[somber music playing]
[newscaster 1] Guys, we should probably mention,
AP led with a story a few moments ago.
[newscaster 2] Bernie Madoff,
the architect of the largest Ponzi scheme in American history,
died today in prison. He was 82.
[somber music continues]
I understand that when Bernie died, he was cremated.
[Leonid Feldman] Judaism is against cremation.
We believe very strongly that our body does not belong to us.
It belongs to God who gave it to us, so we're supposed to return it.
From earth you come, to the earth you return.
But then the real twist of the story
is that the remains of this man are still around
and are sitting on a shelf of a lawyer's office in some box,
because the family refuses to receive the ashes.
[Bette Greenfield] I guess I can understand it, but it hurts.
There must have been good times with him.
They're so angry with him that that anger will stay forever.
Everybody gets buried, even murderers.
They get buried.
This should have happened with him, as bad as I think he is.
And was.
[evocative music playing]
[Feldman] Nobody in the family,
they don't want to be connected to him in any way.
Who wants to be connected to the ashes of this vicious monster,
who did not have any compunctions destroying people's lives?
[theme music playing]
[Diana B. Henriques] By the time 2007 dawned,
Bernie Madoff must have looked back over the previous two years and said,
"I never thought I'd make it through, but I did."
With the help of the feeder funds, with the help of inept SEC investigators,
he had managed to reach 2007 with his slush fund fat.
He regularly flies his private jet to his townhouse in the south of France,
where he has a new boat to play with.
He lives large,
but Bernie and Ruth Madoff were not the only ones
benefiting from this extraordinary year of extravagance.
Back in New York,
Madoff made sure that his trusted minions on the 17th floor
shared in this wealth.
He doubled Frank DiPascali's salary from $2 million to $4 million.
Frank bought a new fishing boat, everything he ever dreamed of having.
Annette Bongiorno is given a substantial raise,
and that year unfolds with more and more luxury.
That sense of exuberance of having arrived at last
at a pinnacle of Wall Street success.
The basic concept of Wall Street,
which sometimes the regulators lose sight of, as do the academics,
is it's a for-profit enterprise.
By benefiting one person, you're disadvantaging another person.
[Jim Campbell] In 2008, all of a sudden,
the global economy was teetering on the brink.
[bell ringing]
[newscaster] Problems with the housing market
are making news tonight, and now there is even more stark evidence
of how serious things are getting in this country.
[Campbell] Mortgage brokers were selling homes based on liar loans,
which mean no documentation of income,
to people that couldn't afford them with mortgages they didn't understand.
And then the investment banks were taking these lousy loans
they knew were going to crater,
packaging them into securities,
getting AAA ratings
from the Wall Street rating agencies,
and selling them to investors on Wall Street.
[brokers shouting]
And then, boom, fell off a cliff.
[reporter] Hundreds of thousands of homeowners are defaulting on their loans.
It literally was like the world was falling off its axis.
Every bank was falling to pieces.
[reporter] Lehman Brothers reeling because of these bad real estate loans.
[Sorkin] Lehman Brothers had filed for bankruptcy.
Merrill Lynch, AIG was teetering.
Morgan Stanley and Goldman Sachs had to be bailed out.
[reporter] We're talking about investment banks,
these are the smartest money on Wall Street.
How have they been getting it wrong for so long?
Bernie and Ruth are in the south of France,
but Bernie can't tear himself away from what's happening back home.
The stock market is dropping precipitously.
We are faced with the prospect of a global meltdown.
So that was the environment that Bernie finds himself in
when he and Ruth get back on that jet for the last time
and arrive back in New York.
[ominous music playing]
[phones ringing]
At this point, all anybody cared about was getting their cash quickly.
Where could they turn?
They could turn to Bernie Madoff.
And they did.
Phones ringing from Frankfurt, from London,
Madrid, Vienna, Abu Dhabi.
"We want our money back."
[phones continue ringing]
[Henriques] And the withdrawal notices start to flow in, and then pour in,
and then avalanche in.
[phones continue ringing]
[Erin Arvedlund] September-October,
that is when the screws begin to tighten.
[phones continue ringing]
[Henriques] Bernie by now is tap dancing as fast as he can.
He's badgering, he's bullying, he's cajoling many of his oldest clients
to stop pulling out money, start putting money back in.
[Arvedlund] He calls his mainstay investor,
Fairfield Greenwich,
run by Jeffrey Tucker and Walter Noel, and says,
"This is a great time to buy." "No."
Then he calls Sonja Kohn of Bank Medici,
makes the same plea.
She doesn't take the bait either.
[Henriques] By the 2nd of December, the writing's on the wall.
Bernie is facing about $1.5 billion worth of withdrawal requests.
And he only has roughly $300 million left in his bank account.
If he writes checks to those clients who want to withdraw their money,
the checks will bounce.
[Madoff] But obviously, you know, I couldn't keep doing that
because of the nature of the Ponzi scheme.
So I knew that… that the game was over.
[Henriques] At this point,
he and Frank DiPascali have a conversation about,
where do they go from here?
Bernie makes it clear to Frank
that they're too far underwater to ever get out again.
[Campbell] Frank has an immediate recognition
that he's gonna go to jail for a long time,
and Frank just went ape shit.
[Henriques] DiPascali will later claim
that this was the moment when he first realized
that Bernie didn't actually have a whole bunch of assets
set away somewhere else that would bail everybody out.
That this was when he realized it was really a fraud.
[inaudible]
[Henriques] What Bernie wants to do with the money he has left, he tells Frank,
is he wants to write checks to some of his biggest long-term investors,
for some of the faithful employees,
for extended family members
who had trusted him with their money and now were going to be wiped out.
After all, the fraud is up now. The fraud is done.
[somber music playing]
[Henriques] As Frank DiPascali is preparing these checks
that Bernie plans to use to distribute the last of his slush fund,
he portrays it to his sons as early bonuses for employees.
Well, Mark and Andrew are deeply disturbed by this.
It makes no sense to them
to be writing bonus checks, given the state of the market.
So on the morning of December 10th of 2008, I was sitting at my desk,
and things hadn't been going well for weeks now.
Bernie was acting very peculiar, and I was trying not to disturb him.
