Oh, wait, you're listening to RadioLab from WNYC. So maybe you just want to start at the beginning. So how did you bump into this? Were you even following financial stories and that?
I did some financial stories, but I think my peak was more people in the headlines at the worst moments of their lives, and then I would go in and become their friends and we would talk intimately about what downfall means when you've been at the mountain. Top. Hey, I'm John Adam Rudd. This is RadioLab and today a behind the scenes look at the greatest financial fraud in history.
It's a series called Ponzi Supernova from audible.com and she said about we got to it. Ellen Horne, the great Ellen Horne who was one of the founding members of RadioLab. A couple years ago, she left us, it was very sad for us, but she went off to audible, teamed up with a guy named Steve Fishman who just heard, and together they produced this series which has tape in it that has never before been heard, and it's pretty extraordinary. And kind of, you know, given what's happened recently with financial reforms up for reconsideration, what you're about to hear, you will find a little bit troubling and extremely timely.
Yeah. And so what we did a couple of days ago, we got Steve and Ellen into the studio to play us some stuff and to talk about it. Yeah, sure. You spent the first episode really chasing the guy trying to get access to Bernie made off in prison.
Yeah. You know, I did all kinds of things. I mean, this was like years long pursuit. I would send Bernie novels in the mail.
I would try and insult him. I copied out Sartre's play No Exit and I sent that to him, you know, just to try and get a rise. I put money in his commissary account and then, you know, send him a your welcome note. Never receiving a response.
Do you know why at this point? What was driving this? I mean, listen, Bernie has done this. I mean, everybody knows.
I mean, keep reading about the details and we keep triangulating Bernie from friends who very obviously didn't know him, investors who obviously didn't know him. I want to hear this guy. Tell me. I want to say, why did you do this?
You were already rich. Come on. What's going on here? I mean, Bernie had the greatest seat in the house to what was going on behind the scene.
So Steve has explained to us for years, he just kept pestering the guy in prison. Very stubborn man. He ended up talking to like a whole series of other prisoners asking them to get the word to Bernie and eventually just got to the chase one day. My home phone rings.
So I pick it up. It's a Sunday evening. The Jets game is on and I got my two young kids running around and it's you have a call from an inmate to the federal prison and then you hear Bernie's voice saying Bernard made off and it's kind of slightly disgusted tone of voice. Just like Captain Ahab, but now you have kids running around the room and Jets game on.
Here's the phone call. Oh my god. Are you ready? And I'm not ready.
I have a tape recorder and my kids are in the background. So my first reaction to Bernie on the phone is, hey kids shut up. It's Bernie made up. So then it calls, come only in 15 minute bursts and then for whatever reason, exactly 15 minutes.
Exactly 15 minutes. It just ends. And then the inmate has to wait 15 minutes to call you back. So he hangs up.
I know I have 15 minutes. I'm running around. I must have a tape recorder. I'm fine.
I'm in the closet. I tested. At this point, we're just going to drop into the series. Yeah, I was just saying it was great to talk to you because, you know, talking to you in person is so different than reading about you, all the kind of caricature out there and the whole sense of you as being, you know, just this one-dimensional person.
It was nice to talk to you too. So, Bernie Madoff is the greatest financial crook in history, but his voice is familiar to me. Madoff could be the uncle I run into at Barn Mitzvahs. We have common roots, middle class, New York Jews, and also an interest in the Jets.
I got it recorded. Yeah, I like that. What do you do? Are you near the TV room now?
Yeah, this phone's over here. I try to imagine the former chairman of the NASDAQ at a payphone in a cell block. Inmates lined up behind him with prison-made tattoos, prison-honed muscles. Oh, and you can call it night, Tim?
Yeah, I call it the night. Prison is not what Bernie expected. I mean, I guess, aside from being, you know, separated from everybody. You know, in my family?
No, you're probably not talking to Ruth right now. It's just, uh... Time's up. It's frustrating.
A call starts. We build momentum. He begins to open up, and then the guillotine falls. Trust is tough to build on the timer, and I need to be the person he will trust with the whole story, at least as he sees it.
Bernie lets me know he has a story to tell. He's been misunderstood. I'm a good person. He tells me.
He starts with this. His family didn't have a clue. Bernie insists he shielded his family, nobly, kept them in the dark, until the unseasonably warm afternoon of December 10th, 2008. That's his whole thing.
He was at his office. Bernard L. made off securities, a family business. What happened?
They went into Bernie's study. That's what? And nobody gets angry at that point. It...
