The Madoff Affair (full documentary) | FRONTLINE

[Music] it was too good to be true would you believe it how the money rolled in but nobody wanted to ask questions you see a willful ignorance nobody wants to get in the way of all this money from small-time investors to sophisticated hedge fund managers all these guys did was just dump money in do no due diligence and count their money amazing did madoff say to you don't put me in your prospectus yes he did do you think that's right and where were the regulators why didn't you find him is the question i blame the government i really truly do tonight on frontline correspondent martin smith unravels the madoff affair [Music] the news broke on december 11 2008 and within seconds phones were ringing around the world michael bienis was in london when he got a phone call from his business partner frank avelino and i said frank what's wrong because i could hear it in his voice michael bernie made off i said he died and then nano said he died was arrested i said oh no and then another nanosecond sex crime or some you know for stock floored phones were ringing in palm beach too i received a call from an investor in aspen who said he had heard that bernie was arrested and i called bernie's office and called his secretary and i said gee we just got this really strange call and she said no no everything's fine emails were flying i read it and then i read it again it was like in shock like non-believing shock and i thought he couldn't he couldn't possibly have this isn't true it's impossible to be true it was the largest stock fraud in history oh my you know in an instant as with everybody else you see everything just gone there are lots of what would you say to all those people that lost money what would you say to them and when did it all begin bernie hey bernie give me one nice shot buddy turn around [Music] the year was 1960 madoff had just graduated from hofstra college and married his high school sweetheart ruth alpern he was working out of her father's accounting firm in midtown manhattan [Music] from there he launched a career as a market maker matching buyers of stocks with sellers on wall street he started this little stock trading firm one of many in wall street's outer fringes at that time and slowly built it up building up customers it was kind of like a wholesale firm he would actually pay clients such as fidelity charles schwab he'd pay them a penny a share to come and trade through him so he saw lots of trading volume that way in other words he would pay for what they call order flow exactly what wasn't known on wall street was that madoff had a side business as an investment advisor the investment advisory business operated so far as we can tell completely under the radar we know to some extent that it began small customers of his who go back the longest started with very small nest eggs madoff's first clients were friends and associates recruited in places like queens long island and the catskills with promised returns of around 18 entire families jumped in as word spread madoff enlisted two accountants from his father-in-law's firm first it was frank avelino on the left and then michael bienis now facing lawsuits avalina refused to talk but biennis agreed to tell us how madoff brought him and frank into the investment advisory business tell me how you get going with investing with bernie how that well saul his father-in-law had been doing it he gave frank a piece and he i got a piece when i became a partner it was only about two and a half million in the account that was big money to me we were only taking a small clip off the top it's all it was couldn't take more we thought that was the rule and we never were pigs that's one thing that kept us going we were never pigs we were never pigs the arrangement was simple with madoff's guarantee of 20 or better avelino and bienis could pocket a few percentage points while issuing promissory notes to their clients with set rates of return you were promising people how much all depends uh big amounts 18 smaller amounts 17 16 even as low as 15. what made you think that he could return 20 i don't know how do i know how do you uh split an atom i know that you can split them i don't know how you do it how does an airplane fly i don't ask could you ask him never why would i ask him i wouldn't understand it if he explained it something with arbitrage between bonds and stocks and blah blah blah blah blah among the first investors biannus brought in were arnold and jones sunken they started with five thousand dollars michael bienis said to my uncle i know that you don't have much money and that i can really get you an investment that's going to do very well for you and before long there were probably about 18 to 20 people that were involved with the viennas did you know where that money was going uh no had you ever heard the name bernard madoff not at that time not at that time madoff liked it that way unbeknownst to even his oldest associates he was quietly taking on other so-called feeders it didn't matter to avelino and biennis by the mid 80s their cut was reaching upwards of 10 million a year just for passing along their clients money so is this easy money would you say that that you're making with madoff easy easy peasy like a money machine i always said i never lifted any heavy weights people said to me even recently oh you must have worked very hard i said no i didn't oh come on i said no i didn't i never worked hard we were like an airplane an airplane you know flies itself but if you make a mistake in your calculations oh boy you do a john denver you run out of fuel did you ever think to yourself this just is too easy this is too good i said i'm a little too lucky why am i so fortunate and then i came up with the answer my wife and i came up with the answer god wanted us to have this god gave us this in 1987 avelino and viennas opened a second office