You know, I felt he was fragile.
And I saw Peter just sitting there,
and I remember Mark and Andy coming into his office.
Ordinarily, they would check with me and say,
you know, "What's my dad doing? What's going on in the office?"
They didn't this time, they just walked right past me and went into the office.
[Henriques] Mark and Andrew attempt to change his mind
about issuing all of these checks.
They say, "Dad, you know, how do you know what the rest of the year is gonna bring?"
"Wouldn't it be safer to hang on to this cash
until we see how the year ends up?"
[inaudible]
[Henriques] After a few attempts to deflect,
Bernie loses his composure.
[inaudible]
[Squillari] I had mail for Bernie and I went to go bring it to his office.
[dramatic music playing]
[Squillari] I obviously startled them,
and they all jumped out of their chairs and stared at me.
And shortly after that,
Mark and Andy, they put Bernie's coat on,
and they escorted him out.
And Bernie never went anywhere without telling me where he was going,
and he just walked past me.
He never looked at me.
And Mark came over to my desk and leaned over and whispered,
you know, "We're going to go do a little Christmas shopping."
I never saw Bernie again.
[compelling music playing]
[Campbell] Mark and Andrew take him back to the penthouse in Midtown.
Ruth is there,
and this is the first time that Bernie comes clean.
[Madoff] I was in a mental state that I could no longer continue it.
So it was almost like a relief to say, "This is it."
"I just can't continue this charade any longer."
And that's what caused me to acknowledge to my family,
uh, that I had been committing this fraud.
Bernie continues to explain how big it is.
Billions of dollars.
And all he has left is that 300 million that he was trying to give away.
Andrew just slides down the wall until he's sitting on the floor in tears.
[Campbell] As soon as he hears the confession
that the entire business has been destroyed,
there's no money,
Mark is totally devastated.
[Henriques] Ruth finally is able to say something, and what she says is,
"What's a Ponzi scheme?"
It must have been one of those moments when your world just turns upside down
and everything you thought was true before is no longer true.
[inaudible]
[Henriques] Madoff's sons get up and leave.
Before they reach the lobby, they have decided that they must consult a lawyer.
Mark's father-in-law is a noted lawyer in Manhattan.
They arrange to meet with him at his apartment.
Mark and Andrew tell him what their father has said,
and their lawyer makes it clear to them:
"This is a fraud in progress."
"Your father is writing checks
to distribute what will soon be called the ill-gotten gains of his fraud,
and if you do not report it,
you will be accessories to that continuing crime."
They had to turn their father in.
[tense music playing]
[knocking on door]
[Henriques] The FBI go to the Madoff apartment
early the following morning.
Bernie's in his bathrobe.
"You know why we're here?"
"Yes."
[Campbell] They ask him, "Is there an innocent explanation?"
And Bernie says, "No."
[Henriques] He tells them, "It's a Ponzi scheme."
What he told his sons was true.
One of the agents calls the office and quickly briefs them on the outcome,
and is told, "Bring him in."
So they brief Bernie on the dress code for being arrested.
[tense music continues]
[Henriques] No shoelaces, no belts, no tie.
He sheds his wedding band and his watch.
Bernie's taken downtown to the FBI building on Foley Square,
and processed as any criminal would have been.
And then he calls Ike Sorkin.
[Ira Sorkin] "Hello?"
"Ike, it's Bernie. I'm handcuffed to a chair at FBI headquarters."
"I need your help."
I then immediately tell Madoff, "If you're talking, stop talking."
[inaudible]
[Ira Sorkin] I didn't know at the time,
but for two hours, he told the FBI everything he knew before he called me up,
and he told them that he was the only one involved.
I was thinking that, [chuckles] "Quite frankly, he's in a lot of trouble."
"The government's not walking away from this."
But the bail was set at $10 million,
so Bernie goes back to the apartment, and that's when it all blew up.
All hell broke loose.
If you work on a trading desk, stop what you're doing
before you walk out and clean your desk out for the day.
Bernie Madoff has been arrested.
[newscaster 1] Federal authorities are calling it
one of Wall Street's biggest Ponzi schemes.
Police say the man behind it was one of the most admired men on Wall Street.
[newscaster 2] Bernard Madoff,
a former chairman of the NASDAQ Stock Exchange.
[atmospheric music playing]
[Frank Casey] My cell phone rings, and it's Harry,
and he's screaming at the top of his lungs,
"Madoff just capitulated."
We had it right on!"
I said, "Hold on, Harry."
And I put down that phone, and I had such fists of rage.
[Ellen Hales] I just felt dirty and violated,
like, "How could this be? How could I be so wrong about someone's character?"
Everything that I thought about this man, Bernie, was completely wrong.
It felt like a betrayal.
After Bernie was arrested, it was complete chaos.
There was the FBI coming in, there was the SEC coming in.
There were people who took off.
I had absolutely no direction, but I knew we had to answer the phones.
[phones ringing]
[Squillari] A gentleman called in.
We had a nice relationship, we would always talk, you know, and he said,
"Eleanor,
did you know?"
It was like somebody hit me in the chest,
because I didn't even think people were going to think I was involved.
That was just like, now another blow. I was like, "Holy shit."
And I said, "No. No, I didn't."
And Pete is standing there, and I hung up the phone and I'm going,
"What am I supposed to do here?"
"You know, what is going… What am I supposed to do?"
Peter just walked away from me.
And I was just like, "You're on your own."
There were people down in the lobby, calling up,
demanding that somebody comes down and talks to them.
I would go down to reception, and I got some of the other ladies,
and we would do it for 20 minutes at a time
because it was too much. It was sickening.
People were scared. You could hear it in their voices. They were scared.
[phones ringing]
[Keith Kelly] Typically, in any investigation, drug, organized crime,
you're starting with the lower-level figures,
working your way up the organization.
Well, here we have the top guy, and we just know a lot of money is missing.
[inaudible]
[Kelly] All the employees had been basically corralled on the 19th floor,
and you don't know which one of them is a co-conspirator,
potentially a cooperator,
or another person that has nothing to do with it.
We had to start somewhere.
So we start interviewing all the employees.
After talking to employees, the FBI uncovers there's a whole another floor.
