053
01:04:29,907 --> 01:04:32,910
as a way to tell his father,
1054
01:04:33,786 --> 01:04:35,329
"This is what you did to me."
1055
01:04:39,083 --> 01:04:43,087
[voice breaks] I just can't get over
what he did to him... what happened.
1056
01:04:43,170 --> 01:04:44,170
I can't.
1057
01:04:44,589 --> 01:04:50,761
[sniffles] It's because I have a son
who's close in age to him, you know,
1058
01:04:50,845 --> 01:04:54,056
and I can't imagine him
suffering like that.
1059
01:04:55,349 --> 01:04:57,727
And he suffered, he really suffered.
1060
01:04:58,769 --> 01:05:00,479
I think that's why I cry.
1061
01:05:00,563 --> 01:05:02,899
[dramatic music playing]
1062
01:05:02,982 --> 01:05:05,735
[Andy Madoff] We were very close.
He was my best friend.
1063
01:05:06,736 --> 01:05:09,405
And, uh, I wanted to help him.
1064
01:05:09,989 --> 01:05:15,745
I just wish until my dying day
that I had done what he wanted.
1065
01:05:15,828 --> 01:05:19,457
I don't know if it would have
made a difference or not, but...
1066
01:05:20,708 --> 01:05:23,836
If I could change things,
at least if I had tried.
1067
01:05:25,755 --> 01:05:28,049
[Henriques]
In the aftermath of Mark's death,
1068
01:05:28,132 --> 01:05:31,469
Ruth had grown increasingly close to Andy.
1069
01:05:31,552 --> 01:05:34,722
There was some kind
of rapprochement between them,
1070
01:05:34,805 --> 01:05:41,103
and he became a great source
of support and encouragement for her.
1071
01:05:43,606 --> 01:05:48,277
And then just almost
too much sorrow to believe,
1072
01:05:48,361 --> 01:05:53,407
the cancer that Andrew
had defeated a decade earlier
1073
01:05:53,491 --> 01:05:54,492
came back...
1074
01:05:57,411 --> 01:05:59,455
and in a virulent form.
1075
01:06:00,373 --> 01:06:03,876
[Squillari] It was terrible,
but Andy was fighting it.
1076
01:06:04,377 --> 01:06:09,382
I said, "Do you think it would help you
to talk to him? To talk to Bernie?"
1077
01:06:09,465 --> 01:06:11,258
He goes, "That's not gonna happen."
1078
01:06:13,135 --> 01:06:15,012
[Henriques] I saw him in the spring.
1079
01:06:15,096 --> 01:06:20,017
He came down to talk to a class
I was teaching at Princeton.
1080
01:06:20,101 --> 01:06:24,146
And over lunch with his fiancée,
he said to me,
1081
01:06:24,230 --> 01:06:26,732
"You know, my dad's crime...
1082
01:06:28,609 --> 01:06:31,904
it killed my brother quickly
and it's killing me slowly."
1083
01:06:32,989 --> 01:06:36,409
[newscaster] Andrew Madoff
died of lymphoma at the age of 48,
1084
01:06:36,492 --> 01:06:39,662
six years after father
Bernie Madoff's infamous
1085
01:06:39,745 --> 01:06:42,999
$65 billion Ponzi scheme collapsed.
1086
01:06:45,126 --> 01:06:50,548
[Henriques] He passed away with
his family around him, leaving Ruth alone.
1087
01:06:51,424 --> 01:06:55,886
Her husband locked up for life,
her sons both gone.
1088
01:06:57,304 --> 01:07:01,350
[newscaster 1] Bernard Madoff at least
knows he'll have a roof over his head.
1089
01:07:01,434 --> 01:07:05,104
His wife, Ruth, though,
doesn't have that assurance anymore.
1090
01:07:06,731 --> 01:07:08,651
[newscaster 2] Yesterday,
federal marshals seized
1091
01:07:08,691 --> 01:07:11,819
Bernard Madoff's
$7 million Manhattan penthouse.
1092
01:07:11,902 --> 01:07:13,404
The apartment is gone,
1093
01:07:13,487 --> 01:07:16,198
and so are the seized homes
in Palm Beach, Florida,
1094
01:07:16,282 --> 01:07:18,993
the south of France, and Long Island,
1095
01:07:19,076 --> 01:07:22,204
leaving his wife effectively homeless.
1096
01:07:23,539 --> 01:07:26,667
I was there when we basically
threw her out of her apartment.
1097
01:07:26,751 --> 01:07:29,295
We took everything and...
"You got to get out of here."
1098
01:07:31,130 --> 01:07:35,509
I was in the kitchen,
and I'm actually inventorying her jewelry.
1099
01:07:40,264 --> 01:07:43,559
She really seemed numb and shell-shocked.
1100
01:07:45,561 --> 01:07:47,480
And she was smoking a cigarette.
1101
01:07:48,397 --> 01:07:50,900
I said, "Ruth, that's gonna kill you."