in fort lauderdale florida and began looking for a new well of investors they start actually doing what they did in new york they just pick up investors people they met an art dealer friends that they picked up doctors you know they would they would get them involved in in the investment scheme the problem was they were getting too many clients by the early nineties they had amassed over three thousand far too many clients to be operating as unregistered investment advisors avelino and vienna's worried they might get busted by the sec we had doubts and we passed them on to bernie in meetings and he said listen to me okay i know the biggest lawyers on wall street and i've told them about this and they say it's okay you're just uh guys who work for my father-in-law are you you're you're a client of my firm that's all you are so you did have doubts you wondered if you should be licensed with the sec i like to be licensed i was a licensed cpa so why didn't you just get yourself licenses because you just can't do that because bernie didn't want us to so bernie is calling the shots here oh of course he is always was i was always we were always captive to him he owned us but then in 1992 there was trouble an investment advisor in seattle had called avelino and viennas to inquire about their steady returns those promissory notes didn't smell right he was given the brush off the advisor called the sec and they launched an investigation they suspected that avelino and viennas were running a ponzi scheme they came over the sec and they talked and they looked and they looked and they talked and we said you know to bernie we got to do something this is not going to be good we just can't sit here he says yeah you're right let me recommend an attorney ira salkin who used to be with the sec sorkin the lawyer madoff recommended had experience handling fraud cases and in the mid 80s he'd even run the sec's new york office there was a lot of money at stake in the case by 1992 avelino and bienis had 441 million dollars invested with madoff sorkin tried to figure out a way to keep avelino and bns in business but before he could come up with a solution the sec ran out of patience all of a sudden in november the sec said game over for closing you down sign the consent decree or we'll run you into court did you understand why michael bienis was shut down michael bienis said he had too many uh people that he helped invest and yes he said he didn't have a license so he was just going to stop doing this because it wasn't good and we could go with madoff at first the sec was worried that the money wouldn't be there but were relieved that the trail led back to madoff by then he had a solid reputation on wall street his market-making operation was handling trades equaling nine percent of all trading on the new york stock exchange and he had recently been named chairman of nasdaq the sec never paid serious attention to madoff they had made off in their sites and the sec looked at madoff but it reached no adverse conclusions estimate off but they knew that madoff was servicing as an investment advisor 3 200 different clients yes madoff was not registered as an investment advisor that's correct even after avelino and biennis are effectively shut down and the money is returned madoff goes forward and is not registered why i can't explain why on the face of it if an investment advisor services more than 15 clients 15 or more clients it is supposed to register he had 3 200. um 3 200 seems to me more than 15. to be more than 15. yes avelino and biennis had to pay 350 000 in fines and return all their investors money and while madoff paid back the lion's share he didn't pay all of it he shortchanged them 18 million dollars avelino and biennis asked for a meeting with madoff at his new office in midtown manhattan's lipstick building all right i said you son of a it's over now cost us a lot of money and a lot of grief and it's all your fault bernie damn you it's your fault because we asked you should we be registered should we get registered we were willing to do it we were willing to pay any lawyer any fee and you said no no no no no no and you assured us big shot that that we were fine we were just investors when you knew damn well we weren't after what i got done he says look i'm i heard enough from you now i want you to stop you're starting to get to me very low very cool so i said bernie i'm sorry i just a very scared person and let's forget what i said and go on with this i apologize in a 1992 interview with the wall street journal madoff claimed he had no idea his two front men were operating illegally does the fact that bernie madoff returned 400 million dollars to those accountants who then returned it to their clients mean that it was a legitimate operation at that time not necessarily many people point to that and say that it must have been legitimate because he was able to raise that much money but we don't know how he raised it we don't know where he got it did you ever think it was odd that you go through all these hearings and all the paperwork is all about you and frank but nothing about bernie and bernie gets off scot-free continues doing what he's doing does that seem odd to you no we just wanted to get out of it and i wanted to run away and hide in a cave i didn't worry about bernie or ernie or sid the kid i was not interested i just didn't want my name in the paper again one day once and that was enough for me what did you tell the clients that had left that had gotten their money back goodbye here's your here's your they knew it was in the papers here's your money don't bother me but sources tell frontline that's not what happened avelino and bienis continued to move money to madoff through other front men taking lucrative kickbacks on the referrals one case in point in fort lauderdale is uh michael sullivan who was a friend of avelinos and he basically took these