Everybody was stunned. They were shocked. Everybody was scared. They were shocked.
No. They were shocked. No. I mean, look, you think you're a part of this multi-glucidester?
Andrew Bernie's youngest son had been diagnosed with lymphoma five years earlier. He fought it and recovered fully. He considered changing jobs, but Bernie talked him into returning to work beside his dad, his brother, his uncle, his first cousin. The family opened their army.
We were very close down. They are very proud of my son. They were proud of me. No.
As for what happened next? The end of the... Sent a message in the most horrible way. The chaplain came to get you and what does he bring you to the chapel?
Right. And Ruth's on the phone and she tells you. Mark Madoff killed himself at age 46, hung himself with a dog leash in his so-ho loft while his toddler slept in the room next door. The date, December 11, 2010, two years to the day after his father's arrest.
To Bernie, Mark's message to him was clear, you ruined my life. Bernie told me he still hoped he could reach Andrew and explain, but Andrew's cancer returned. He blamed the relapse on his father's crimes, the stress and shame of it all. Andrew Madoff died in 2014.
Bernie though is a survivor. Once he confessed to the largest Ponzi scheme in history, for him, the worst was over. It must have been something of a relief to finally be able to get this off your show. Yeah.
I mean, you were looking down the barrel for you. I guess you kind of knew it would end up here, you know, where you are now sooner or later. It's what I think I'd be, not being able to tell anybody that I destroyed the family. They said, why need to do this?
Yeah. That's what I'm trying to think of. Yeah. The psychologist.
Yeah. They have wonderful psychologists here. They're very helpful for me. Well, that's great.
That's great. Believe me. That's great. I have a few possessions with everyone.
A New Yorker and his shrink. Seeking reassurance, searching for answers. Where does a monster come from? I feel packed.
I've ever seen this story. You have borrows. You have a voice. I came to think of my conversations with Bernie as a kind of session too.
So I, Steve, I mean, I'm just curious, what are you thinking at this point as you're talking to him? I mean, we're running through his story and we've developed a kind of rapport, I mean, you know, there's a different generation, but Jewish roots, New York area. This is a guy who's familiar to me and I, and we develop a rapport and burning kind that tells me the story of his father and of how he got into this. I've got to build this point because it's the only company called Dodger's Pointy goods.
And he invented a joke with a punching face now. That's correct. You know, I was able to get a rod. Yeah.
Yeah. Yeah. Big successful business. And then they're in the Korean War.
It was the steel shorts you couldn't get to deal. And it's business now. So, you know, I look through that. You watch that happen.
You see a father who idolized your building business and lose everything. You're talking about the, you know, that's not going to happen. Bernie was determined to attain success, lasting success. The kind that had eluded his father, whatever it took.
Twenty-two years old, he convinces a handful of investors to trust him. Friends, parents, former customers of his high school law and sprinkler business. Clients of his father-in-law's accounting firm. First thing I did.
New issues were hot in the 1960s, though without the mad scramble and hype of today's IPOs. Back then, there was no CNBC, no computers. With new issues, he thought he'd hit on a money-making strategy. Bernie lost almost all of his client's money.
As he tells it, he was embarrassed. He was in tears. Ruth took him to her father. Bernie begged for a bailout.
His father-in-law saved him. Bernie needed a better strategy. The odds were against him as he saw it. Bernie wasn't one of the Wall Street elite.
Did they make that clear that, you know, you're not in the club? Oh, yeah. I mean, it was obvious to everybody. Steve says that idea of Bernie as a lower-class kid from Queens who wanted to prove himself to the big boys and be accepted.
Steve says that's one of the keys to really understanding how a guy like Bernie made off could have gotten into this gigantic fraud, because when Bernie's business started to really take off, possibly increasingly through fraud, all of a sudden he had all of these guys from the big banks calling him up and wanted to take him out to lunch. By the mid-'90s, where did it spread? People clamored to put their money in Madoff's I.A. business.
So I opened up these funds. Hedge funds, bank funds, and feeder funds created to funnel money to Madoff who pumped out those incredibly consistent returns. It's flattering too, all right? Yeah.
Everyone wanted to be with Bernie. Country Club golfers, hedge funds, prestigious banks. They did these high-spotted shorts over the stock to them. Which would be a matter of weeks or months.
You might be able to recover from it. According to Bernie, this was the turning point. The market went against him. The boy genius failed.
And the deluge of money? That was his undoing. He couldn't move billions of dollars in and out of the market. I don't.