[ominous music playing]
[Campbell] And after being led to the 17th floor,
a key card is swiped that gets them access.
[ominous music continues]
[Steven Garfinkel] We went in, and we were like,
"Holy shit."
[Kelly] And there's just rooms and rooms full of boxes,
papers and documents everywhere.
And I realized that if we start moving this evidence,
we're going to lose a lot of context.
So I declared the 17th floor a crime scene,
and we just started the investigation right then and there.
[Garfinkel] Now, you talk about the proverbial needle in a haystack.
How do you figure all this out?
The key is a source, informant, or cooperating witness
who could shepherd you through that.
And that was Frank DiPascali.
He knew that he had a lot of criminal exposure.
He had a family he cared deeply about.
He had to think of, what could he do for himself?
And Frank provides us with the roadmap
to figure out how the scheme worked.
It was really kind of amazing to see.
There was no real investing ever happening.
There were no trades.
In other Ponzi schemes, you've had guys who would trade stocks, and they'd lose.
I mean, they were bad traders, and they were always trying to catch up.
I had never seen anything like this, where there was absolutely
no investing going on.
[reporters clamoring]
[reporter] Mr. Madoff, what would you say to all those people who lost money?
[newscaster] Pushing and shoving, that's what Bernard Madoff came home to
after making a brief appearance in a Manhattan federal court Wednesday.
I was in the back of that whole scrum of television cameras and reporters.
Don't touch me.
[Arvedlund] There is that famous scene of him pushing a television camera,
and that was a daily occurrence.
[reporter] Mr. Madoff, what would you say to all those people that lost money?
What would you say to them?
Bernie Madoff's fraud was like a nine-alarm fire
in the world of business journalism.
It was a fire hose of news.
It was wall-to-wall,
because what it represented was so much larger than this one man.
When you think about the financial crisis,
it was this moment where everybody's losing their home,
they're losing their 401K.
The unemployment rate is skyrocketing.
People wanted to point fingers, but they were all big institutions,
they were buildings, in many people's minds.
And then all of a sudden, Bernie Madoff arrives on the scene,
and he becomes the personification of this crisis,
he becomes the face for the financial crisis.
All of the hate, all of the venom, all of the anger
that was being focused on Wall Street, on everything,
they could put it onto him all of a sudden.
[Garfinkel] And people want to know, how come Madoff got bail?
How come he's living in his penthouse,
unlike some other less fortunate individual
who doesn't have his monetary means
who's, you know, being held without bail on Rikers Island.
It just didn't, you know, seem right.
[Sorkin] In the beginning, you'd hear about Bernie Madoff.
Then you'd hear about some investors.
[newscaster] Filmmaker Steven Spielberg, Mets owner Fred Wilpon…
The bold-faced names in his investor list surfaced first.
Elie Wiesel, the Nobel Peace Prize winner and Holocaust survivor…
For the first moment…
[stammers]
…I felt a kind of,
not physical, but spiritual, mental nakedness.
That everything was taken.
It took several more days, weeks in some cases, to put together
the retired corrections officer,
the retired teachers, the retired dentists.
[Sorkin] These were, like, real people,
and you could see them and you knew them and you'd see their faces.
I think all of a sudden it made this human. It made it real.
[Greenfield] When my father passed away, my younger brother says,
"Well, all of Dad's money was in Madoff, we might as well leave it."
I decided to retire because I said,
"My God, there's money there."
"I could draw on that money. I could take my money and live on it."
And I moved to Florida, and I used my money,
money that I had saved, to buy the house,
and I figured, "This is gonna be terrific because I'll get my distribution,
that'll pay back the money that I put into the house,
and then I'll have some money to retire on."
I said. "This is the last place I'm gonna live in."
And I was very happy.
I was in the house four months, that's all, when my brother called,
and he said, "Bernie Madoff was just arrested for fraud."
And it was such a shock.
[Jeffrey R. Werner] I often thought,
"What would have happened if my father had been alive
and had heard the news?"
And I think it would have killed him even faster than the cancer.
My father was with Madoff since at least the early '80s.
All the accounts together, we had somewhere around $30 million,
and then the money in Madoff went "Poof!"
Like that, gone.
It was 30 million Monopoly dollars.
[Richard Schwartz] I felt stupid that I had been conned,
which obviously I was.
Also, my family said,
"Well, Rich has had some Wall Street experience,
so he understands what's going on."
And shouldn't I have known better?
So, it was definitely a thing that really affected me personally.
[Greenfield] Initially, when I heard about what happened
and knew I wasn't getting any money,
I was very upset, scared.
You know, what am I going to do? I can't try to look for work.
I was in my mid-seventies already.
But I really felt terrible for my father, even though he had passed away.
There's an expression that my mother used to use, called,
"It's a shanda for the neighbors,"
which means your neighbors will know that you made that bad decision.
It's a shame.
He was fooled.
And that made me very angry.
[Schwartz] We had made certain financial decisions, my wife and I.
We have a son with disabilities,
and we said, "Well, we really don't need the life insurance
because we have this asset with Madoff,
this nest egg, which would eventually be used for his care."
That got blown to bits.
[Werner] My mission was to try to keep my mother in her house,
the house that my father built in Palm Beach.
But I knew eventually the house, which was our biggest asset,
was going to have to go.
My mother was devastated by it.
But don't cry me a river.
A lot of people lost everything altogether.
[Harry Markopolos] A white-collar crime is different than a blue-collar crime.
A blue-collar crime, the bodies drop before you investigate.
And a white-collar crime, they drop afterwards.
[newscaster] A French investment fund manager
who had $1.5 billion of his clients' money with Bernie Madoff
was found dead in his Manhattan office today, an apparent suicide.
René-Thierry de la Villehuchet.
[Markopolos] It was all over the news.
Thierry's suicide.
It happened 11 days after Bernie turned himself in.
Thierry locked himself in his office that night,
and he sliced his arms open and bled into a trashcan
so he wouldn't make a mess for the cleaning lady.
[Casey] He chose the methodology of death that he did,
a painful solution,
to atone for his sins of omission.
What a waste of a man.
[Markopolos] He was a man of honor, and he was betrayed.