pools of investors that they and they routed them right into uh into sullivan and he's moving it to madoff avelino knew sullivan through bible group at this fort lauderdale church after 1992 sullivan took on around 30 of avelino and biennis's accounts avelino and biennis kept their hands in the jar the sec action was simply a bump in the road it was it barely slowed them down bienis denies rooting clients through sullivan or anyone else if they called me i said listen the only advice i can give you is call bernie if you want to get i don't know if he'll take you or call michael sullivan no absolutely not never now why does that push a button because it's not so and that's what really bugs me but you've got people saying that they're worried about people saying they're lying but documents show that after 1992 former avelino and vienna's clients began moving their money into partnerships that were michael sullivan's conduits to madoff avelino and biennis also continued to invest their own personal money with madoff and went on to amass fortunes the avallinos bought this 4.5 million dollar house in palm beach and stocked it with paintings by degas de kooning hopper and bacon paintings worth tens of millions of dollars the biennises became major donors to charities throughout broward county in 2002 biennis accepted an award from a local business college with wisdom and grace this modern day renaissance man has left an indelible mark on our community michael bienis in the 90s madoff really didn't need avelino and viennas anymore he had moved on to bigger pools of money there are two pieces to a ponzi scheme you always have to attract new investment and you have to make sure that all you don't have a sudden outflow the key is stability by the 90s madoff had already formed alliances with financiers like ezra merkin president of new york's prestigious fifth avenue synagogue stanley chase of beverly hills who worked the hollywood crowd and bob jaffe of boston and palm beach people who had access to madoff whether they were advisors or accountants or attorneys or or fund of funds built a sort of a cottage industry of just feeding money to bernie and it's sort of mushroomed madoff was also being courted by private bankers mostly from greenwich connecticut the capital of the hedge fund business one of the first to knock on his door was jeffrey tucker a former sec lawyer with a love for horse racing he joined private banker walter noel to found fairfield greenwich group fairfield greenwich started as a small scale investment advisory business led by a gentleman walter noel who had a pretty good reputation on wall street not just in u.s money circles but in foreign money circles as well he attracted a partner who also had a good track record jeffrey tucker they form joined forces and got fairfield greenwich up and going walter noel's assistant remembers how at first they struggled until they found madoff jeffrey just told walter i've got this guy who's got really impressive returns you know come meet him let's look into it maybe there's a product we can develop once they created fairfield sentry to invest exclusively with madoff that's when things really started to accelerate and what attracted them was not just made of steady returns but an unusual fee arrangement madoff didn't charge them any fees he said i'm making all my money on trading through my market making operation and commissions and so i won't take any fees and you can keep it all for a feeder fund like fairfield sentry those client fees added up to around a hundred million dollars a year the feeder fund's taking you know two and twenty or one in ten one percent of the assets and ten percent of the returns and all these guys did was just dump money in do no due diligence and count their money amazing and while tucker handled fairfield century's account with madoff it was noelle's family that did the marketing walter knowles bevy of lovely daughters married into uh families that were well known uh in those moneyed circles and the fairfield greenwich sales team if you will the walter noel extended family began to market its services far and wide noelle's eldest daughter married a colombian investment banker andres piedragita other sons-in-law marketed century in latin america and the middle east their annual christmas card chronicles their rise the unofficial model was if we act rich we will become rich this was about being able to finance a lifestyle that people only that some people only dream about they read about these things in in wn in in town and country and they wanted that sort of lifestyle they wanted to be in society walter noel was making an extraordinary amount of money and all he had to do was market and there were many people that just looked at what fairfield century was doing and said hey this is free money fund managers everywhere wanted in on it latin america asia and europe and they went to major banks looking for clients nowhere more than in the world's capital of discretion and secrecy geneva these guys were going around to all banks really doing growth shows and saying here it is we have a two percent management fee on this fund but we give you back one percent of it if you buy the fund so you bring the uh clients to us and we'll give you a kickback exactly it's it's a worry to attract to catch to be very aggressive in catching new clients yeah by 2008 one-third of all geneva fund managers had invested with madoff to the tune of 14 billion dollars it's extraordinary how the hedge fund industry in some way works like hollywood you know you have stars you don't understand but you have big stars and you need to invest in big fun with big names famous people you need to invest in that thing because it's a big name one of the biggest names in europe was french aristocrat thierry de la ville an avid sailor well connected with european royalty he approached the world's biggest private