A photo collage shows a black and white photograph of Bernie Madoff looking down. Behind him are headlines about his ponzi scheme.
Credit: Gabriel Hongsdusit/Reveal

After Bernie Madoff’s death, we dig into how he pulled off one of the biggest Ponzi schemes in history. Reporter Steve Fishman explores what lessons the fallen financier’s story holds for today. Madoff duped thousands of investors out of tens of billions of dollars, and his scam rocked Wall Street for years.  

Fishman, who spent years interviewing investors, regulators and even Madoff himself from inside federal prison, traces the rise and fall of his scheme. We learn how Madoff pulled it off and why nobody caught on for decades. We also hear from experts who say investors still are vulnerable to financial fraud, especially in the era of bitcoin and other cryptocurrencies.

This show was originally broadcast Feb. 3, 2018.

Dig deeper

Listen: Steve Fishman hosted a six-episode podcast about Madoff’s scheme called Ponzi Supernova.


Reported by: Steve Fishman | Lead producer: Fernanda Camerana and Michael I Schiller | Edited by: Taki Telonidis | Production manager: Amy Mostafa | Production assistance: Brett Simpson | Score and sound design: Jim Briggs and Fernando Arruda | Digital producer: Sarah Mirk | Episode art: Gabriel Hongsdusit | General counsel: D. Victoria Baranetsky | Executive producer: Kevin Sullivan | Host: Al Letson

Special thanks to Ellen Horne and Kelly Prime, producers of the Audible series Ponzi Supernova. Also to Todd Whitney, Collin Campbell and Amanda Remus. Katharine Mieszkowski helped with fact checking.  

Support for Reveal is provided by the Reva and David Logan Foundation, the John D. and Catherine T. MacArthur Foundation, the Jonathan Logan Family Foundation, the Ford Foundation, the Heising-Simons Foundation, Democracy Fund, and the Inasmuch Foundation.


Reveal transcripts are produced by a third-party transcription service and may contain errors. Please be aware that the official record for Reveal’s radio stories is the audio.