It was traumatic for me personally.
I cried for three days straight,
because I was thinking of calling Thierry.
I knew he had lost a lot personally.
I knew his firm was done for.
I wish I had reached out. Maybe I could have prevented that.
[newscaster] For what might be the last time ever,
Bernie Madoff left his $7 million Manhattan penthouse early this morning
and made his way to federal court.
Bernie essentially decided to plead guilty because he was guilty.
He had very little to gain by going to trial.
It would have prolonged a process
that was subjecting his family to a relentless,
scalding degree of public attention.
[Ira Sorkin] He made the decision, in effect, "Let's get this over with."
"I gotta get rid of those cameras,
I've gotta protect Ruth, I gotta protect the boys."
[camera shutter clicking]
[Henriques] They came up with an array of securities fraud
and money laundering charges against him,
and it's a long process.
He had to not only say "guilty," he had to explain what he'd done.
At the end, his attorney asks for a continuance of bail
until Bernie could be sentenced, which would happen several months later.
The judge says no.
[inaudible]
[Henriques] "He's pleaded guilty, he is a confessed felon,
he's going to be locked up."
[strike echoes]
And at that moment, you know, Bernie is going to jail that day.
Could have heard a pin drop in that courtroom.
[handcuffs rattling and clicking]
[Henriques] And you could hear the click of the handcuffs around his wrists.
[tense music playing]
[Henriques] He was housed in the Manhattan Correctional Center
until he could be sentenced.
[Madoff] The government wanted, the prosecutor wanted me
to plea bargain with them, to, uh…
you know, make some sort of a deal
by providing information as to who else was involved in this fraud.
Uh… I mean, the belief was that I couldn't be doing this all myself,
that there had to be other people involved.
[Arvedlund] When Bernie Madoff said, "I did it all by myself,"
I knew that he was protecting mostly his family,
and of course, his employees.
There was no way that one person can pull off such a complicated fraud.
[Campbell] The 17th floor employees are what I call the witless co-conspirators,
all of whom were hired as high school graduates,
knowing nothing about how the Street operated,
and were able to basically enable
the operations of this Ponzi scheme, undetected, for years.
[Kelly] During our investigation,
the big defense of all the employees,
and even Frank DiPascali,
was they didn't know it was a Ponzi scheme.
When they said they didn't know it was a Ponzi scheme,
they also said, "Well, we knew the trades weren't legitimate,
but that somehow Bernie had the assets somewhere in Europe
and gold and real estate to cover it."
Well, that's still illegal.
[newscaster] Federal investigators are ripping apart 20 years of fraud
inside Madoff's firm, moving beyond Bernie,
looking at sons Andrew and Mark who directed trading activities.
[Kelly] Andrew and Mark Madoff certainly knew
that the investment advisory business
was not like your typical brokerage account.
Maybe they didn't know it was a Ponzi scheme,
but they knew it wasn't what it appeared to be.
[Squillari] I worked there for 25 years.
Those boys grew up in front of me.
They never went downstairs to the investment advisory side.
They didn't work there. There was no connection.
[newscaster] Also under the microscope, Madoff's wife of 49 years, Ruth,
who has not been charged in the case.
I have no comments at this time on any subject.
[Garfinkel] I'm often asked the question, "Do you think Ruth knew?"
I looked really closely at Ruth.
[delicate music playing]
[Garfinkel] Ruth had an office kind of around the corner from Bernie's office.
Go into her office, open the file cabinet,
and I was like, "Whoa! We hit pay dirt here!"
If Ruth Madoff had, you know, a street name,
it would be Ruthie Books, because she was a bookkeeper and she was highly organized.
Personal tax returns, bank account statements,
information on Bernie's boats,
property they owned…
It was all laid out perfectly for us.
So we learned a lot about Bernie's lifestyle,
but I never saw anything that pointed to her knowing about the Ponzi scheme.
Whatever Bernie shared with her, we don't know.
[gentle music playing]
[Werner] You know, my father was very money-conscious.
He tried to bring me up in a money-conscious kind of a way.
And he would say, "You know, if it looks too good to be true, it is."
But he didn't follow his own advice.
And I don't blame him either.
I blame the government.
The SEC, they believed the con.
They were conned too.
[H. David Kotz] If you have the SEC going forward
and conducting an exam or doing an enforcement investigation,
and instead of having the appropriate effect,
which is to relatively easily uncover the fraud,
you actually allow the fraud and give the fraud credibility,
and it grows because of your exams and investigations,
that's a very severe indictment of the government.
I think if it wasn't for the financial crisis,
he may never have been caught.
[newscaster] "We are sorry, and we're fixing the problem."
That was the response today from the Securities and Exchange Commission.
Contrite regulators were called on the carpet by Congress today
after a scathing report said the agency was incompetent.
[Markopolos] There was an investigation called for by Congress,
and I had to give testimony.
So when I showed up, I showed up early.
Every seat for the press was full.
I talked to everybody in the press, let them know it would be a prizefight,
and they could expect some riveting testimony.
And sitting there next to the press was all the SEC staff.
And I was signaling them a message that I was going to pound them.
As today's testimony will reveal,
my team and I tried our best to get the SEC to investigate
and shut down the Madoff Ponzi scheme
with repeated and credible warnings to the SEC that started in May 2000,
when the Madoff Ponzi scheme was only a $3 to $7 billion fraud.
We knew then that we had provided enough red flags
and mathematical proofs
where they should have been able to shut him down right then and there.
Unfortunately,
as they didn't respond to my written submissions in 2000,
2001, 2005, 2007, and 2008,
here we are today.
It was like an explosion that you had never seen before.
The agency literally shook.
He was…
so, uh, specific about the failures
and so, in some ways, harsh about the failures.
The SEC is over-lawyered
and has too few staff with relevant industry experience
and professional credentials to find fraud,
even when a multibillion-dollar case is handed to them on a silver platter.
You have no excuses.
You darn well better be apologizing to the Madoff victims.
The SEC continues to roar like a mouse and bite like a flea.
I was told it was the most heated Congressional testimony since Watergate.
I think I speak for everyone when I say we hate fraud.
We wish it never happened. We wish we could get to--
But your job is to prevent fraud, not to hate it.