wealth manager ubs to help him gather clients for his madoff fund at his company access international on his marketing team were prince michael of yugoslavia and philippe juneau once married to princess caroline of monaco at lavish parties they marketed to people like l'oreal's lilian bettencourt the world's wealthiest woman thierry de la villege would say to them look come to dinner we'll have your friends a good time good wine and then here comes the hard sell i've got this great money manager in new york he makes money whatever the weather i can introduce you put money into my fund i'll i'll hand it on to bernie madoff be like dude his brother bertrand said teary believed completely in madoff he'd have intellect but madoff had one condition he had to impose on everyone funds were forbidden from listing him as an investment advisor in any marketing materials that's because madoff was unregistered with the sec even though he had thousands of clients and billions under management i met bernie madoff in the early 90s sandra manske the founder of hedge fund giant tremont and later maxim capital has publicly advocated for more transparency in the hedge fund industry in an exclusive interview with frontline she said she was unaware of how big madoff had become did i know about all the feeder funds in europe absolutely not access access i did not know of access i didn't had a big phone didn't know that you know optimal didn't know that mansky says everyone operated by madoff's secrecy rules did madoff say to you don't put me in your prospectus yes he did do you think that's right do you think that's appropriate um i don't know um every one of my clients knew that this was a madoff feeder fund so why not and the prospectus then um that was one of always bernie's conditions of getting an account but you've publicly called for transparency that's transparency yes but many funds and investors were very secretive they didn't mention that they had money with madoff um it was something you didn't talk about and that's exactly how bernie madoff wanted it [Music] the question of when it became a fraud is fundamental to the bernie madoff mystery this went on for an astonishingly long time for a ponzi scheme madoff was driven he has the kind of personality that is extremely proud of the incredibly intricate and complex web that he's woven madoff's firm used to advertise its high ethical standards good afternoon elizabeth speaking investors who asked were shown the operation on the 19th floor of the lipstick is good at building and pending erickson 26 and five teenies very impressive you know scores of people basically younger people sitting at these computers clicking away or watching the screen or whatever and you know and one thing's lord here are all these people in their 20s and 30s who are each making a million dollars a year [Laughter] they probably were but this was madoff's market-making operation run by his two sons mark and andrew and his brother peter his wife ruth came in once a month on the street it had a good reputation it was a great company to work for a lot of people didn't leave that place usually with madoff you you stayed there it was almost like you you would work there and you know the only way that you would get fired unless you did something um incredibly wrong as is now well known the heart of the fraud was two floors down on 17. here a dozen employees worked under the direction of a 33-year veteran of the firm frank de pascali nobody really knew his role you know i knew he was important because he would speak with bernie often and essentially like whatever frank wanted he would for the most part get but few staffers even caputo and ibrahim and the rest of the it team that had access to the floor understood what he did we were spitting out statements constantly the fact that all of these statements were just sort of made out of thin air is is pretty shocking well did people ever suspect that it wasn't legitimate it was very rare that since i was there that anybody would ask questions about something in the uh in the firm you just didn't do that you just didn't do it after the statements were printed they were mailed to clients providing them a paper record of trades and stocks treasuries and s p 100 index options most customers were focused on the bottom line but for anyone who looked hard enough there were a few clues some statements showed investments in fidelity spartan a fund whose name had changed and was not open to new investors and frontline's own investigation of a small sampling of statements found unusual accounting of cash balances also the fact that madoff sent trading confirmations in the mail two to five days after a trade was reportedly made allowed him the benefit of hindsight like betting on a horse race after it had begun did it ever raise red flags that all his confirmation tickets were sent to you in the mail whereas all other broker-dealers were providing electronic confirmations they were sent to us in the mail and we never thought anything of it but i get my confirmations when i trade tickets in the mail but you can also opt to get one electronically which is something bernie madoff didn't offer well bernie also again it was part of his not having the world know when he went into the market but it never seemed odd that he didn't issue an electronic confirmation no but if an investor complained about how madoff did business dipascali would threaten them i remember one phone call i made he said if you don't like what i do we'll send you money back it was very intimidating because first of all i didn't want the money back and i didn't know what was so terrible about the question i was asking so he didn't really want to hear any questions no absolutely not and we got intimidated by it there were many on the outside who suspected something was wrong a persistent rumor dog made off that he was involved in an illegal