On the morning of December 11, 2008, prominent New York attorney Ike Sorkin was at a nursery school in Washington, D.C., watching his granddaughter play. Around 9:30 a.m., his cell phone rang. It was a client, Bernie Madoff, whose first words were, “I’m handcuffed to a chair at FBI headquarters. I need your help.” Sorkin later recalled, “By the time he called me on the phone that morning of the 11th, he had already confessed to the FBI. I had no idea why he’d been arrested.”
That vignette, related in Madoff Talks (McGraw-Hill Education), a new book by Jim Campbell publishing April 27, reveals much about Madoff and about the book. A lawyer telling anecdotes about his client? Attorney-client privilege forbids it, but Madoff, from prison in North Carolina, had waived privilege and given Sorkin permission to talk to Campbell. Madoff’s wife, Ruth, also talked to Campbell, as did his son Andrew, many of Bernie’s former employees, the lawyers of some who were charged, the FBI agent who led the investigation, forensic finance consultants, and many others who have not spoken to any other author or journalist writing about history’s largest and most devastating Ponzi scheme. Most important, Madoff himself exchanged email with Campbell and sent him long, handwritten letters, all from prison.
Madoff Talks is thus unique and will likely stand as the authoritative source on this massive crime that impoverished thousands of investors around the world—except that they weren’t investors at all. Of the $19.5 billion they entrusted to Madoff, which he falsely told them had grown to $64.8 billion, not a single dollar was ever invested in anything. Madoff’s chief lieutenant, Frank DiPascali—whose own lawyer referred to him as the Chief Fraud Perpetuating Officer—told Campbell, “It was all fake. It was all fictitious. It was wrong, and I knew it at the time.”
So why did Madoff decide to communicate at length with Campbell? “I believe, from his perspective, he saw me as an avenue to get his side of the story out,” writes Campbell, a consultant and Wall Street veteran who hosts a syndicated radio program, Business Talk with Jim Campbell. “He will, I am sure, be disappointed with my findings.”
It’s hard to imagine what Madoff’s side of the story might be, given that he ran a gigantic fraud for at least 16 years, as he maintains, or more likely for 35 years or longer, as Campbell argues. Yet it becomes clear in Madoff Talks that he feels what Campbell calls a “Nixonian pathological need to be understood.”
In surreal passages from his letters, Madoff acknowledges that he committed a huge crime but constantly tries to deflect responsibility. “I was a product of the corrupt culture of Wall Street,” he writes—the “everybody does it” defense. He even provides an excuse for starting the Ponzi scheme. He claims that his legitimate investing business hit a bad patch in 1992, when an incredibly complex trade went bad and his biggest investors, known as the Big Four, “failed to honor their commitments.” In order to mislead the rest of his investors into thinking all was well, he started down the fatal path of turning his investment fund into a Ponzi scheme.
That’s Madoff’s story – that he didn’t really want to become a criminal. While acknowledging that he made multiple errors in that 1992 crisis, he wants us to believe that bad guys pushed him into doing what he did. Campbell doesn’t buy it. His analysis suggests that by 1992, “the Ponzi scheme had been underway perhaps for a couple of decades.”
What comes through most strongly in Madoff Talks is the enigma of Madoff himself. He was impressively and legitimately accomplished, having helped to build NASDAQ and serving as its chairman. He founded a market-making firm that he could have sold at one point for as much as $3 billion; but he couldn’t sell it because any prospective buyer’s due diligence would have uncovered the Ponzi scheme. Evidence suggests he protected his wife and two sons from any knowledge of his criminal enterprise. Yet from prison he sent a note to his son Andy and his fiancée that said, in its entirety: “Dear Andy and Catherine, I’m so sorry for everything. Dad” There was no further reconciliation. Andy has since died of cancer, and Madoff’s other son, Mark, hanged himself in 2010.
One other question lingers: Since Ponzi schemes must inevitably collapse, didn’t Madoff realize he was doomed?
Maybe not. Campbell believes Madoff had no exit strategy. Until the very end he remained highly respected, with investors eager to give him their money. He apparently believed he could keep the scam going until he died, and if the financial crisis of 2008 hadn’t prompted hordes of customers to withdraw funds—which, of course, weren’t there—maybe he could have. He had to know the suffering for his investors, employees, and family would have been just as bad, perhaps worse. But he was long past caring.