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Al Letson:From the Center for Investigative Reporting and PRX, this is Reveal. I’m Al Letson. Bernie Madoff. Just hearing the name makes you think of scandal and greed. Bernie died this month while serving a 150-year prison sentence for creating a massive Ponzi scheme that cost investors tens of billions of dollars. A few years ago we did a show about Madoff, with someone who got to know him pretty well, a guy named Steve Fishman, who at the time owned a bar in Brooklyn, New York.
Al Letson:It is a chilly Friday. It’s gray outside. We are not far from Prospect Park. What’s the name of the bar we’re going to?
Fernanda Camare…:It’s Erv’s on Beekman.
Al Letson:That’s producer Fernanda Camarena. Today we’re bringing back the show we put together.
Fernanda Camare…:Right across the street here. You want to go in?
Al Letson:Yeah, let’s do it.
Steve Fishman:Al.
Al Letson:Hey, man.
Steve Fishman:How are you?
Al Letson:I’m good. How are you?
Steve Fishman:Figured I’d greet you from behind the bar.
Al Letson:Nice, nice, nice. What do you got lined up here?
Steve Fishman:I got you a shot of bourbon. Obviously, that’s the way you start all your interviews.
Al Letson:Cheers.
Steve Fishman:Good to meet you.
Al Letson:Steve’s bar was a cozy little hangout, tucked into what used to be a laundry mat in a three-story brick apartment building. The bar’s specialty was handcrafted cocktails. The bar was named after Steve’s father, Erv, who passed away.
Steve Fishman:Two of these and you feel like a billionaire.
Al Letson:As good as Steve was at fixing drinks, that wasn’t his day job. Steve’s a journalist, a magazine writer, and a podcast maker. A journalist owning a bar seems like a scary combination, because any time I’m hanging out with journalists, they’re drinking. I say they. We’re drinking. How did you end up owning a bar?
Steve Fishman:I spent a long time as a journalist. I actually dropped out of college and became a journalist of a small newspaper in Connecticut. The newspaper bought a bar.
Al Letson:Smart newspaper.
Steve Fishman:We would go right down, because I’d work the three to midnight shift, and then we would go right down to the bar until closing. Let’s face it, you sit down with a beer or a shot, and you start talking, and it’s just great to hear the stories.
Al Letson:Steve has chased a lot of stories through the years, but none of them captivated him more than the story of Bernie Madoff.
Reporter:Mr. Madoff, what would you say to all those people that lost money?
Reporter:Hey Bernie, [crosstalk].
Reporter:Mr. Madoff, what would you to say to them?
Reporter:Bernie. Hey Bernie. Give me one nice shot, buddy.
Reporter:Bernie, turn around! Come on!
Al Letson:Bernie duped people into trusting him with their money, and then put it into fake investments, and doled out fake returns. Their money made Bernie and a handful of others rich. Then the market crashed in 2008, and exposed his scam. It was the largest financial fraud in U.S. history, with accounts that Bernie claimed were worth more than $60 billion. It was a lie, and when the bottom dropped out, it raised big questions about the safety of investments. Steve remembers the market crash and the day he first heard about Bernie.
Steve Fishman:Bernie gets arrested, it’s headlines. My editor comes over to me and says, “This might be a story for us. Let’s wait and see if it lasts the weekend.” I kind of plunged into it. It was great journalistic sport. Everybody in the world is after Bernie, and I thought, I got to find this guy. He’s the poster boy for the financial crisis. I’m thinking, if I understand Bernie, I’m going to understand the financial crisis.
Al Letson:Unlike pretty much everyone else who covered Bernie, Steve stuck with the story long after it disappeared from headlines. He produced a podcast series for Audible on Madoff’s scam called Ponzi Supernova. Steve wanted to understand, really understand how Bernie got away with his scheme, and what made him tick as a person. Steve talked to investors, he tracked down regulators and people who knew him. He was determined to talk with Bernie himself, who was sentenced to 150 years of federal prison in Butner, North Carolina. After Bernie got locked up, he refused to talk to the media. Steve’s strategy was to get to Bernie by connecting with people who had access to him, his prison mates.
Steve Fishman:Here’s the hilarious thing. Bernie is like a superhero to them. A super villain to us, a superhero to them.
KC White:A superhero, a super criminal hero. You know what I mean?
Al Letson:This is KC White, a bank robber who was the first prison mate of Bernie’s who Steve connected with.
Steve Fishman:He had been in prison with Bernie. He’s got an afro, a really lovely smile, not a whole lot of teeth in that smile, but a really friendly guy, a great storyteller.
KC White:Because this is a man that done stole more money than anybody else. We’re talking about anybody else. One old man done took everybody. He done beat the record on everybody. He done went to the top of the list in criminality. Everybody is in there for money. The majority of the cases is about money. Here you got a man that done did it, done took it all. He’s more important than Jesse James. Bonnie and Clyde.
Al Letson:KC knew inmates who were still behind bars with Bernie. He’d smuggled a list of them out of the prison and gave it to Steve.
Steve Fishman:Now, for me, these were the people who could get me to Bernie. I take that list, and I write to all 150 people on that list, but the real break for me comes because there’s this guy in prison named Robert Rosso. Robert Rosso comes upon one of my letters, and he reaches out to me.
Robert Rosso:It was nice for me that you were a writer. I’m sure it was nice for you that I was a writer.
Steve Fishman:Yeah.
Al Letson:Robert became a writer in prison while serving a life sentence for dealing meth. Steve and Robert bonded, and one day Steve sent Robert a letter, asking him to hand it to Bernie.
Robert Rosso:I did and I said you wanted to talk to him. He said, “I don’t really want to talk to anybody.” He kind of walked off a little bit. He stopped, and he said, “Well,” he goes, “What do you think of him?” I said, “I like him.” That’s what I said. I go, “I like him.” Said, “He seems like a straight shooter.” He goes, “Okay.” He goes, “Okay.” He goes, “Let me go take a look and read this.”
Al Letson:Then one evening, back in January of 2011.
Steve Fishman:My home phone rings. It’s an evening. The Jets are in the playoffs. I remember that. I get this recorded voice, “You have a collect call from Bernard Madoff.” I’d been trying to get to this guy for two years, and there he is on the phone. In the background, my kids are shouting and screaming. My reaction, “Shut up, it’s Bernie Madoff on the phone.” Here’s the strange thing about the phone call from Bernie. It’s like a guy I could meet at a bar mitzvah. This guy, we’re both from the New York area. I recognize the accent. I probably have a similar accent.
Al Letson:Calls from this prison are cut off after 15 minutes, and Steve couldn’t move fast enough to record that first one, but then, Bernie calls back.
Machine:You have a VAC Collect Call from.
Bernard Madoff:Bernard Madoff.
Steve Fishman:Bernie?
Bernard Madoff:Yeah. Hi, Steve.
Steve Fishman:Hi. I was just saying it was great to talk to you, because 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 just this one-dimensional person.
Bernard Madoff:It was nice talking to you too, Steve.
Steve Fishman:I’m immediately comfortable. I think Bernie’s comfortable too. That was Bernie’s gift. He was comfortable with everybody, and instilled confidence in everybody, so maybe this is just Bernie being Bernie. We have this kind of rapport, and it leads into a very easy conversation. I have to tell you, the thing that was stunning to me, Bernie wants to talk.
Bernard Madoff:I sound okay on the phone, trust me, I’m not okay. I was under tremendous pressure. It was a nightmare, only to me. It was only a nightmare for me.
Steve Fishman:I guess you kind of knew it would end up here, where you are now, sooner or later.
Bernard Madoff:When I say nightmare, that’s a nightmare. Imagine not being able to tell anybody. I destroyed the family. They said, “Why did you need to do this?” I said, “I don’t know.” Believe me, that’s what I try and figure out here once a week. The psychologist [inaudible]. Fortunately, they have wonderful psychologists here, and they’re very helpful to me.
Steve Fishman:Wow, that’s great, that’s great.
Bernard Madoff:Believe me.
Steve Fishman:That’s great.
Bernard Madoff:I have two full sessions with her every week.