form of insider trading called front running the idea behind that was because he had this market making business and market making means you see the trades coming from big institutions and the big concern with market makers is you can step in in front of say merrill lynch buying a million shares of ibm and buy your own so that when merrill buys the million shares the stock goes up a little bit and you make some money people couldn't figure out any other way for him to make money except if he was front running people ran those sort of models and couldn't make money doing it they couldn't make anywhere near the kind of returns that he did especially in when markets were falling but he consistently made money every year almost every month in boston a team of risk analysts was puzzled wondering what madoff was up to there's always that potential that one little potential that you've got a rocket scientist an einstein here and he's found some piece of information that's flowing to him proprietarily because of the nature of his business of executing big trades in the late 90s casey was working with harry marco polis the now famous whistleblower casey and marco polos first heard about madoff's returns from the french aristocrat terry du la villuche back in those days i understand that mr madoff didn't like his investors mentioning his name let alone what he was doing but terrain knowing that i was an options fellow i guess and the fact that he was a sailor and i was a sailor established some common ground and trust i guess and he mentioned that it was this fellow by the name of bernie madoff i said well what's he doing and he said split strike conversion work i didn't say much about that but i thought that well wait a minute it is predominantly a bull market strategy and how can you make money in bear markets or down markets so something's amiss casey asked marco polos who understood esoteric tactics like split strike conversion to do some reverse engineering i brought the return stream the track record back to harry and i said harry if you can do this for me we can make a lot of money harry started engineering and looking at it and dissecting the returns and he's after four hours of work or so came up he said frank this is a ponzi scheme i said harry that's a strong word and harry says look at this the market goes down he's not hurt at all he produces one percent market goes up he produces one percent to be fair he did report a few bad months here and there sure um harry looked at that later on over the years and told me that basically a baseball player they have to be hitting 9 25 straight for 10 years in a row would you want to bet on a player like that that he wasn't doing something illegal in may 2000 harry marco polis contacted the sec for the first time submitting an eight-page memo frank casey meanwhile flew to meet with dyla villashay at his new york office i said what happens if you've got all your eggs with bernie and he is a fraud and torrey says it can't be i've got all my money with them i've got most of my family's money with them i've got almost every royal family that i know he's got the money with him so he says we really have done our work frank you just don't have all the facts casey decided to hand the story to an investigative reporter who covered hedge funds michael okrant when he said bernie madoff my ears immediately picked up and i said what are you talking about bernie's a market maker casey told okrant that madoff had billions under management i immediately knew it was a great story no matter what because just the fact that bernie madoff was managing this much money was a story in itself that came as a surprise to you that was a shock i mean nobody knew that in his reporting ocrant questioned madoff's consistent returns and why other money managers were unable to duplicate them he then arranged for an interview with madoff this guy was just his columns cucumber i didn't see any sign and usually i mean that should have been sort of a sign to me in retrospect too you know any ceo that can spend two hours with you they just don't do that literally at one point just kind of chuckled and said give me some respect for you know being in business for 40 years having this great infrastructure we've built up having this this access to market information that we have as a result of being market makers he said to you give me some respect yeah oh yeah six days after ocran's article barron's a prominent wall street weekly picked up the thread the baron's article raised similar questions this article comes out and causes a stir in the office yeah a lot of people knew about the barons article and people were were you know having side conversations about it but at the time you know he was a supposedly very respected person on wall street casey and marco polos hoped the articles would prompt the sec to act it had been more than a year since marco polos had submitted his memo the sec is going to swoop in we're all sitting around calling each other up and emailing each other it's going to happen soon boy the sec is on it nothing happens but over at fairfield greenwich now headquartered in new york the articles did get some attention jeffrey tucker the senior partner who'd first begun their business with bernie madoff went over to the lipstick building he wanted to verify fairfield's holdings at that point worth around three billion dollars he met with bernie and frank di pascali according to investigators madoff showed him records of trades and named a third party who had cleared them tucker never asked for any verification and he never went down to the 17th floor to see where fairfield's accounts were allegedly being traded they told their investors they were conducting extraordinary levels of due diligence into their investment managers stuart singer has filed suit against fairfield greenwich on behalf of investors who say that the company failed