The Madoff Interview: The Banks “Had to Know”
Diana Henriques snagged the first interview with Bernie Madoff since his arrest in late 2008. And while he maintained that his family knew nothing about his Ponzi scheme, he asserted that banks and hedge funds “had to know.”
But during a private two-hour interview in a visitor room here on Tuesday, and in earlier e-mail exchanges, he asserted that unidentified banks and hedge funds were somehow “complicit” in his elaborate fraud, an about-face from earlier claims that he was the only person involved […]
In many ways, however, Mr. Madoff seemed unchanged. He spoke with great intensity and fluency about his dealings with various banks and hedge funds, pointing to their “willful blindness” and their failure to examine discrepancies between his regulatory filings and other information available to them.
“They had to know,” Mr. Madoff said. “But the attitude was sort of, ‘If you’re doing something wrong, we don’t want to know.’ ”
In one sense, Madoff is deflecting blame here, particularly away from his family. But there’s some context. A recent report identified JPMorgan as complicit in the Madoff scheme, and potentially liable on a civil lawsuit. According to emails and documents, JPMorgan apparently knew something was amiss with Madoff’s performance figures but never reported the crime to the SEC. Some lawsuits have already been filed. In addition, JPMorgan sold certain derivatives links to Madoff’s returns, giving them a major financial incentive not to disrupt the scam, off of which they profited.
So while Madoff didn’t identify any particular company, he wasn’t saying these things in a vacuum, and his words may have a powerful effect on these cases. Not that Madoff is the most reliable narrator or anything, and not that he could appear in court and expect to be seen as credible. But he’s not saying a whole lot beyond a recognition that a fraud like his wasn’t too hard to spot for sophisticated bankers with access to the numbers. More than testifying, Madoff is simply pointing a way for future lawsuits against banks and hedge funds related to his case. He said he has not shared any information with federal prosecutors, though he would be willing to do so. He has worked with the court-appointed trustee who is trying to recover money for victims of the fraud, and the trustee could have passed that information along to prosecutors.
Henriques is writing a book on Madoff that should come out in a couple months, and so we could see more revelations in there. She hints at emails showing that Madoff investors settled out of court with some banks and funds over their knowledge of the fraud, and that he himself made settlements to “keep me quiet” about the role of those institutions.
If you didn’t know about fraud on Wall Street, you weren’t paying attention. Madoff’s was just the most egregious. However, nobody wanted to blow the whistle and end the stream of money going into their pockets. Not even Madoff could escape the law, and he’s one of the only people to face jail time for fraud during this financial crisis. But he may not be the last.