One guy led you to this pile of dung that is Bernie Madoff
and stuck your nose in it, and you couldn't figure it out.
You could've shut Madoff down in one half hour
by just following up on one of his allegations
that they were not conducting trades.
If you are the watchdog, you have totally and thoroughly failed in your mission.
Don't you get it?
[Ed Perlmutter] Is the SEC too cozy with the industry?
Are they captive by this industry,
or are they looking out for us? Looking out for the taxpayers?
[Madoff] When I started doing business with all my clients,
I was a little guy with nothing.
I was this little kid from Queens.
Didn't go to Harvard or… and so on.
Why would anybody trust me to give me business?
Turn their money over to me?
But the first thing I learned:
Whatever you do in this business,
never break your word.
Your word was your bond, literally, and that was it.
You trusted everybody.
But nothing in this industry is what it looks like.
[Arvedlund] The fact that Bernie Madoff pled guilty,
I think drew attention away from banks
and maybe some other big investors
who should have gone to jail, but they didn't.
[Campbell] In my opinion, the feeder funds abrogated their responsibilities
and had no criminal liability
for the fact that all these folks were wiped out innocently.
Their culpability was a complete failure to do due diligence, which was their job.
And I think the owners of Fairfield Greenwich,
Sonja Kohn, all those folks, they should have gone to jail.
But Madoff could never have perpetrated the fraud that he perpetrated
had he not had the complicity of JPMorgan Chase.
[Campbell] JPMorgan is the only entity
that had a view into Bernie's Ponzi scheme:
The checking account.
The 703 account.
[investigator] The bank stipulated that during the period
from 2003 to 2008,
you maintained on deposit at JPMorgan Chase
$3 to $6 billion.
-Is that correct? -Yes.
[Chaitman] That's enough to draw the bankers' attention to the fact
that this is not a normal banking relationship.
They had a statutory obligation under the Bank Secrecy Act
to monitor that account
and to gain an understanding of what his business was.
[Casey] When you move more than $10,000 through a banking system,
and the banker cannot see the logic of that transaction,
it generates something called a suspicious activity report.
And then the Feds start looking at it.
FBI.
How do you transfer
billions of dollars on phony transactions back and forth at major banks
and not generate a SARs report?
[Kotz] People knew not to ask too many questions.
If you're getting good returns and you're getting lots of money,
and you're not to ask any questions, you don't ask any questions.
And, you know, greed has a way of doing that to people.
[Markopolos] JPMorgan paid a few billion dollars in criminal fines
for their role in the Madoff case.
Yet no one went to jail. Not one person at the bank was found guilty of anything.
In fact, no one was even charged.
I ask you, how is that possible?
[Chaitman] This is their way of doing business.
JPMorgan Chase has pled guilty to five massive criminal conspiracies
involving billions of dollars within the last six years.
When they get caught,
they're never required to disclose the profits they made on the scheme.
They just pay a fine and they go on.
So JPMorgan Chase financially profited
from Madoff's crimes.
And I have to believe that
they absolutely understood what was going on.
[Bruce Dubinsky] The Madoff fraud dwarfed so many frauds.
It's the largest Ponzi scheme in the world to date.
The statement value at the end, when the music stopped in 2008,
was $64 billion people thought they had with Madoff.
[Henriques] Sixty-four billion dollars.
But that was imaginary money.
Bernie had created it out of thin air.
[Madoff] The $64 billion, don't forget,
was the false profits that were being generated.
[Henriques] But there's another number that was real money.
The real money that people handed to Bernie in cash
totaled about $19 billion.
[Dubinsky] Nineteen billion dollars of cash actually invested with Madoff.
That's a staggering number, $19 billion.
From nonprofit organizations that had invested money,
to foundations, to individuals,
to people that had sold a mom-and-pop business
and invested their life savings in it.
A lot of people put their money with Madoff, all of their money,
and lost it all.
[Henriques] After the shocking discovery that Bernie had made no investments,
there were no stacks of securities tucked away in a bank vault somewhere,
there was despair.
But despair brightened when the ruling was made from Washington
that Bernie was a member of the Securities Investors Protection Corporation.
SIPC, as it's called.
[Chaitman] SIPC was established
pursuant to the Securities Investor Protection Act in 1970 by Congress,
and its purpose is to operate an insurance fund
to provide up to $500,000 per account
if the broker takes the money and doesn't buy the securities.
[Henriques] That $500,000 dollars is coming out of Wall Street's pocket.
Wall Street finances SIPC through dues that its members pay.
[Chaitman] But the Madoff case,
the courts decided that
there should be what's called a Ponzi scheme exception to statutes.
Basically SIPC insurance wouldn't apply to a Ponzi scheme.
But this is just nonsense.
It's exactly when there's a Ponzi scheme that customers need the insurance.
The irony of it is,
the insurance fund had been woefully inadequate for almost two decades.
In 1990, SIPC decided
that the amount that each member firm should contribute
to fund the Insurance fund
was $150 a year,
not per customer, which still would have been a joke,
but per firm.
That's less than they spend on flowers in the Executive Suite every week.
[Arvedlund] Ultimately, there were so many Madoff victims
that if they were to compensate everyone, SIPC would have gone bankrupt.
So that's where Irving Picard stepped in.
He became the Madoff trustee.
[Chaitman] A trustee is the person who's responsible
for liquidating a registered broker-dealer that becomes bankrupt.
Picard is appointed by the Securities Investor Protection Corporation.
His fees are paid by the Securities Investor Protection Corporation.
[Arvedlund] Irving Picard has to figure out exactly who is owed what.
There's a formula that Picard decides is the simplest one.
It's called the net equity formula.
We're continuing to get money out, and we're trying to be fair.
Some are net losers,
which means that they weren't able to get their money out of the Ponzi scheme.
But let's say I'm an early Madoff investor.
And all the while I've been taking money out,
not knowing it's a fraud, and I've made more than I've put in.
According to the trustee, I'm a net winner,
and I need to give that money back.
That's what's known as a claw back.
[tense music playing]
[Henriques] These clawback lawsuits were filed by the trustee
against hundreds and hundreds and hundreds of investors.