to conduct due diligence fairfield's focus was on marketing and selling the product which was made off rather than on kicking the tires and checking to see that made off was real if they had spent as much time on due diligence as they did on marketing we wouldn't be here today even though fairfield greenwich was in new york their risk management operation headed by ahmed vijay virgaya was located a stone's throw away from this beach in bermuda why would you have a due diligence officer in bermuda that's a good question considering that fairfield has offices in new york and madoff is in new york madoff is not in bermuda fairfield's partners refused to speak to frontline but their attorneys insist that their due diligence surpassed industry standards sherry cohen remembers differently i know that there was absolutely no due diligence done when i worked for them certainly no deep questions i mean they didn't need to know the details it's like too much information don't bore me with the details and they wouldn't have gotten it anyway and as for due diligence no one seemed to question the fact that madoff's accountant was a one-man operation in this strip mall an hour's drive north of new york did you ask him why he had such a small accounting firm yeah i mean that was it was this family you know business that it was an accounting firm that his father-in-law had used for years and he continued to use it and it didn't bother you that it was the small of course it bothered you i mean everybody you know those are kind of things that it would bother you but that was one of the conditions of doing business that you accepted that and part of that was his you know proprietary trading model the black box that he used that he wasn't going to disclose what was in it i talked to one big hedge fund manager who told me that madoff says that he didn't want to expose his proprietary trading techniques to competitors and so therefore he went to a relatively obscure little accounting firm to keep to keep his operation a little bit off the radar well that's hogwash and anyone with any sophistication should know that no one could have credibly believed that bernard madoff had to use a couple people in a little accounting firm because he was concerned that his secret sauce his secret investment philosophy was going to get out by 2005 marco polos determined to get through to the sec submitted a 21-page memo detailing more than two dozen red flags when he wrote that letter and i read it i said oh my god they're going to be on this this is you're giving it to them you're giving them everything marco polos wasn't the only person complaining to the sec there were other letters that have surfaced that were sent to the sec in october 2005 someone writes i'm deeply concerned that madoff is running a very sophisticated fraudulent pyramid scheme there was another no down months and low volatility all the time just doesn't add up so there was a steady flow of letters it wasn't just marco polos yes i think i think um it is clear that there were letters and it is also clear that the sec did look at him what is not clear is why the sec was unable to conclude that he was conducting the ponzi scheme we now know he was conducting in late 2005 madoff learned that sec investigators were about to interview fairfield's due diligence officer in that office in bermuda madoff got on the phone he began by saying this conversation never took place in this 65-page transcript of a single conversation madoff coached him on how to handle sec investigators you don't want them to think you're concerned about anything he said you should be casual madoff then instructed your position is to say listen madoff has been in business for 45 years he executes a huge percentage of the industry's orders he's a well-known broker you know we make the assumption that he's doing everything properly finally in january 2006 prompted by marco polos the sec launched an official investigation frontline has been told by insiders that when sec lawyers visited the offices made off personally answered questions and was visibly nervous and irritable it took two years before the sec issued a verdict madoff was cleared i gave them a road map and a flashlight to find the fraud and they didn't go where i told them to go in early 2009 harry marcopolis finally got to tell his story my questions are you have supposedly sophisticated investment fund managers who are investing into this what happened with them why didn't they see this they were paid so much to look the other way those feeder funds were incentivized not to ask the questions to be willfully blind if you will and not get too intrusive into the madoff scheme later that day the sec was called to account what the heck went on with all of your investigators and all of your agency and everything that that you all described one guy with a few friends discovered this thing nearly a decade ago led you to this pile of dung that is that is burning made off and stuck your nose in it and you couldn't figure it out we have a pending action pending in the southern district of new york you took action after the guy confessed he turned himself in don't give yourself any pat on the back for that and congressman every time why didn't you find him is the question i understand your question and we cannot answer as to the specifics sec officials refused to answer questions because they said they didn't want to compromise an ongoing investigation but privately officials told frontline the agency had for years been severely understaffed and overwhelmed i can talk generally you know if anybody made the case better than mr marco polos and i didn't think anybody could about you people being completely inept you've made the case better than him linda thompson the sec's chief of enforcement and one other on this panel were forced out when the housing bubble burst in the spring of 07 and markets