Irresistible for the young man once shut out of the club. I guess the other thing there is, you know, you had a history of breaking up the country club at the New York Stock Exchange. Right. The market makers.
And, you know, now in some sense, I guess you're finally getting the recognition from those kind of same people that they need you. Yeah. That's right. It just, it's the whole thing sort of spun out of control.
But let me just kind of get something out of the way. So, a Ponzi scheme, which we sort of need to know. Ponzi scheme is, I give you money to invest. You know, you pretend you invest that money, but you don't.
Instead, what you do is you go out and you get new investors, take their money, give it to me, and then you go out and get even newer investors, take their money, give it to the ones before them, and on and on and on. So, like, all you're doing is just repositioning money, like taking it from the new guys, giving it to the slightly less new guys, making it look like you're trading when you're not, and it only works as long as you have new people coming in. And you have a constant stream of new people coming in with new money. But that all sort of fell apart in 2008.
In 2008, when we had a huge stock market crash, Bernie woke up after decades of getting a lot of money in, all of a sudden one day, people said, I want my money back. I do. Me too. Me too.
And he had not done anything except expect more money to come through the front door. On that day, there was no money coming in the front door. And so Bernie's version, the fraud started because impressive people threw money at him. A good person who made a mistake.
And we've been hours talking about this. And it seems to me at some point that there's always going to be that next phone call. But there's that gap. You know, 15 minutes, I have to wait until the phone rings.
And one time the phone doesn't ring. Bernie doesn't call back. And I get from the prison a letter basically explaining that I have been declared a security risk. What does a security risk mean?
I have no idea. And, you know, it's some kind of catch. I mean, I try to appeal that to the Bureau of Prisons. It's unappealable.
So basically the word says, you know, there's a hassle. You know, he's a security risk. He can't talk to him. And just to synopsis, just so at this point, having spent a hunk of time, you went into this thinking, okay, I'm going to sit in his shoes and I'm going to feel him.
And where are you right now at this point? So now I've spoken to him for three or more hours. And, you know, I've taken this journey with him. I've heard his story.
And, you know, I have felt some empathy for Bernie from his point of view. And so now I start to listen to the tapes and I start to really kind of dig in. And it occurs to me that Bernie's telling me two stories. Bernie Madoff, on one hand, is this wizard conducting this incredible financial criminal wizardry, a mastermind.
And on the other hand, he's this kind of pawn. Pawn. Not a word you normally associate with Bernie Madoff. No, and actually that's more on that after the break.
Because what ends up happening when the cool revelations of the series is the way in which Bernie actually sees himself as a victim. And it's here where the story sort of starts to expand beyond him. And you start to sort of see a much bigger field of play. Yeah.
That's coming up after the break. This is Alicia Bridges going from Saskatoon in Saskatchewan. Radio Live is supported in part by the Alfred P. Sloane Foundation, enhancing public understanding of science and technology in the modern world.
More information about Sloane at www.sloane.org. Hi, I'm Morgan Sutton, host of Close All Tabs from KQD, where every week we reveal how the online world collides with everyday life. You don't know what's true or not, because you don't know if AI was involved in it. So my first reaction was, haha, this is so funny.
And my next reaction was, wait a minute, I'm a journalist. Is this real? And I think we will see you as a streamer, president, maybe within our lifetimes. You can find Close All Tabs wherever you listen to podcasts.
Hey, I'm Jad Abumran. I'm Robert Krollwich. This is Radio Lab today. We're playing a series of excerpts from a brand new series from Audible called Ponzi Supernova, comes from reporter Steve Fishman and Ellen Horne, our former executive producer.
And it's a series about Bernie Madoff, the largest financial fraud in history, sort of a behind-the-scenes look. And in this series, there's lots of really kind of crazy, frankly, descriptions of how Bernie Madoff and his team pull it off and how on many occasions they almost got caught. Former U.S. Attorney Matthew Schwartz told me about one of the closest of the Close Calls, one starring Frank D.
Pascali, Madoff's top lieutenant. D. Pascali testifies that he's, you know, singing a conference room with the auditors. They ask for this report called a PSYAC S-I-A-C report.
So picture it, a conference room full of auditors. One asks for this routine report, something a legitimate trading firm would have on the shelf. Of course, Madoff isn't a legitimate trading firm, so they don't have it. Then quick, Frank, and be cool.
In front of the auditors, Frank phones the computer programmers and says, Hey, can you bring up the PSYAC reports and the guy says, basically, the PSYAC report? You told us we didn't need the PSYAC report. Where the hell am I going to get a PSYAC report? And he says, Great, I'll see you in 10 minutes.
