JUDY WOODRUFF: Finally tonight, the man at the center of a massive financial fraud and how he managed to fool investors.
Jeffrey Brown has our book conversation about that subject.
JEFFREY BROWN: He sits now in a federal prison in North Carolina, but, for decades, Bernard Madoff was first a wildly successful stock trader and money manager, and then unveiled as the perpetrator of the largest Ponzi scheme in history involving tens of billions of dollars.
A new book, “The Wizard of Lies: Bernie Madoff and the Death of Trust,” chronicles the story. Its author, New York Times reporter Diana Henriques, has joined us on a number of times in the past few years to report on the scandal and is back now.
And welcome back.
DIANA HENRIQUES, The New York Times: Nice to be here.
JEFFREY BROWN: General question first.
DIANA HENRIQUES: Yes.
JEFFREY BROWN: Because you were here — we talked many times. You reported this over years. When you pulled it all together as a book, what — did anything jump out at you, in terms of a theme or a kind of surprise or what this was about?
DIANA HENRIQUES: Well, every journalist dreams of writing a novel someday and has maybe one in the bottom drawer. Well, I can — I can click that off my bucket list. This…
JEFFREY BROWN: This was it, huh?
DIANA HENRIQUES: This was it.
DIANA HENRIQUES: It had such timelessness to it, really, which was what struck me.
Frauds come and frauds go. And I’m — unfortunately, I have had to cover a lot of them over the years, and you have, too. But this just seemed to strike bedrock with me. It was something so human and so universal about trust bestowed and trust betrayed that I just couldn’t get it out of my system.
JEFFREY BROWN: And the man at the center of all this, as you say early on, one thing you learned is that his habit of deceit began earlier than we knew.
DIANA HENRIQUES: It did.
In 1962, as a very young man — he started this firm when he was still in college, so that was in 1960 — he was at an intersection between lies and truth. He had a couple of dozen family accounts.
JEFFREY BROWN: All the way back in 1962, he was at the intersection?
DIANA HENRIQUES: 1962, yes, indeed.
JEFFREY BROWN: Wow.
DIANA HENRIQUES: He had put family and friend money into wildly inappropriate stocks, these over-the-counter high-flyers that hit an air pocket in 1962 and lost all their value.
Rather than admit that, rather than go back to these investors and say, you know, I really lost your money, I failed you, he covered it up. He took all the money his firm has — had made in those two years and bought those shares back, borrowed money from his father-in-law to recapitalize the firm and never told them what had happened.
So they, of course, thought, oh, this young man, he’s a genius. He managed to navigate through this dreadful stock market problem in ’62 and still preserve my money.
So, he could not admit failure.
JEFFREY BROWN: You know you chronicle here decades of such doings. And I suppose what still people wonder is, how did he pull it off, you know, even with seemingly sophisticated investors and institutions?
Were people credulous or gullible, or to what extent were some people complicit? What do you conclude here?
DIANA HENRIQUES: Well, my conclusion, first of all, is that he had a wonderful set of skills for a Ponzi schemer, for a con artist. He was unlike most Ponzi schemers that I have covered, not charismatic, not charming, not a (INAUDIBLE). He was never the most charming person in the room.
He made you feel like you were the most charming person in the room.
JEFFREY BROWN: Yes. Now, explain that. He would make you feel good about yourself and smart about yourself, and, therefore, so…
DIANA HENRIQUES: Exactly.
JEFFREY BROWN: … smart that you would invest with him.
DIANA HENRIQUES: Exactly.
JEFFREY BROWN: Yes.
DIANA HENRIQUES: So, you would never doubt your judgment about trusting Madoff, because Madoff made you feel like you were a genius too.
DIANA HENRIQUES: So, he — I mean, he — when I interviewed him in prison in August of 2010, I have to admit, he made me feel like I was the most interesting, intelligent reporter he had ever met in his life.
JEFFREY BROWN: Is that right?
DIANA HENRIQUES: He had that magic. It really is amazing.