collapsed hedge funds were hurting our economy and our markets will not recover until the bulk of this housing correction is behind us as the markets continued to tank down 40 percent by november hundreds of hedge funds stopped allowing clients to withdraw money or simply shut down in october it's the worst market we've seen in you know maybe 70 years but bernie's still making money and why would you invest in the equities markets when you could put a substantial portion of your monies into this fund that's generating very consistent returns even in this down market so it was very appealing to the investors if anything people wanted to get money out of the equities markets and move it more into bernie because he's the only one making money consistent money in this marketplace he stopped buying aig and he stopped buying citibank it wasn't in his basket they were always in his basket and you know i called him and he said i said you know it was really terrific that you avoided all these financials what did he say he said that he thought that the investment bankers and the major banks were destroying the united states manske and dula villashay placed even more money including their personal accounts with madoff the problem was that by december even madoff started getting more requests for withdrawals than deposits people are losing money everyone's got margin calls there are everyone had there's a lot of movement of money so i think a lot of the large institutions needed money even if it was parked in bernie's funds to help pay back other investors or to run their own businesses whatever it was so i think anytime there's a down market that's when a lot of these ponzi schemes blow up because there's often lots of redemptions even if the investment's doing well the fact is he he easily could have gone through his life without this being found out the only reason that this ended was because at one given point in time the economy did so badly that people wanted needed to get money out of madops investments in the final days madoff called his biggest feeder fairfield sentry and demanded they stem the bleeding eager to help noel bedreita and tucker began a massive fundraising campaign launching a new madoff fund called fairfield emerald it didn't attract enough new capital and withdrawals from century continued a desperate tucker then wrote madoff dear bernie we apologize these redemptions are panic driven our firm is very dependent on its relationship with your firm our mission is to remain in business with you but it was too late the scheme was up on december 11th the morning after madoff had allegedly confessed to his sons the fbi knocked on his door and asked if there was an innocent explanation madoff said no it was quote one big lie he confessed with pride like look what i did i mean you're not gonna believe what i did when you get to the bottom of this here's a guy who thinks he got over on the world for the last 30 years and uh doesn't have a bitter remorse and too bad i have no interest in psychoanalyzing a made-up the man the man is a monster he's evil i cannot fathom uh hurting every single person i met every dear friend it just doesn't get worse than that there's nothing that i would like to say to bernie madoff that i can say on television but this may be the only huge fraud in history where the government has extreme complicity so that's what i would have to say i blame the government i really truly do that red flags went up over the years and nothing was done about it it's just it's mind-boggling what can i tell you how do you do something like that and how do you do that to your employees to your family sandra mansky is facing a lawsuit from a pension fund and other investors who allege she failed in her obligation to do due diligence she in turn has sued her accountants other madoff feeders are being sued ezra merken for concealing where his client's money was placed and frank avelino for misleading investors stanley chase made so much money from the scheme a court-appointed trustee claims he must have known of the fraud michael bienis and his wife diane are selling their 16 000 square foot home and have moved into a small apartment did you have any warning that anything was amiss as god is my only judge on my mother's grave not an inkling may he strike me dead viennas has hired a lawyer though no lawsuits have been filed what is his old attorney ira sorkin is now representing madoff fairfield greenwich has seen multiple lawsuits filed they range from gross negligence to fraud in late december planned year-end multi-million dollar bonuses for jeffrey tucker walter noel and andres pedro ita were cancelled one more post script a few blocks from where madoff began his investment advisory business nearly fifty years ago thierry deliver luche took his own life taray was a sailor and he was a hunter he could have taken himself out any way he wanted to if he wanted to just remove himself from the pressure the man chose the method he did in my mind only as an act of atonement slitting his wrists watching himself bleed to death slowly [Music] me meanwhile investigators are talking to madoff lieutenant frank de pascali and others still trying to figure out what happened on the 17th floor mr rayne if you have anything to say bernard l madoff will be sentenced next month [Music] in june 2009 bernard madoff was sentenced to 150 years in prison both of his sons have since died mark from suicide on the second anniversary of madoff's arrest and andrew from cancer in september 2014. the trustee recovering assets for madoff victims has collected over 10 billion dollars and has distributed close to 6 billion [Music] so [Music] for more on this and other frontline programs visit our website at pbs.org front lines the madoff affair is available on dvd to order visit shoppbs.org or call 1 800 play pbs frontline is also available for download on itunes [Music] you