1102
01:07:53,569 --> 01:07:55,780
And she said, "Oh, if only it would."
1103
01:07:55,863 --> 01:07:58,824
[somber music playing]
1104
01:07:58,908 --> 01:08:05,623
She seemed kind of resigned to this,
you know, bad ending.
1105
01:08:08,667 --> 01:08:11,212
[Roland Ubaldo] Ruth Madoff
has vacated the residence.
1106
01:08:11,295 --> 01:08:15,382
She has surrendered all personal property
to the United States Marshal Service.
1107
01:08:16,967 --> 01:08:19,804
[Henriques] Suddenly, she was a nomad.
1108
01:08:20,513 --> 01:08:24,767
She lived out of two suitcases
in the back of her car.
1109
01:08:24,850 --> 01:08:26,852
And that was her life now.
1110
01:08:28,062 --> 01:08:29,438
[Campbell] She lost everything.
1111
01:08:29,522 --> 01:08:31,690
She lost her position in life,
1112
01:08:31,774 --> 01:08:33,526
she lost both her sons,
1113
01:08:33,609 --> 01:08:37,154
and she lost her husband
that she'd been with since she was 13.
1114
01:08:40,032 --> 01:08:43,369
[Henriques] When I visited
Bernie in prison in the years after,
1115
01:08:43,452 --> 01:08:46,288
there was very little authentic
1116
01:08:46,372 --> 01:08:52,044
about Bernie's descriptions of his fraud,
about how he felt about what he'd done,
1117
01:08:52,128 --> 01:08:58,008
but I felt that there was
that authentic evidence of grief
1118
01:08:58,092 --> 01:09:00,553
about what had happened to his family.
1119
01:09:01,971 --> 01:09:05,975
Noted psychiatrists
that I talked with about Madoff's case
1120
01:09:06,058 --> 01:09:12,898
hypothesized that what Bernie was grieving
was the loss of his family's adoration.
1121
01:09:14,942 --> 01:09:17,611
It was not so much that he loved them
1122
01:09:17,695 --> 01:09:21,198
as that he loved having them love him.
1123
01:09:21,866 --> 01:09:26,579
Which is, of course,
pure narcissism and pure sociopath.
1124
01:09:28,747 --> 01:09:34,712
But, whatever it was,
I could see the toll that it took.
1125
01:09:35,546 --> 01:09:37,339
- Thank you.
- [applause]
1126
01:09:37,423 --> 01:09:39,633
Thank you. Please, everybody be seated.
1127
01:09:39,717 --> 01:09:42,553
It is an indisputable fact
1128
01:09:42,636 --> 01:09:46,515
that one of the most significant
contributors to our economic downturn
1129
01:09:46,599 --> 01:09:50,686
was an unraveling
of major financial institutions
1130
01:09:50,769 --> 01:09:53,898
and the lack
of adequate regulatory structures
1131
01:09:53,981 --> 01:09:56,275
to prevent abuse and excess.
1132
01:09:57,109 --> 01:09:59,987
A culture of irresponsibility took root
1133
01:10:00,571 --> 01:10:03,699
from Wall Street
to Washington to Main Street.
1134
01:10:04,825 --> 01:10:07,328
So the question is, what do we do now?
1135
01:10:08,287 --> 01:10:11,165
We did not choose how this crisis began,
1136
01:10:11,248 --> 01:10:14,877
but we do have a choice
in the legacy this crisis leaves behind.
1137
01:10:17,004 --> 01:10:19,757
[Markopolos]
I think the global financial crisis
1138
01:10:19,840 --> 01:10:21,967
showed us that
you can't trust Wall Street.
1139
01:10:22,551 --> 01:10:24,303
You can't trust the investment banks.
1140
01:10:24,386 --> 01:10:27,890
You can't trust the Wall Street analysts,
you can't trust the rating agencies,
1141
01:10:27,973 --> 01:10:30,017
and you certainly
can't trust the regulators.
1142
01:10:30,100 --> 01:10:33,020
Madoff was the scapegoat
for the financial crisis.
1143
01:10:34,521 --> 01:10:39,151
No one went to jail except for Madoff
and a few of his henchmen and henchwomen.
1144
01:10:40,069 --> 01:10:42,071
No one from the rating agencies
went to jail.
1145
01:10:42,154 --> 01:10:44,448
No one from the Wall Street
analyst community.
1146
01:10:44,531 --> 01:10:46,742
No one at the investment banks
went to jail.
1147
01:10:46,825 --> 01:10:49,912
The CEOs didn't go to jail.
They got to collect their bonuses.
1148
01:10:49,995 --> 01:10:51,580
Their banks were bailed out.
1149
01:10:52,373 --> 01:10:55,125
But no one bailed out Bernie's victims.
1150
01:10:55,209 --> 01:10:58,003
[bittersweet music playing]
1151
01:10:58,087 --> 01:11:00,357
[Markopolos] You can't
distance yourself from the victims.