Al Letson:The prison where Bernie is serving his sentence is known for having great medical facilities, and that includes therapy for inmates. It’s listed by Forbes Magazine as one of American’s 10 cushiest prisons. Steve became Bernie’s first interview with the media since landing there, but it wasn’t a standard Q and A. Steve almost became a second therapist for Bernie, who opened up about his life. He talked about his father.
Bernard Madoff:My father built a sporting goods business. He opened something called Dodge’s Sporting Goods, and he had a big successful business. Then during the Korean war, there was a steel shortage. He couldn’t get steel, and his business failed. I lived through that. You watch that happen, and you see your father, who you idolize, build a big business, and then lose everything. You’re frightened about something like that happening.
Al Letson:He talked about the Ponzi scheme.
Steve Fishman:Bernie said to me, “If you think I woke up one day and decided to steal everybody’s money, you’re wrong. I didn’t need it.”
Bernard Madoff:If you think that I did this, I woke up one morning and said, “Listen, I want to be able to buy a boat and a plane, and this is what I’m going to do,” that’s wrong. I had more than enough money to support any of my lifestyle and my family’s lifestyle. I didn’t need to do this for that.
Al Letson:Bernie already had a legitimate stock trading business, and he was a former chair of NASDAQ. He wasn’t hurting for money, but he started the scam anyway. Once he got started, he couldn’t stop.
Bernard Madoff:It feeds your ego. You say to yourself, “All right, all of a sudden, these banks which wouldn’t give you the time of day, some of them all of a sudden are willing to give you a billion dollars.” I had all these major banks coming down and entertaining me. It is a head trip.
Al Letson:In some of those conversations, Bernie sounds like a confident master manipulator. At other times, like people are taking advantage of him.
Bernard Madoff:Everybody was greedy. Everybody wanted to go on, and I just went along with it.
Al Letson:He talked about the day his scheme came crashing down. December 10th, 2008, he had to come clean to his two sons. He says they didn’t have a clue.
Bernard Madoff:Then my brother came in, an he said, “You have to tell the boys. They know something’s wrong. They don’t know what it is.” We got into my car and we drove the few blocks to the apartment [inaudible]. We had my Christmas party that night. That’s when I broke down and I told them. I started crying and I say to them what the deal was, that I owe all this money out and I’m not going to be able to recover it.
Steve Fishman:Nobody gets angry at that point?
Bernard Madoff:Everybody was stunned. They were shocked. They were scared and they were shocked. Look, you can just picture. One day you think your father is running this multi-billion-dollar business, and everything is fine, and he’s happy and they’re happy, and then all of a sudden, their world come crashing down. They saw me in tears. The last time I cried like that was [inaudible] I found out my son had cancer. The afternoon I told them all, they immediately left. They went to a lawyer. The lawyer said, “You got to turn your father in.” They went, did that, and then I never saw them again.
Al Letson:The family would never recover. On the two-year anniversary of his father’s arrest, Mark Madoff committed suicide, hanging himself in his Soho loft. Later, Bernie’s youngest son, Andrew, died of cancer. Andrew blamed the return of the disease on his father’s crime. Do you think Bernie expected his children to turn him in?
Steve Fishman:I don’t know if he expected it, but he tells it as a moving story. A lot of people won’t be moved by it. I will say this about Bernie, I kind of believe Bernie got bone tired. He just couldn’t support the lie anymore, but there was something about him that was relieved to finally see it end.
Al Letson:Steve learned a lot about Bernie during their string of 15-minute phone calls. They spoke around a dozen times, and then prison officials cut them off. That didn’t stop Steve from piecing together the story of Bernie Madoff’s Ponzi scheme, and how he was able to fool financial regulators and thousands of investors for years. That’s coming up on Reveal from the Center of Investigative Reporting, and PRX.
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Al Letson:From the Center for Investigative Reporting and PRX, this is Reveal. I’m Al Letson. Today we’re bringing back our episode about Bernie Madoff, who died this month.
Al Letson:All right, so what train are we going to take?
Steve Fishman:We’re going to grab the B train.
Al Letson:All right.
Steve Fishman:Right here at a softball throw from Prospect Park.
Al Letson:I’m with reporter Steve Fishman. He traced the rise and fall of Bernie Madoff in the Audible podcast series Ponzi Supernova. Bernie scammed investors of tens of billions of dollars, and we wanted to know exactly how he got away with it. Right now, we’re on our way to the place where it all went down, the Lipstick Building in Midtown Manhattan. Bernie’s offices were in this building, and we wanted to see if we can get inside. Steve spent two years talking to investigators, auditors, and experts about how Bernie ran his scam.
Steve Fishman:Like the sound of squealing brakes.
Al Letson:We leave the subway, climb up onto the sidewalk, and walk through the cold, crowded streets.
Steve Fishman:There it is. That’s the Lipstick Building.
Al Letson:Which one?
Steve Fishman:It’s the one that looks like a lipstick building. Do you see it?
Al Letson:That one there?
Steve Fishman:Yeah. The red one.
Al Letson:Oh. I see. I see.
Steve Fishman:You see how it looks like a lipstick case?
Al Letson:Yeah.
Al Letson:The building is made of auburn marble and steel, and the edges around it, yeah, from the right angle, it does look like a lipstick case with lipstick popping through at the top. We enter the lobby.
Steve Fishman:Wow. It’s so beautiful, and it’s so quiet here.
Al Letson:Bernie’s fraud went undetected for at least two decades. Steve explains that one of Bernie’s tricks for hiding his Ponzi operation was to put it on a separate floor from his legit business.
Steve Fishman:He had a floor for his legitimate business, the market making business, and then a floor that really nobody could get to, the 17th floor where the Ponzi scheme was run.
Al Letson:Bernie would come in here every day to get to work?
Steve Fishman:Yeah. He’d come in here delivered by his car. He probably lived a mile uptown from here. His driver dropped him off here. He went through this lobby which it’s gorgeous. It’s serene.
Al Letson:It was anything but serene when the scandal first broke back in December 2008. Steve remembers interviewing an FBI agent who was assigned to investigate Bernie.
Steve Fishman:He was told to go up to the 17th floor, and he comes through this lobby.
Steve Garfinkel:I walked in, and I was thinking what the hell is going on here.
Al Letson:That’s agent Steve Garfinkel who’s now retired from the FBI.
Steve Garfinkel:There were a lot of people trying to get upstairs to the 17th floor, and they won’t let them in in the lobby.
Al Letson:He tells a story about just a crowd of investors just screaming and shouting, “We want our money! Where’s our money? Where’s our money?”
Steve Garfinkel:Yeah. “We want to go up to the offices.” I’m thinking, “Oh, boy. Some people are pissed off here.”
Steve Fishman:Somehow in this kind of serene almost empty lobby you can imagine it kind of filled with an angry horde, like something out of the ’30s, the depression era ’30s when banks are failing and people are trying to grab as much money as they can to get it safe.
Al Letson:We head out the door, and as we stand outside the red marble tower, Steve takes a last look.
Steve Fishman:It’s so respectable looking. It’s so serene and calm. You look at it, and you see security guards and guys in suits, and you feel like, what could go wrong. There are times when that respectable façade, it just melts away.
Al Letson:I sat down with Steve to find out how Bernie’s Ponzi scheme worked and how he got away with it for so long. One key, the people Bernie hired.
Steve Fishman:You can’t really put an ad on Craigslist saying, “Looking for somebody to help sustain a three-decade-old Ponzi scheme,” which meant that you had to appeal to a select group. The first person that Bernie hired, and this is going back three decades, was Annette Bongiorno. Annette was a high school graduate who was very likable. She was known in the office as the grandmother. She brought food every day to feed her colleagues.
Al Letson:One of those colleagues was a guy named Frank DiPascali. He never finished college, and he didn’t know much about trading, but he knew Annette. She was his childhood neighbor and babysitter. She introduced Frank to Bernie, and he eventually became Bernie’s right-hand man.