Channel: FRONTLINE PBS | Official

Views: 361,742

Rating: 4.8462601 out of 5

Keywords:

Id: rH1Y66IwKvc

Length: 54min 18sec (3258 seconds)

Published: Thu Apr 15 2021

Reddit Comments

[u/unknown_human]

Madoff died in prison on Wednesday, he still had 138 years left to serve.

[u/shivermetimbers68]

I always found this interesting, from the Top 5 Assholes Who Were Right:

2. Harry Markopolos

​

The Asshole:

Harry Markopolos is a financial investigator who pretty much, by his own admission, combines the worst of a math nerd with the worst of a frat boy.

​

He liked to tell off-color jokes, and one day started ranting about some fund manager who he claimed was running the biggest scam in history. He said he was having to check his car for bombs every morning because the guy was tied to the Russian mob. He slept with a loaded gun every night, and seemed hugely overdue for some kind of mental health intervention.

​

He screamed his accusations to anyone who would listen, for nine straight years. He was soundly ignored.

How He Was Right:

The poor fund manager this crazy man was accusing was one Bernie Madoff, creator of the largest Ponzi scheme ever.

​

Markopolos has since written a book, and titled it No One Would Listen. And he's right. No one DID listen. It all started a decade ago when Markopolos was asked by his bosses to figure out how Madoff was making such great returns. He did the math and figured out it was absolutely impossible.

Unsurprisingly, his bosses didn't want to hear that. He ratted Madoff out to the SEC multiple times and apparently managed to insult half the commission in the process by telling them they sucked at their jobs. While he was busy offending people, Madoff's scheme swelled to a $65 billion fraud.

​

Forget financial regulation: let's create classes giving accountants people skills. If we had, the country might have saved about $43 billion, and Markopolos wouldn't have had to rub our faces in it.

[u/Fahqbyach]

A total of 2 people went to jail for a $65 billion scheme. I remember when one of his sons killed himself pondering whether he knew or was ashamed for never knowing. The idea that Bernie would stay late at night to stock pick for every clients statement is just too implausible to accept so it’s so strange to me that more people didn’t go to jail

[u/RicoDredd]

The American Scandal podcast series on this is really good.

[u/Kiloete]

The real lost was about $18bn not $65.

The investigators of this case did a fantastic job in recouping funds. $14bn has been recovered for the investors. Such a rate of return is unheard of in fraud cases, never mind ponzi schemes.

The reason for the high rate? Bernie never threw away anything. A warehouse full of printed transactions was found.

interview here with the lead investigator is worth listening to

http://fcpacompliancereport.com/2021/04/fraud-eats-strategy-chasing-bernies-billions-examination-largest-asset-recovery-effort-history-part-1/

[u/LausanneAndy]

He didn't really cost investors $65Billion ..

If I offer you to invest $100,000 with me and I claim that in 1 year your return will be $100 million. Sounds incredible! What a return!

When you don't end up getting this money because it was all bullshitz and I spent it all on marshmallow fluff ..

.. well how much is the actual fraud here? $100K or $100M ?

You've been defrauded of $100K .. but (in the case of Madoff) the press likes to talk about the maximum possible return and say that was the total fraud.

(kinda like when drug dealers get busted for 10kgs of cocaine and the press claims it has a street value of $6 grillion .. when actually the dealers were going to get paid $25K for delivering the drugs)

[u/jean_erik]

But because the victims were rich, they were able to recover about 80% of the funds.

This is seriously the first billions-of-dollars scam that I've heard of in my near 40 years of living with victims actually receiving a substantial sum of their money back.

If the victims were all middle class, "non-sophisticated" retail investors, nothing would have been returned. It would have been seized by law enforcement.

[u/spambakedbeans]

60 Minutes interview from 2011.

[u/Firesidephil]

The story of how an average Bernie nearly Madoff with millions...