And then he does, as he describes it, a little soft shoe to stall for time. Meanwhile, the team has minutes to prepare a false report and then make it appear as if it's been idling on a shelf. They're frantically putting together and printing out this report, which is, you know, it's half a foot thick of this being paper, dot matrix paper. And then it's supposed to be a report that's been lying around for a month and instead it's hot off the presses.
So first, they stick it in the refrigerator that's down in the advisory business to cool it off. And then they literally play football with it. They're tossing it around the room to one another to make it look weathered. And then they run it up to a deep-ass galley.
It's a deep-ass galley. Here's the PSYAC report. Who cool hands it to the auditors. They're close calls over and over again.
It's fabulous theater. Steve actually described Burning Man Uff's operation. You know, they created like this massive $65 billion fraud as, like, super rickety. Basically held together by tape and safety pins and old dot matrix printers.
And their series goes into a lot of detail about certain mechanics and how it worked. What caught our attention was the thing that we sort of mentioned before the break. This idea that Bernie saw himself not as this, like, all-powerful criminal mastermind, but as kind of a pawn. Yeah.
There was an original group of investors that Bernie made off the ground. And this group is called the Big Four. And that's exactly right. The Big Four.
They came to be now even made off calls from the Big Four. I had four prime big clients. Jeffrey Pickauer, Norman Levy, Carl Shapiro, and Stanley Chase, commonly referred to as the Big Four. It was very clear that those accounts in particular, Shapiro, Levy, Pickauer, and Chase.
Former assistant U.S. attorney match courts again were handled very differently from other accounts and were handled in a way that, you know, it mattered less if there was a mistake. For these accounts, the workmanship was quite different, more demanding, less exacting. Some employees were more meticulous than others.
And some clients you could afford to be less meticulous with. Annette Bonjourner had been there a long time. She was employing number one in the Ponzi business. Garfinkel told me she handled the accounts of the Big Four.
Steve Garfinkel was one of the FBI agents who investigated Bernie Madoff's operation. Annette's clients, the way she forgets their account statements. There were some instances when the customers got their account statements from Annette, and complained that, oh, you know, you promised me, you know, 18%, and I only got 16%. And they sent the statement back to Annette.
So then she would do a new statement. Miraculously, you got the, you know, your new statement with a new higher return. Madoff himself says the accounts of the Big Four were forgazied. They were doing most of Schmeidre's trays to Jewish terms that were used.
You know, they were, you know, taking lost trays and the stuff that they did was unbelievable. And they were doing it through me. They demanded Bernie do kinkier maneuvers. Stanley Chase, for example, there was explicit testimony that he would not tolerate a single losing trade in his accounts.
And he had a particular trading strategy where sometimes you could have a losing leg of a trade, but the trade as a whole was a winner because it was a three-legged trade. He wouldn't even tolerate that. For some reason, every single trade, every single leg of every single trade had to be a winner. That doesn't happen in real life, and no one can demand that of their money manager.
Each of the Big Four paid back millions. In Pick Hours case, billions of dollars. Every one of them claimed Madoff had duped them. They weren't prosecuted, and it's impossible for Schwartz to say for certain who knew what.
What he can say is, there was activity in the accounts of the Big Four that would raise questions in the eyes of anyone. Now, you might believe that your genius money manager can get you 700% return in a good year, but no one has the ability to rewrite history and turn stocks into bonds. And so these men, mostly older, powerful mentors to Madoff, opened for me a new door into the Madoff Ponzi operation. They gave Bernie his break, and then demanded that he provide them things he couldn't honestly achieve.
These people are not the Big Four, whether it's them personally or their lieutenants, or whoever it is, they are asking for things that are not possible. Bernie is accomplishing those things. So now, ask yourself, who has the power in that relationship? Is it Bernie because he knows he's doing illegal things for these parties, or is it the party who's now making Bernie do illegal things?
It's both of them. When Bernie said to you, gosh, I discovered that people are really greedy. Remember that was in the beginning. Is this what he means, that these people were using him?
This is what Bernie means. And Bernie has actually a particular enmity for those Big Four. One of them, Jeffrey Pickower, took out $7 billion. $7 billion from this game.
Right, beyond what he invested. That's Ellen Horn, who produced the series. Now, the story of Jeffrey Pickower is one of the more dramatic moments in the series. Ten months after Bernie made off the rest, Barbara Pickower, wife of Madoff's largest investor, Jeffrey Pickower, dialed 911.