Steve Fishman:His lieutenant who really ran the fraud, ran it day to day, knew how it worked, and as soon as all hell broke loose he came running in and wanted to play, as they say in the field, he wanted to play for Team America.
Al Letson:Playing for Team America meant telling authorities exactly how Bernie’s operation worked. Frank was interrogated by Assistant U.S. Attorney for the Southern District of New York at the time, Matthew Schwartz. Matthew is tall, clean-cut and remembers Bernie’s story with sharp detail. Matthew says for months the FBI would start the day by picking up Frank at his mansion in New Jersey. Even though Frank was still living in a fancy house, after the bust, he was broke.
Matthew Schwart…:He always packed his lunch. We would all go out and buy a salad or something, and he couldn’t afford to do that. He would always bring a sandwich, and he always brought a sleeve of Oreos. There were a few times where I brought my kids in on the weekend, but sometimes the Oreos would be left over, and they would have one of what they called bad guy cookies.
Steve Fishman:I think that the really startling thing that Frank DiPascali reveals through these daily interrogations is how rickety this machine was. These guys are stunned that this operation had fooled the world for a couple of decades. It was being run by a handful of people without advance degrees who were using this vintage, antique technology. It’s crazy.
Al Letson:It was crazy and ridiculously simple. Bernie and his cronies had to somehow convince investors that their money was generating big returns, so they’d pick a stock and work backwards.
Matthew Schwart…:That’s how a Ponzi scheme works, right?
Al Letson:That’s Matthew Schwartz again.
Matthew Schwart…:How do I get $10 to appreciate to $15? Used to keep boxes of old Wall Street Journals, and they would take the stock tables, stock prices that were published every day at the time. They would just lay them out end to end on the floor. It’d be, I can’t imagine, but 10, 20, 30 feet of newspapers side to side. You’d sit in a office chair that had wheels, a wheeled chair, and you’d just sort of slide left and right to pick the right day with the right stock with the right price.
Al Letson:Matthew says Annette in particular became a whiz at making numbers work, at reverse engineering these trades so it seemed like money was being made.
Matthew Schwart…:She would test out different permutations. “All right. What if I do it on Tuesday? No. The return isn’t good enough if I do it on Tuesday. What if I say that it was purchased on Monday instead? Oh, okay. That does it.” Sometimes she’ll circle it, she’ll underline it. She was very expressive in her writing.
Al Letson:Once they had the numbers figured out, Matthew says they made up fake statements to send the customers. They showed that stocks had been bought and sold and made money, but the trades never happened. The statements were made using software that was written just for Bernie’s operation.
Matthew Schwart…:It was the machinery through which the entire fraud was perpetrated. It made up all the fake records. Most of it was automated.
Al Letson:Two computer programmers, George Perez and Jerry O’Hara, wrote the software, and at first, they didn’t realize that it was all a scam.
Steve Fishman:It starts to dawn on them, maybe slowly, but certainly they come to the realization that they’re involved with this criminal enterprise. They walk into Bernie, and they say, “Hey. We don’t want to do this.”
Matthew Schwart…:Madoff says, “Okay. Fine. Don’t write those programs anymore.” Then, right afterwards, he turns to DiPascali after they’ve gone and said, “Give them whatever they want.”
Al Letson:According to Frank DiPascali, Bernie’s right-hand man, the programmers think about it then come back and say they want more money and they want it in a certain way.
Matthew Schwart…:Can you pay us in diamonds? That way there won’t be a paper trail. Can you pay us in diamonds? DiPascali says at the time, “What are you talking about? Where am I going to get a bag of diamonds? I’m not paying you in diamonds.”
Al Letson:They eventually scrapped the idea of diamonds and settled for a raise, hush money, and kept on making those fake account statements, but the trades never happened, and Bernie’s crew was paying old investors with new investors’ money. He had clients big and small, which he talked about in a deposition he gave in prison a few years ago.
Bernard Madoff:I had four prime big clients, Jeffry Picower, Norman Levy, Carl Shapiro, and Stanley Chais, commonly referred to as the big four.
Steve Fishman:These are four older Jewish men who were really kind of father figures to Bernie. They were great friends in addition to being big investors. There’s the famous story about Levy on his deathbed telling his children, “Trust Bernie. Trust Bernie.” They come to him. He starts investing for them. He claims that at first he was making them legitimate money, but at some point, certainly by the early ’90s, it’s a full-blown Ponzi scheme. They are taking out hundreds of millions of dollars. They’re taking out billions of dollars in some cases, and for Bernie, that was an enormous pressure.
Al Letson:It’s at this point that the Ponzi scheme starts to slip out of Bernie’s control. Steve talked with a lawyer named David Sheehan who spent the past 10 years trying to recover money for people who invested with Bernie.
Steve Fishman:Basically, the modus operandi there was, “Hey. I know what you’re doing.”
David Sheehan:Yeah, so I’m going to take a lot of money out. That’s what they did.
Steve Fishman:That’s pretty straightforward. I don’t think people know about that. Do they?
David Sheehan:No. I don’t think that’s widely known. I don’t think people thought of Bernie being blackmail, because probably everyone thought, or at least they all maintained the posture of, “I didn’t know anything.”
Steve Fishman:Also, I think certainly the public perception, Bernie’s the powerful one. He’s conning people, but you’re saying exactly the opposite.
David Sheehan:I think he was to a certain extent a tool of these people. He may have started out as a Ponzi, but I think they helped him perfect it.
Steve Fishman:How do you withdraw now? How do you extract yourself without somebody somehow subtly, implicitly saying, “Bernie, the game’s not over until I say it’s over.”
Al Letson:Framing it that way makes Bernie sound like a victim here, which maybe in some sense he is, but also he had to come up with this scheme. The top four and the big banks, they didn’t come up with the scheme. Bernie did.
Steve Fishman:Yeah. Bernie is clearly the author of this Ponzi scheme, and there’s no conman more talented than Bernie. Let’s face it. He was favored by circumstance, by luck, but Bernie is an incredibly skillful and talented liar. No other way to put it. At the same time, Bernie could not have done this without the implicit cooperation of a number of institutions and investors.
Al Letson:One of the banks accused was the Spanish bank Banco Santander, which controlled a company called Optimal Investment Services. Now, many of their clients were small time investors who had gone in with their life savings. Banks are supposed to make sure that the funds they sell to their customers are stable and safe. That’s where Rajiv Jaitly comes in.
Rajiv Jaitly:I was in effect the hassle factor.
Al Letson:Rajiv was hired by Optimal to do what’s called due diligence on Bernie’s fund, but immediately there was pushback. Rajiv wanted to take a closer look at Bernie, but says his boss didn’t want him making waves.
Rajiv Jaitly:I think he was concerned that I would spoil a very good relationship.
Al Letson:A relationship that was making the bank a commission on every dollar it delivered to Bernie. Rajiv met with Bernie in February of 2006, and one of things he wanted to do was see a trade from beginning to end.
Rajiv Jaitly:You can sort of see how it’s entered into the system, how it might have appeared on the statements, in from the brokers, and so on. I was just told that that just simply wasn’t going to happen, and I shouldn’t raise it.
Al Letson:Rajiv left the meeting with Bernie with no answers. He went back to his office to write his report but didn’t feel he had enough information, so he asked one of his colleagues to verify the trades.
Rajiv Jaitly:When I then rang up to sort of see how it was going, he says, “Oh, no. No. We haven’t done that.” He said, “Look, Rajiv. We all know you’re a difficult guy. We had to calm you down at that particular point, so we agreed to it. There’s really no need to do it. We’re all over this. We understand the investment strategy. It doesn’t need this.”