But it was quite a contentious issue,
because the net winners were many of the smaller, older investors
who had been with Bernie from the get-go.
They had invested money with him and then lived off the profits
that he was supposedly generating for them over the years.
[Chaitman] For example,
if my grandfather had opened an account with Bernard Madoff,
and that account was inherited by my mother,
and then upon her death, I inherited the account,
you'd be asking me as the granddaughter
to pay back for withdrawals my grandfather made 45 years ago.
[Arvedlund] So you can imagine that people were furious,
particularly those who had been taking money out every year,
say, to fund their retirement or to send their kids to college.
And by the way, they were paying taxes on that.
People were saying, "How can I give back money I've already given to the IRS?"
Basically, Picard took money from one set of Madoff investors
to pay off another set of Madoff investors,
which I call the reverse Ponzi scheme.
The victims were victimized again.
[Gordon Bennett] I had been in Madoff for so long, since 1992,
and we took out more money than we put in.
So the trustee came back at us and said, "Fork it over."
We didn't have it,
because we took out the money and spent it every year.
[Kate Carolan] And our claw back case went on for years.
Years of calling the lawyers and saying, "What's going on?"
[delicate music playing]
[Carolan] We could not plan the rest of our life.
It was just horrible.
Just horrible.
At one point, we were told we'd probably be better off getting a divorce,
because we had heard that they're not taking the wife's assets.
But you just don't know, and now you don't trust anybody anymore.
But then we said, "Hell, no."
And we thought we'd fight it a different way,
which was through the Hardship Application.
[Bennett] They give you a form to fill out and say, "You know…"
[Carolan] Yeah, they said, "If you had to go into your closet
and sell all your clothing right now, what would you get for it?"
And, you know, I had six pairs of jeans.
What's the value of jewelry?
-Jewelry… -I don't wear jewelry. [laughs]
We didn't have that. They wanted to know your artwork…
We don't have artwork.
We filled out the form showing you what we have, which is not a whole lot.
This is painful for us to go through this
year after year, not knowing what's going to happen.
[Carolan] But in the end, it worked.
Our attorneys in New York talked to them, and the trustee ended up saying,
"You're free."
[Carolan] I kind of lost my husband for several years,
because all he did was try to find a solution.
And he got so absorbed in finding the solution.
There was part of him that was gone.
And that takes its toll.
[Bennett] I earned all the money, I invested all the money,
I did all the due diligence,
and it all blew up in my face.
[poignant music playing]
You know, it's…
[voice breaking] …it's one thing to lose your life savings,
and that's bad.
But when you lose your house too, it's terrible.
[sniffles]
[Garfinkel] I think you have to distinguish
who the victims are in this case.
There are, you know, the widows out there who…
This was all their money. They trusted it to Bernie.
People who invested via feeder fund.
They didn't know any better.
But if you look at big investors,
people who had hundreds of millions or even billions of dollars
on the books with Madoff,
who are supposedly very savvy, sophisticated,
they entered into this agreement with the devil, in effect.
I think that they knew what they were getting into.
We're talking about the big four investors.
Norman Levy,
Jeff Picower,
Stanley Chais,
and Carl Shapiro.
[Madoff] I had a very special relationship with the big four clients, all right?
They didn't want to screw me either, generally, because, number one,
we had a close family type of relationship,
and also I made them a lot of money.
They didn't wanna kill the goose that laid the golden egg.
Picower was a little bit different.
[Arvedlund] Picower behaved as a co-conspirator.
I don't think Bernie's billion-dollar Ponzi scheme
could have survived without him.
Bernie needed Picower to help
keep the money flowing,
and it is my opinion that Bernie Madoff helped Jeffry Picower commit tax fraud.
They used each other.
Moreover, Picower made more money off of Madoff's fraud than anyone else,
and Irving Picard knew what was going on.
So after Madoff was arrested,
Irving Picard starts chasing him for money.
[newscaster] Irving Picard,
the trustee in charge of recovering money lost in the scheme,
sued the publicity-shy Picower and his wife,
citing outrageous annual returns as high as 950% on Madoff investments
at a time average returns on the market were only about 9%.
I've always believed that Picower knew a lot more about the fraud.
Unfortunately, we will never know.
[newscaster] Investigators are trying to figure out
how Jeffry Picower wound up dead
at the bottom of his swimming pool in Palm Beach County.
[reporter] Police are investigating his death as a drowning,
but apparently are not ruling anything out.
[Campbell] Obviously, they knew he was in the midst of being held accountable
for his role in the Ponzi scheme,
and that he might have tried to commit suicide.
But the general consensus from the autopsy was that it was a heart attack.
Had Jeffry Picower lived,
I believe he would have been indicted.
While Jeffry Picower certainly should have gone to prison,
Picard was able to claw back the money.
So Jeffry Picower's wife Barbara is forced to return $7.2 billion
of the ill-gotten gains from the Ponzi scheme.
We are hopeful that positive and fair outcomes,
like that of the Picower negotiations and several of our other settlements,
can and will be repeated.
[Campbell] As for the other longtime investors,
Norm Levy's estate is forced to return $220 million.
[cash register dings]
[Campbell] The estate of Stanley Chais agreed to settle for $277 million.
[cash register dings]
[Campbell] And Carl Shapiro forfeited $625 million.
[cash register dings]
Irving Picard had recovered more than 14 billion
of the roughly 19 billion in cash
that had flowed into the fraud.
No one would ever have dreamed that you would recover that amount of money.
But the methods that the law required him to use
were just heartbreaking.
Going after innocent Madoff victims,
many of which the average age was 70,
some of these folks had to go work in Walmart…
Suing them for their IRAs and their houses,
and the amount of fees they took I consider unconscionable.
[Arvedlund] Irving Picard's law firm, over the course of many, many years,
billed over a billion dollars to oversee the Madoff trusteeship.
So Irving Picard became a very wealthy man as a result of the Madoff debacle.
I don't think the process was fair at all because we were innocent,
and to put us through all that…
Yeah. I feel victimized for sure.
But I feel differently.
Um, I mean, looking at it analytically,
it was the only way to pay the other victims,
is to take money back from people that took more money out,
because there's no other money.