This call is hard to listen to, it's upsetting. Hey, down the line, I'm gonna set the medics to you, don't hang on. The fact that Jeffrey Pickower had a heart attack and drowned in its pool, you can congratulate me on that. According to Madoff, before Pickower went for his final swim, Bernie phoned him.
I called up Jeffrey Pickower and, you know, I said, you gotta give the money back. I said, you guys owe me money, and I want the money back. Pickower said, well, you know, I don't have it all. I said, Jeffrey, I know that you have the money there.
You worth $9 billion and I want $7 billion back. Consider what Madoff's tone regarding the death of someone he knew for decades, what this says about Bernie Madoff, who he is. Whenever someone hears that I interviewed Madoff, they always want to know, does Bernie feel remorse? I've interviewed serial killers, child rapists, people considered monsters.
I suspended judgment. I wanted to hear their stories, to understand them. This doesn't mean I wasn't horrified by what I heard, but I tried to see the world through their eyes and exercising empathy. At times, I feel empathy for Bernie.
But here's what struck me about Bernie. He didn't feel empathy. He claimed to feel remorse. He mowed the words, but there was always a butt.
On the phone with me, every single time Bernie mentions victims, he can barely get through the apology before interrupting himself. They were warned, they were greedy, always this strange, sorry, not sorry. Yeah, I said the brokerage firms, I could go crazy. It's impossible to tell the story of the fall of the House of Madoff without understanding that there were real victims, real suffering.
Back in early 2009, victims were telling stories of their ruined lives on TV, on the radio, on every local talk show. It was the worst thing that ever happened to us. This can't be real. We have lost everything.
I've lost everything, and you've lost everything. Everything that we work for. Who's down the green? I manage our food stamps.
Sometimes at the end of the month, I scavenge in dumpsters. Did you catch the remorse, or was it too fleeting to register in your brain? My producers and I were in touch with dozens of victims. To the victims, Bernie's indifference was in raging, all over again.
But it wasn't the slightest bit surprising. What is surprising is what happened to victims, since Madoff dragged their $65 billion down a dark hole. I mean, there is now, this is eight, nine years later, there is an industry that is created around the Madoff collapse. There are hundreds of lawyers working on recovering money.
And that's a very complicated story. And when we try and tell, because you know what? A lot of people who lost money didn't have any inclination, couldn't have had any inkling that this was going on. So the Justice Group comes in, private lawyers, courts, judges, the Justice Department, and they try to make amends.
Have they? Justice is a very complicated issue in the universe created by Bernie Madoff. You have a trustee appointed to recover funds for victims. Well, some of those funds went to people who took those funds in good faith.
They'd given Bernie millions of dollars. They took out a million plus one. And so they thought they were doing the right thing. They thought it was their money.
But we've got to give money back to the people who lost more money than they put in. You're going to have to give some of your money to them. So it's a very complicated moral universe. Well, there's the individuals, and then in the last category, there are the banks and the investment institutions that sold Bernie to ordinary people all over the world.
Yeah, there are these financial institutions. Hedge funds raised billions of dollars, took them to Latin America, Europe, all across the United States, market and Bernie Madoff, as a safe bet. You know, he was weaponized by the financial system. And so we wondered why weren't those hedge funds accountable for not doing their job?
Yeah, and this is the still happening, still unraveling, still needs to be reported part of the story. That question about why the people who quote weaponized Bernie Madoff haven't been punished yet probably will never be punished. That is something that Ellen Horne and Steve Fishman tackle in the final episode in their series. And we definitely recommend you check it out at audible.com slash Ponzi supernova.
We'll link you there as well from radio lab.org. And thank you to Stephen Fishman and to Ellen Horne for sharing this work of theirs with us. Also a shout out to producer Kelly Prime who helped Ellen Steve work on series. Yeah, so thank you Audible, thank you for listening.
I'm Chad O'Reilly. We'll see you next time. Hi, this is Logan from Hamilton, Montana. Radio Lab is produced by Jad Abemrod.
Dylan Keefe is our director of sound design. Soring Leeler is senior editor. Jamie York is our senior producer. Our staff includes Simon Adler, Brenna Ferrell, David Gabelle, Matt Kilti, Robert Kruehlich, Annie McEwen, Latif Nasser, Melissa O'Donnell, Ariane Wack, and Molly Webster.
With help from Tracy Hunt, Valentina Bonini, Nighar Fatali, Phoebe Wang, and Katie Ferguson. Our fact checker is Michelle Harris.