Al Letson:Rajiv says he typed up a report, but it wasn’t glowing, and it wasn’t what his bosses were looking for. They ordered a junior analyst to draft a new one.
Rajiv Jaitly:The report at its very beginning says that their view was that Madoff was a well run and efficient organization, to which my response was, “On what basis? What evidence do we have for it?”
Al Letson:This was Rajiv’s last straw. He quit working for Optimal.
Rajiv Jaitly:The reason I resigned was because I felt that Optimal weren’t serious about risk. I decided it was appropriate for me to leave.
Al Letson:Rajiv’s boss was eventually prosecuted for mismanaging his clients’ money. He was found not guilty. The other people whose job it was to uncover scams like Bernie’s were the regulators in New York.
Steve Fishman:Bernie was under examination or investigation for years, but here was the amazing dynamics of that situation. Bernie is considered a lion of Wall Street. They send in the Securities and Exchange Commission, the SEC, the body that is supposed to regulate and watchdog people like Bernie, they send in investigators, examiners, but they are extremely junior. They’re young. They’re recently out of school. They’ve never investigated a Ponzi scheme before.
Al Letson:After the fraud was exposed, the SEC wanted to know why its people never caught on. It conducted an internal investigation. It was run by David Kotz.
David Kotz:I was only the second inspector general in the history of the SEC. The previous inspector general had been there for 18 years.
Al Letson:David did more than 100 interviews over the course of seven months. He even talked to Bernie, who told him about one encounter with an SEC examiner.
David Kotz:Sort of acting like a tough guy. Yeah, he would lean back with his hands behind his head like Lieutenant Columbo, and asking these tough questions. He wore an SEC jacket with the word enforcement emblazoned across the back. Now, he wasn’t in enforcement. Enforcement is the entity that essential sues people. He was an examiner. That he sort of acted like a jerk and was acting really tough and like a big shot. Yet, Madoff pointed out that while he sort of acted like a blowhard in Madoff’s words, he never really asked any tough questions. It was all a show. Madoff was able to see through it really quickly.
Al Letson:There were a couple times when examiners came close to exposing Bernie’s fraud.
David Kotz:It’s actually not that difficult to uncover a Ponzi scheme if you’re the federal government. There are ways that you can go and see where trades are cleared.
Al Letson:When investments are bought and sold, money goes from the buyer to the seller. Clearing is the process where two accounts are updated to reflect the transaction. The buyer’s account shrinks, and the seller’s goes up. It’s proof that the money is actually changing hands. Sounds pretty basic, right? That’s what the Depository Trust Company is for.
Steve Fishman:There’s something called the DTC. Basically, it’s where the money sits when the trades get cleared, when the trades get done. There should be tons of money in Bernie’s account.
David Kotz:If the allegation is the isn’t trading, then you can go to this place, and you can see whether he’s trading.
Bernard Madoff:They asked me, “Where are the securities for the client?” I said, “At Depository Trust.”
Al Letson:That’s Bernie, from a deposition taken from behind prison walls. Some agents wanted to verify that Bernie’s transactions were real, so they asked him.
David Kotz:“Do you have an account at DTC?” He said, “Yes.” They asked him his account number.
Bernard Madoff:646, that’s my account name.
David Kotz:He gave them the account number.
Bernard Madoff:When I left that meeting, I figured, “That’s it. They got me.”
David Kotz:He thought Monday morning he’d be going to jail.
Bernard Madoff:I lied to them and said they were at the Depository, and I’m thinking for sure they’re going to call the Depository on Monday morning and find out the securities weren’t there.
Steve Fishman:Somebody at the SEC does call the DTC, and asks about Bernie’s account, but all that person asks is, “Does Bernie have an account?” Once he gets the yes, the person moves on. Now, the next question they should ask is, “How much money is in that account?” Bernie should have had billions of dollars in that account, and he had maybe a few million, tens of millions. The Ponzi Scheme would have gone down, it would have been exposed, had they asked that one further question. These guys are junior, they’re inexperienced, and they’re intimidated. They’re intimidated by Bernie, and they’re intimidated, it seems, by the functioning of the financial system. They just don’t know about the DTC.
Al Letson:The SEC missed their chance, and it wasn’t just the SEC, there were private auditors sniffing around to find out how Bernie was making his money. The returns were impressive, and they wanted to know more.
Steve Fishman:You have auditors sitting down and wanting to see reports, specific reports. Reports that Bernie doesn’t happen to have because hey, guess what? He’s not really investing the money.
Al Letson:Matthew Schwartz, the former U.S. Assistant Attorney, says Bernie’s right-hand man, Frank DiPascali, remembered one close call they had with auditors.
Matthew Schwart…:DiPascali testifies that he’s sitting in a conference room with the auditors. They ask for this report called a SIAC report.
Steve Fishman:Bernie doesn’t have it, but Frank makes a phone call.
Matthew Schwart…:“Hey, can you bring up the SIAC reports?” and the guy says basically, “The SIAC report? He told us we didn’t need the SIAC report. Where the hell am I going to get a SIAC report?” He says, “Great. I’ll see you in 10 minutes.” They were frantically putting together and printing out this report, which it’s half a foot thick of this big 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. First, they stick it in a refrigerator that’s down in the investment 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. Then they run it to DiPascali.
Al Letson:Unbelievably, it worked. They fooled the auditors. For decades, Bernie tricked auditors and investigators into believing his lie. In the meantime, his Ponzi scheme grew bigger and bigger, like an enormous balloon. It took The Great Recession and investor panic to eventually pop it. “Bernie should have been caught many times over,” says SEC Inspector General David Kotz, but investigators missed every clue along the way.
David Kotz:As we showed them the documents, as we showed them the information, as we showed them how easy it was for them to uncover it, all these defenses sort of melted away, and they were themselves sort of astonished. There were some who were crying during the interview. We had to take a break because they were crying because they were so emotional. As we are going through this, they’re realizing how easy it would have been for them to do, and how many mistakes that were made, and the consequence of all those mistakes.
Al Letson:The consequences? Ruined finances, and upended lives of the people who trusted Bernie Madoff. After a short break, we’re going to find out what happened to Madoff’s victims, and try to understand if we’re safe from another Ponzi scheme like this. That’s coming up next on Reveal from The Center For Investigative Reporting and PRX.
Al Letson:From The Center for Investigative Reporting and PRX, this is Reveal. I’m Al Letson. Today, we’re retelling the story of criminal mastermind, Bernie Madoff. We’ve heard how he pulled off his Ponzi scheme for decades, fooling many of the people who worked for him, regulators, and investors, but it all came crashing down with the financial crisis of 2008. People were panicked. They wanted their investments back, but the money was gone.
Female:It was the worst thing that ever happened to us.
Male:Everything that we worked for is down the drain.
Male:This can’t be real.
Al Letson:Bernie had taken almost $18 billion dollars of their money. Now, for some investors, it was their entire life savings and retirement. According to Bernie’s fake investment statements, that money had grown to more than $60 billion, but it was all a lie.
Male:We have lost everything. I have lost everything, and you have lost everything.
Female:I manage on food stamps. Sometimes at the end of the month I scavenge in dumpsters.
Al Letson:Years later, Bernie still doesn’t seem to understand how much damage he did to people who trusted him with their money. Here’s what he told reporter Steve Fishman from prison.
Bernard Madoff:Now of course you listen to them, they’re living out of dumpsters and they don’t have any money and so on and so forth. I’m sure it’s a traumatic experience to some, but I made a lot of money for a lot of people.