I don't like the law, but I don't have a better alternative.
I think it was a necessary evil that we had to go through,
and he was doing his job, the trustee.
[Keteyian] For the last three months, Bernie Madoff has spent his days
in a 7.5x8-foot jail cell
here in Lower Manhattan,
not far from this court.
Today he'll find out how he will spend
the rest of his life.
I wake up every morning and my wife…
[voice breaks] The things that matter, I have.
And he can't take them away.
It says a lot about America's history of punishing white-collar crime
that the biggest fear Madoff's victims had as he approached his sentencing date
was the slap on the wrist.
That he would somehow get patted on the head
and sent off to some fairly pleasant prison environment
to spend, you know, a fairly lenient sentence.
I mean, this had happened. People had seen that.
[Arvedlund] When I went to the sentencing in June of 2009,
there were a lot of Bernie Madoff's victims in the courtroom.
They were really captivating,
talking about how they had lost everything.
[victim 1] I was in the process of retiring.
That will never happen, the way things are right now.
[victim 2] I go to the grocery and have to watch what I'm buying.
A whole different ball game now.
[victim 3] I wake up in the middle of the night, dreaming about this,
and how… The damage that he's done to my entire family.
The vastness of the financial pain was something I had never seen before.
[Henriques] The defense lawyer, Ike Sorkin,
pleaded for mercy, for leniency.
He said, "This is a 70-year-old man!"
"He's obviously not going to commit a crime like this again."
And then Bernie said, "I will turn to my victims and apologize."
[Arvedlund] The strange part was that
Bernie Madoff really had no expression.
He didn't show any remorse.
He wasn't emotional.
He was like a financial serial killer.
He was able to look widows in the eye
and take their money and say,
"You are taken care of. You can trust me,"
and screw them over in the next breath.
[inaudible]
[Arvedlund] And he did that over and over and over.
And then the judge began to talk.
He announced that he was required to impose a sentence
that would reflect the magnitude of Madoff's crime.
And he sentenced him to 150 years.
-[strike echoes] -[clamoring]
[Henriques] This was a purely symbolic sentence.
It was a judge saying,
"You have inflicted so much harm on society."
"Society is going to inflict a commensurate amount of harm on you."
It was a remarkable moment in that courtroom.
[tense music playing]
[Matthew L. Schwartz] Once Madoff himself had pled guilty and been sentenced,
there was a real desire
by multiple government agencies, by victims, by all of us,
to try to hold the people who were criminally involved accountable.
And for a period of time, I was a member of the team
prosecuting everything relating to the Madoff Securities fraud.
[Campbell] It takes several years for them to put the whole case together
based on everything that Frank told them,
and this leads to charges against 17th-floor employees
that were complicit in the Ponzi scheme, according to the government.
[Matthew Schwartz] Annette Bongiorno and Jodi Crupi got six years in prison.
Jerry O'Hara and George Perez both got two and a half years.
[Henriques] What sometimes gets forgotten
is Peter Madoff remained under scrutiny by prosecutors.
Peter Madoff pled guilty and was convicted of two counts,
one of falsifying the records of a broker-dealer,
and the other of engaging in a criminal conspiracy
that actually had multiple criminal aims.
None of those charges accused him of participating in the Ponzi scheme,
and he insisted that he had known nothing about it.
Nevertheless, he was sentenced to ten years in federal prison.
[Campbell] Frank DiPascali, he's charged with securities fraud.
But because Frank cooperates with the government,
his sentence isn't given until after the government case is finished.
Government case finishes, we're now talking years.
Frank has lung cancer and dies within four weeks,
and is never sentenced.
This was a fraud of epic proportions,
and each of the people that was convicted at trial
was involved in that fraud for a period of decades,
And their hands weren't just a little dirty, they were totally dirty.
At the same time, they plainly were not the prime movers of the fraud.
So, you know, was the sentence imposed on them
fair?
You know, that's not for me to say.
If I were the judge, would it have been more severe?
It would have been.
[Squillari] After Bernie was arrested, so many people hated Mark and Andy.
They hated these lovely young men, who they saw as monsters.
[newscaster] Since the scandal broke,
the pressure has not let up on Mark or his brother Andrew.
I want his family to feel the pain that they've inflicted on our family.
They were subjected to the most unrelenting, fierce,
hostile public and media coverage I've ever seen.
[reporter] Mr. Madoff?
[thud]
[Henriques] The sons were shocked and horrified by their father's crime.
And they confronted Ruth with the need to choose.
In fact, they insist that she break off all contact with Bernie.
[Henriques] "It's him or us," they told her.
And even worse,
"It's him or your grandchildren."
"Choose."
[Campbell] But she could never totally let go of him.
[Henriques] She'd been with him since she was 13 years old,
she couldn't walk away from him in his hour of need.
And that set up what became months of conflict
between Ruth and her beloved sons.
They'd refuse to see her.
The family just shattered.
It was as if you'd smashed it with a hammer.
[tense music playing]
What he did to me, to my brother, and to my family, is unforgivable.
What he did to thousands of other people,
destroyed their lives, um…
I'll never understand it and I'll never forgive him for it,
and I'll never speak to him again.
Andy found a way that he wanted to move on,
and Mark didn't.
He just didn't.
It was too much.
[reporter] Have you talked to your dad?
I have no comment. I'm sorry. I can't help you.
[Squillari] He went into a dark place.
And I don't know if there was anything anybody could have done for him, because
he was constantly being accused.
The innuendos from people.
There was no relief.
There was nowhere he could go.
It's hard for me to talk about Mark. Anyway.
[siren blaring]
[newscaster] The Madoff scandal took a tragic twist on Saturday
when the oldest son of the disgraced imprisoned financier
was found hanging from a pipe in his fashionable New York City apartment,
dead of an apparent suicide.
Police said 46-year-old Mark Madoff
was discovered by his father-in-law shortly after 7:30 a.m.,
a black dog leash wrapped around his neck,
Madoff's two-year-old son asleep in his room.
He leaves behind four children from two marriages.
[Hales] I remember thinking at the time that
that was an "F you" to his father.
He did it on the two-year anniversary of his father
telling him about the Ponzi scheme,
and I think he purposely planned it for the anniversary
as a way to tell his father,
"This is what you did to me."