1152
01:11:00,381 --> 01:11:01,757
To see what they went through,
1153
01:11:03,342 --> 01:11:04,343
it's difficult.
1154
01:11:05,719 --> 01:11:09,848
[Werner] In the end, my mother passed away
before we had to sell the house.
1155
01:11:10,891 --> 01:11:13,894
That last day, leaving and packing up,
1156
01:11:13,978 --> 01:11:16,188
it was one of the worst days of my life.
1157
01:11:16,272 --> 01:11:19,108
I drove away through the gate at the end.
1158
01:11:20,526 --> 01:11:23,737
And I started crying like...
1159
01:11:24,571 --> 01:11:26,073
Couldn't hold back.
1160
01:11:26,991 --> 01:11:29,493
I wasn't just leaving
the house that my father built...
1161
01:11:30,911 --> 01:11:32,621
[voice breaks] ...that my mother lived in.
1162
01:11:35,541 --> 01:11:37,543
It was the end of Palm Beach life.
1163
01:11:38,085 --> 01:11:41,630
A big part of my life. Over. Gone.
1164
01:11:46,927 --> 01:11:50,389
[Greenfield] I live in a rented condo,
so I don't own anymore.
1165
01:11:50,472 --> 01:11:52,224
I miss that house.
1166
01:11:52,308 --> 01:11:54,643
I would've liked
to have been able to hold on to it,
1167
01:11:54,727 --> 01:11:57,438
but I learned to live
without a lot of money.
1168
01:11:57,521 --> 01:12:01,650
Maybe that's the good thing that
my father taught us: how to survive.
1169
01:12:04,028 --> 01:12:09,491
So, I don't begrudge
having to move or doing new things.
1170
01:12:09,575 --> 01:12:14,621
Now I'm learning
all about Shakespearean plays,
1171
01:12:14,705 --> 01:12:16,206
and I thought,
1172
01:12:16,290 --> 01:12:20,002
Bernie Madoff's story
is very Shakespearean.
1173
01:12:20,085 --> 01:12:24,131
It fits with the way
Shakespeare liked to write,
1174
01:12:24,214 --> 01:12:28,010
and he's had a villain in it,
and he had children,
1175
01:12:28,761 --> 01:12:30,346
but he wanted power.
1176
01:12:31,597 --> 01:12:33,015
And it is a tragedy.
1177
01:12:36,393 --> 01:12:41,440
[Henriques] The fact that Bernie Madoff
had been turned in to the FBI by his sons
1178
01:12:41,523 --> 01:12:47,029
lifted it into something
more and more tragic in terms of betrayal,
1179
01:12:47,112 --> 01:12:48,906
and the more I studied the story,
1180
01:12:48,989 --> 01:12:54,828
the more I began to see it
as this parable of betrayed trust.
1181
01:12:55,829 --> 01:12:58,540
It's the monster in everybody's closet.
1182
01:12:59,124 --> 01:13:00,751
It's the terror under the bed.
1183
01:13:00,834 --> 01:13:06,423
It's what everyone knows
could happen to anyone.
1184
01:13:07,758 --> 01:13:10,886
The only people
who can deceive you completely
1185
01:13:10,969 --> 01:13:13,347
are people you trust completely.
1186
01:13:15,557 --> 01:13:20,187
And the price of trusting anyone
is that they can betray you like that.
1187
01:13:20,270 --> 01:13:23,607
[dramatic music playing]
1188
01:13:23,690 --> 01:13:28,320
[Markopolos] People want to believe
in good returns without downside risk.
1189
01:13:28,404 --> 01:13:30,489
Everybody wants that in their portfolio,
1190
01:13:30,572 --> 01:13:32,449
but they're chasing the Holy Grail.
1191
01:13:33,826 --> 01:13:36,412
The Holy Grail doesn't exist in real life,
1192
01:13:36,495 --> 01:13:38,455
nor does it exist in finance.
1193
01:13:39,832 --> 01:13:42,668
Madoff was a fake.
There was nothing real there.
1194
01:13:47,047 --> 01:13:50,467
[Dubinsky] And so could there be
another Bernie Madoff in the future?
1195
01:13:50,551 --> 01:13:52,469
There will be another Bernie Madoff.
1196
01:13:52,553 --> 01:13:54,763
That will happen. Mark my words.
1197
01:13:54,847 --> 01:13:57,516
[dramatic music continues]
1198
01:13:57,599 --> 01:14:01,562
[Markopolos] The Madoff case.
It's a record-breaking case as of 2008.
1199
01:14:02,479 --> 01:14:03,479
But remember...
1200
01:14:05,774 --> 01:14:07,276
records are made to be broken.
1201
01:14:12,698 --> 01:14:16,076
[dramatic music rising]
1202
01:15:01,246 --> 01:15:04,416
[closing theme music playing]