Al Letson:He claims they knew what they were signing up for when they invested with him.
Bernard Madoff:On all their statements they signed, there were things that they signed that basically they knew that this kind of trading is speculative. Believe me. You don’t think they had doubts? They had doubts.
Al Letson:Even if they had their doubts, the question now is, will they ever see their money again? I talked to Steve about that, and he told me over the past 10 years there have been a couple of efforts to recover and return as much of the money as possible, including something called The Madoff Recovery Initiative. It’s run by a court-appointed trustee who works with a team of lawyers. They act like a cleanup crew, searching for those investors who took out more money from Bernie’s fund than they put in. Then they sue them to get the money back.
Steve Fishman:Say I invested a million dollars with Bernie Madoff, but I had taken out $2 million, because that’s what my statement said I had. Along comes the Madoff trustee and says, “You know what? You put in a million, you took out two million, you owe us the difference.” It was a very complicated and heart-wrenching situation for lots and lots of people.
Al Letson:So far, the trustee has gotten back more than 70% of the money, about $14 billion dollars, but there are still thousands of people who may never get their money.
Steve Fishman:What happened is that the agencies in charge of trying to recover this ran into a wall, because a lot of the funds were registered overseas. Their money could not be claimed by the people trying to recover the money. It was in some kind of safe haven. It was like it was behind a fortress.
Al Letson:The question I have for you, Steve, is about accountability. Obviously, this was Bernie’s idea, and he had people that were running it. A lot them are paying the consequences of it. There’s another side to it where you have all of these big banks, the big four investors that we talked about earlier, and they haven’t been held accountable for anything.
Steve Fishman:Once you get to the institutions that essentially took what was a local swindler, I’m talking about Bernie Madoff, and weaponized him, and brought him around the world and made him the biggest Ponzi scheme in history, I’m talking about the financial institutions, the hedge funds, the banks. None of those people are held accountable. No one from those institutions has put on handcuffs.
Al Letson:Where does that leave people like you and me, people who want to save for retirement, but are not financial whizzes. Are we safe from the next Bernie Madoff? To answer that question, we decided to call a couple financial fraud experts who know the Madoff case well.
Steven Richards:My name is Steven Richards. What can I tell you about Ponzi schemes?
Al Letson:Steven is what’s called a forensic consultant. He investigates financial fraud. Years back, he worked at the SEC and later for a private firm that investigated Madoff’s fraud. Steven led a team whose job it was to figure out how much people put into the Ponzi scheme, and how much they took out.
Steven Richards:I think a lot of things have happened since the days of Madoff, at the regulators, in the civil environment, that would make the likelihood of a large-scale financial fraud, like what Bernard Madoff did, much harder to do.
Al Letson:Steven says that’s because after Bernie, the SEC made some changes in its enforcement division, and revamped the way it handles complaints and tips from whistle-blowers. Many of these changes come under the Dodd Frank Act, which was written to protect consumers and reform Wall Street. It was signed into law in 2010, but is it enough?
Jim Mintz:The fact is that we live in a savage world, a place where nothing protects you except yourself. There’s no calvary coming over the hill.
Al Letson:That’s Jim Mintz, CEO of The Mintz Group. Lawyers hire him to investigate cases they’re working on, and he’s been doing this for 30 years. Jim knows the Madoff case inside and out, and says that even with Dodd Frank in place, investors need to be skeptical of anything that sounds too good to be true.
Jim Mintz:I’m here to tell you that out in fraud land, where I do my investigative work, there doesn’t seem to be any protection or new seatbelt that the government has given us.
Al Letson:In fact, Jim thinks we’re more at risk today.
Jim Mintz:The opportunities for fraud have grown since 2008 and Bernie Madoff, because of the internet, and because of the flattening out of the world, so that there are opportunities that seem attractive for us to put our money in, that are thousands of miles away.
Al Letson:Jim says all you need to do is look at the headlines about Bitcoin and other cryptocurrency.
Jim Mintz:Everybody is talking about cryptocurrency. If you listen carefully to how regular people talk about it, it’s almost as if they start to speak a little faster, or a little with almost like having trouble breathing while they’re talking about it. Those are the signs that you’re entering a danger zone.
Steven Richards:It has all the hallmarks of a place where you could have Ponzi-type schemes more easily.
Al Letson:That’s forensic consultant Steven Richards again.
Steven Richards:Everybody’s seeing that wealth generation so quickly, wants to be a part of it. You also have a situation where most people do not understand what a cryptocurrency is, how it was created, how they work.
Al Letson:Cryptocurrency isn’t the first investment that people didn’t understand, but bought into anyway.
Steven Richards:Humans have an inherent bias that want to believe that other people have their best interests in mind, and they don’t. The other thing is the advancement of technology, and a lot of other things, have created this most simple access to people that fraudsters have ever had. If they have access, and they can create trust, they have the opportunity to do a Ponzi.
Al Letson:Bernie’s Ponzi scam might seem like it happened a long time ago, but if you ask reporter Steve Fishman, who followed the Bernie Madoff story for years, he said it’s history worth remembering.
Steve Fishman:Bernie Madoff was one of the most successful liars in history, but his lie exposed a truth. He got away with his fraud because of a broken system. That system, I’m talking about the financial system. It enabled Madoff. It weaponized him and then it looked the other way. Why did it look the other way? Because it was lining its pockets with profits. If banks, investment houses, regulators had done their jobs, Bernie Madoff would’ve been a local phenomenon. Instead, he was the biggest fraudster ever.
Al Letson:Bernie Madoff pled guilty to 11 felonies, and was serving a 150-year sentence in federal prison when he died earlier this month. He was 82. The only other people who were convicted were some of Bernie’s immediate circle of fraudsters, including his accountant, the woman who calculated the phony stock trades, and the computer programmers who made the fake statements. Bernie’s right-hand man, Frank DiPascali, pled guilty to several charges, but died of cancer before his sentencing.
Al Letson:Many thanks to Steve Fishman for his reporting on Bernie Madoff and the financial crisis. His complete six-part podcast series is called Ponzi Supernova, and was produced by Audible. You can hear it at Audible.com or wherever you get your podcasts. You should also check out another podcast from Steve called Empire on Blood. It’s a gritty story about murder and justice in the Bronx.
Al Letson:Today’s show was produced by Fernanda Camarena, with help from Michael Schiller, and edited by Taki Telonidis. Big thanks to Ellen Horne and Kelly Prime, producers of the Audible series. Also, Todd Whitney, Collin Campbell, and Amanda [Remis]. Reveal’s Katharine Mieszkowski helped with fact checking. Some of the music for this week’s show was from Pear Blossom Music, Glen [Cochi], Darren Gray, and Mike Cruz. Our production manager is Amy Mostafa. Our sound design team is the dynamic duo, J. Breezy, Mr. Jim Briggs, and Fernando, my man yo, Arruda. They had help this week from Brett Simpson. Our digital producer is Sarah Mirk. Christa Scharfenburg is our CEO. Sumi Aggarwal is our interim editor in chief. Our executive producer is Kevin Sullivan. Our theme music is by Camerado, Lightning. Support for Reveal is provided by the Reva and David Logan Foundation, the John D. and Catherine T. McArthur Foundation, the Jonathan Logan Family Foundation, the Ford Foundation, the Heising-Simons Foundation, the Democracy Fund, and the Inasmuch Foundation. Reveal is a co-production of the Center for Investigative Reporting and PRX. I’m Al Letson, and remember, there is always more to the story.
Female:From PRX.