[voice breaks] I just can't get over what he did to him… what happened.
I can't.
[sniffles] It's because I have a son who's close in age to him, you know,
and I can't imagine him suffering like that.
And he suffered, he really suffered.
I think that's why I cry.
[dramatic music playing]
[Andy Madoff] We were very close. He was my best friend.
And, uh, I wanted to help him.
I just wish until my dying day that I had done what he wanted.
I don't know if it would have made a difference or not, but…
If I could change things, at least if I had tried.
[Henriques] In the aftermath of Mark's death,
Ruth had grown increasingly close to Andy.
There was some kind of rapprochement between them,
and he became a great source of support and encouragement for her.
And then just almost too much sorrow to believe,
the cancer that Andrew had defeated a decade earlier
came back…
and in a virulent form.
[Squillari] It was terrible, but Andy was fighting it.
I said, "Do you think it would help you to talk to him? To talk to Bernie?"
He goes, "That's not gonna happen."
[Henriques] I saw him in the spring.
He came down to talk to a class I was teaching at Princeton.
And over lunch with his fiancée, he said to me,
"You know, my dad's crime…
it killed my brother quickly and it's killing me slowly."
[newscaster] Andrew Madoff died of lymphoma at the age of 48,
six years after father Bernie Madoff's infamous
$65 billion Ponzi scheme collapsed.
[Henriques] He passed away with his family around him, leaving Ruth alone.
Her husband locked up for life, her sons both gone.
[newscaster 1] Bernard Madoff at least knows he'll have a roof over his head.
His wife, Ruth, though, doesn't have that assurance anymore.
[newscaster 2] Yesterday, federal marshals seized
Bernard Madoff's $7 million Manhattan penthouse.
The apartment is gone,
and so are the seized homes in Palm Beach, Florida,
the south of France, and Long Island,
leaving his wife effectively homeless.
I was there when we basically threw her out of her apartment.
We took everything and… "You got to get out of here."
I was in the kitchen, and I'm actually inventorying her jewelry.
She really seemed numb and shell-shocked.
And she was smoking a cigarette.
I said, "Ruth, that's gonna kill you."
And she said, "Oh, if only it would."
[somber music playing]
She seemed kind of resigned to this, you know, bad ending.
[Roland Ubaldo] Ruth Madoff has vacated the residence.
She has surrendered all personal property to the United States Marshal Service.
[Henriques] Suddenly, she was a nomad.
She lived out of two suitcases in the back of her car.
And that was her life now.
[Campbell] She lost everything.
She lost her position in life,
she lost both her sons,
and she lost her husband that she'd been with since she was 13.
[Henriques] When I visited Bernie in prison in the years after,
there was very little authentic
about Bernie's descriptions of his fraud, about how he felt about what he'd done,
but I felt that there was that authentic evidence of grief
about what had happened to his family.
Noted psychiatrists that I talked with about Madoff's case
hypothesized that what Bernie was grieving was the loss of his family's adoration.
It was not so much that he loved them
as that he loved having them love him.
Which is, of course, pure narcissism and pure sociopath.
But, whatever it was, I could see the toll that it took.
-Thank you. -[applause]
Thank you. Please, everybody be seated.
It is an indisputable fact
that one of the most significant contributors to our economic downturn
was an unraveling of major financial institutions
and the lack of adequate regulatory structures
to prevent abuse and excess.
A culture of irresponsibility took root
from Wall Street to Washington to Main Street.
So the question is, what do we do now?
We did not choose how this crisis began,
but we do have a choice in the legacy this crisis leaves behind.
[Markopolos] I think the global financial crisis
showed us that you can't trust Wall Street.
You can't trust the investment banks.
You can't trust the Wall Street analysts, you can't trust the rating agencies,
and you certainly can't trust the regulators.
Madoff was the scapegoat for the financial crisis.
No one went to jail except for Madoff and a few of his henchmen and henchwomen.
No one from the rating agencies went to jail.
No one from the Wall Street analyst community.
No one at the investment banks went to jail.
The CEOs didn't go to jail. They got to collect their bonuses.
Their banks were bailed out.
But no one bailed out Bernie's victims.
[bittersweet music playing]
[Markopolos] You can't distance yourself from the victims.
To see what they went through,
it's difficult.
[Werner] In the end, my mother passed away before we had to sell the house.
That last day, leaving and packing up,
it was one of the worst days of my life.
I drove away through the gate at the end.
And I started crying like…
Couldn't hold back.
I wasn't just leaving the house that my father built…
[voice breaks] …that my mother lived in.
It was the end of Palm Beach life.
A big part of my life. Over. Gone.
[Greenfield] I live in a rented condo, so I don't own anymore.
I miss that house.
I would've liked to have been able to hold on to it,
but I learned to live without a lot of money.
Maybe that's the good thing that my father taught us: how to survive.
So, I don't begrudge having to move or doing new things.
Now I'm learning all about Shakespearean plays,
and I thought,
Bernie Madoff's story is very Shakespearean.
It fits with the way Shakespeare liked to write,
and he's had a villain in it, and he had children,
but he wanted power.
And it is a tragedy.
[Henriques] The fact that Bernie Madoff had been turned in to the FBI by his sons
lifted it into something more and more tragic in terms of betrayal,
and the more I studied the story,
the more I began to see it as this parable of betrayed trust.
It's the monster in everybody's closet.
It's the terror under the bed.
It's what everyone knows could happen to anyone.
The only people who can deceive you completely
are people you trust completely.
And the price of trusting anyone is that they can betray you like that.
[dramatic music playing]
[Markopolos] People want to believe in good returns without downside risk.
Everybody wants that in their portfolio,
but they're chasing the Holy Grail.
The Holy Grail doesn't exist in real life,
nor does it exist in finance.
Madoff was a fake. There was nothing real there.
[Dubinsky] And so could there be another Bernie Madoff in the future?
There will be another Bernie Madoff.
That will happen. Mark my words.
[dramatic music continues]
[Markopolos] The Madoff case. It's a record-breaking case as of 2008.
But remember…
records are made to be broken.
[dramatic music rising]
[closing theme music playing]