He also had another gift I think got under people’s defenses, and that was, he made you feel safe. And as markets got scarier, more volatile, more turbulent, more complex, all these derivatives and all these fancy products, Madoff made it simple for you, and he made you feel safe.
So, unlike the typical Ponzi scheme that tended to exploit people’s greed, Madoff exploited people’s fears. He — he made you feel like he could keep you safe in this increasingly frightening market. And that drew an awful lot of conservative investors to him, thinking that they were giving up high-flying returns to get the safety and consistency that Madoff gave them.
JEFFREY BROWN: One, of course, continuing question is the oversight, the regulators. I mean, it’s not like the SEC was never alerted to something going on, right?
DIANA HENRIQUES: Right. And…
JEFFREY BROWN: What’s your conclusion, looking at these years, of what went wrong?
DIANA HENRIQUES: Well, what’s so frustrating is, it’s not that the SEC did nothing, as people sometimes react. They say, oh, the SEC, they got all these tips and they didn’t do anything.
Frustratingly, they did do something. They undertook one fumbled, failed investigation after another. So, as I was putting that part of the story together in the book, it was like watching the Titanic sail towards the iceberg. I mean, you just wanted to shout out loud, no, send that letter, make that phone call, go one step further.
And they never did. You just get a sense of an agency that could not imagine that this man they had respected and relied on for guidance and advice for decades could possibly be running a fraud, even though they caught him red-handed telling them lies.
JEFFREY BROWN: You know, you — I want to go back to your interview with him in prison…
DIANA HENRIQUES: Yes.
JEFFREY BROWN: … because you say — you write that he seems “unfailingly candid, earnest, and trustworthy, but then he always does, even when he’s lying. That is his talent and curse.”
What was it like to be there with him, and what is his attitude now towards the crime and towards the victims?
DIANA HENRIQUES: Well, I have to say that the change I saw between my first visit in prison with him in August and my second visit in February was quite dramatic.
The man I met in August was very similar to the man I had known on Wall Street, very precise, very plainspoken, very accessible. The man I saw in February was very different. I was, of course, interviewing him just two months after the death of his son Mark, who committed suicide on the second anniversary of his father’s arrest.
And Madoff was disheveled. He was intense, rather than humorous. He seemed shaky to me. And, so, that difference between those two men that I met in prison struck me very, very strongly.
But there was still that laser-like focus on what he wanted to say, what he wanted — the message he wanted to deliver. And, of course, on the second visit, that message was, oh, the banks, the banks, they must have known.
In fact, he told me…
JEFFREY BROWN: Now he’s saying they must have known.
DIANA HENRIQUES: Now he’s saying they must have known.
He told me at the end of that interview — we were already standing up, and the guards are moving him towards the door, because the time is well past — and he said, “You know, I never realized, until I read these lawsuits that the trustee is filing against the banks, how suspicious they were becoming of me.”
JEFFREY BROWN: Really?
DIANA HENRIQUES: Because, in their dealings with him, they gave him no indication that they were beginning to have doubts.
JEFFREY BROWN: You know, just to finish here, you started by saying this was a novel you always wanted to write with these characters.
Are there still mysteries about Bernie Madoff and his schemes, still things you wonder about?
DIANA HENRIQUES: Oh, there are. I wish we could nail down when it really started.
I make my argument in “The Wizard of Lies” that it started much sooner than Madoff admits. He says 1992. I do not find that credible. I think it’s plausible it was around the mid-’80s. But it would mean a lot to his very early investors to know whether he was ever honestly managing their money, or whether he just cold-bloodedly took it from them from the beginning, intending to steal it. So, I wish we could get the answer to that.
JEFFREY BROWN: And, in the meantime, the effort to get back as much of this money as possible continues.
DIANA HENRIQUES: It does. And it’s a remarkable legal battle, one that we’re going to be watching closely in the years to come.
It’s going to make new law. It’s going to guide the rest of us and affect other investors who get caught in crimes like this.
JEFFREY BROWN: All right, the book is “The Wizard of Lies.”
New York Times reporter Diana Henriques, nice to talk to you.
DIANA HENRIQUES: Nice to be here.