Taki Telonidis is an interim executive producer for Reveal. Previously, he was the media producer for the Western Folklife Center, where he created more than 100 radio features for NPR’s "All Things Considered," "Weekend Edition" and other news magazines. He has produced and directed three public television specials, including "Healing the Warrior’s Heart," a one-hour documentary that explores how the ancient spiritual traditions of our nation’s first warriors, Native Americans, are helping today’s veterans diagnosed with post-traumatic stress disorder. Telonidis also was senior content editor for NPR’s "State of the Re:Union." Before moving to the West, he worked for NPR in Washington, where he was senior producer of "Weekend All Things Considered" between 1994 and 1998. His television and radio work has garnered a George Foster Peabody Award, three Rocky Mountain Emmy Awards and the Overseas Press Club Award for breaking news. Telonidis is based in Salt Lake City.

Michael I Schiller is a senior reporter and producer for Reveal. His Emmy Award-winning work spans animation, radio and documentary film.

“The Dead Unknown,” a video series he directed about the crisis of America's unidentified dead, earned a national News and Documentary Emmy Award, national Edward R. Murrow Award and national Society of Professional Journalists Sigma Delta Chi Award.

His 2015 animated documentary short film “The Box,” about youth solitary confinement, was honored with a video journalism award from the Society of Professional Journalists’ Northern California chapter, a San Francisco International Film Festival Golden Gate Award and a New Orleans Film Festival special jury prize, and it was nominated for a national News and Documentary Emmy for new approaches.

Schiller was one the producers of the pilot episode of the Peabody Award-winning Reveal radio show and podcast. He continues to regularly produce audio documentaries for the weekly public radio show, which airs on over 450 stations nationwide. Schiller is based in Reveal's Emeryville, California, office.

Amy Mostafa (she/they) was the production manager for Reveal. She is a UC Berkeley School of Journalism alum, where she focused on audio and data journalism as a Dean's Merit Fellow and an ISF Scholar. She has reported on science, health and the environment in Anchorage for Alaska Public Media and on city government in Berkeley and San Francisco for KQED. Her work also has appeared on NPR, KALW and KALX. Mostafa holds a bachelor's degree in English literature and public policy. She has most recently reported on housing and aging in the Bay Area. She is based in Reveal’s Emeryville, California, office.

Brett Simpson (she/her) was an assistant producer for Reveal. She pursued a master's degree at the UC Berkeley Graduate School of Journalism, where she focuses on audio, print and investigative reporting. She has received fellowships from the Council for the Advancement of Science Writing, the National Press Club, the White House Correspondents’ Association and the UC Berkeley Human Rights Center. She is also the graduate researcher at UC Berkeley's Investigative Reporting Program. Most recently, Simpson reported breaking news for the San Francisco Chronicle and covered the coronavirus outbreak in the San Francisco Bay Area for The New York Times. She received a bachelor's degree in English at Princeton University, where she twice won the Ferris Prize for Outstanding Undergraduate Projects in Journalism.

Jim Briggs III is the senior sound designer, engineer and composer for Reveal. He supervises post-production and composes original music for the public radio show and podcast. He also leads Reveal's efforts in composition for data sonification and live performances.

Prior to joining Reveal in 2014, Briggs mixed and recorded for clients such as WNYC Studios, NPR, the CBC and American Public Media. Credits include “Marketplace,” “Selected Shorts,” “Death, Sex & Money,” “The Longest Shortest Time,” NPR’s “Ask Me Another,” “Radiolab,” “Freakonomics Radio” and “Soundcheck.” He also was the sound re-recording mixer and sound editor for several PBS television documentaries, including “American Experience: Walt Whitman,” the 2012 Tea Party documentary "Town Hall" and “The Supreme Court” miniseries. His music credits include albums by R.E.M., Paul Simon and Kelly Clarkson.

Briggs' work with Reveal has been recognized with an Emmy Award (2016) and two Alfred I. duPont-Columbia University Awards (2018, 2019). Previously, he was part of the team that won the Dart Award for Excellence in Coverage of Trauma for its work on WNYC’s hourlong documentary special “Living 9/11.” He has taught sound, radio and music production at The New School and Eugene Lang College and has a master's degree in media studies from The New School. Briggs is based in Reveal's Emeryville, California, office.

Fernando Arruda is a sound designer, engineer and composer for Reveal. As a multi-instrumentalist, he contributes to the original music, editing and mixing of the weekly public radio show and podcast. He has held four O-1 visas for individuals with extraordinary abilities. His work has been recognized with Peabody, duPont-Columbia, Edward R. Murrow, Gerald Loeb, Third Coast and Association of Music Producers awards, as well as Emmy and Pulitzer nominations. Prior to joining Reveal, Arruda toured as an international DJ and taught music technology at Dubspot and ESRA International Film School. He worked at Antfood, a creative audio studio for media and TV ads, and co-founded a film-scoring boutique called the Manhattan Composers Collective. He worked with clients such as Marvel, MasterClass and Samsung and ad agencies such as Framestore, Trollbäck+Company, BUCK and Vice. Arruda releases experimental music under the alias FJAZZ and has performed with many jazz, classical and pop ensembles, such as SFJAZZ Monday Night Band, Art&Sax quartet, Krychek, Dark Inc. and the New York Arabic Orchestra. His credits in the podcast and radio world include NPR’s “51 Percent,” WNYC’s “Bad Feminist Happy Hour” and its live broadcast of Orson Welles’ “The Hitchhiker,” Wondery’s “Detective Trapp,” MSNBC’s “Why Is This Happening?” and NBC’s “Born to Rule,” to name a few. Arruda also has a wide catalog of composed music for theatrical, orchestral and chamber music formats, some of which has premiered worldwide. He holds a master’s degree in film scoring and composition from NYU Steinhardt. The original music he makes with Jim Briggs for Reveal can be found on Bandcamp.

Kevin Sullivan is a former executive producer of Reveal’s public radio show and podcast. He joined Reveal from the daily news magazine show “Here & Now,” where he was senior managing editor. There, he helped lead the expansion of the show as part of a unique partnership between NPR and WBUR. Prior to radio, Sullivan worked as a documentary film producer. That work took him around the world, with stories ranging from reconciliation in Northern Ireland to the refugee crisis during the war in Kosovo.

Following the 9/11 terrorist attacks, Sullivan launched an investigative unit for CBS in Baltimore, where he spearheaded investigations on bioterrorism and the U.S. government’s ability to respond to future threats. He also dug into local issues. His exposé of local judges found widespread lax sentencing of repeat-offender drunken drivers. Other investigations included sexual abuse by Roman Catholic priests, and doctors who sold OxyContin for cash. Sullivan has won multiple journalism awards, including several Edward R. Murrow awards, a Third Coast / Richard H. Driehaus Foundation Competition award and an Emmy. He has an MBA from Boston University.

Al Letson is a playwright, performer, screenwriter, journalist, and the host of Reveal. Soul-stirring, interdisciplinary work has garnered Letson national recognition and devoted fans.