The entire team at Henry Holt—especially Stephen Rubin, Maggie Richards, Patricia Eisemann, Chris O’Connell, Meryl Levavi, and Emi Ikkanda—has gone above and beyond on my behalf, as has Alex Ward, my trusted liaison in book development at the New York Times.
The bricks and mortar of this book are the people, more than a hundred of them from all sides of this scandal, who were willing to share their knowledge and their memories with me. Many did so in confidence, and I am grateful for their trust. Some victims of this crime spoke with me despite despair and disagreements; I am humbled by their generosity. I also want to acknowledge the courtesy of Warden Tracy W. Johns, Associate Warden Deborah Gonzales, and their staff at the Butner federal prison facility, and the cooperation of Bernard L. Madoff and his lawyer, Ike Sorkin, in facilitating my efforts to construct as complete a history of this crime as possible. My thanks are also due to all the professionals at Baker & Hostetler, the Securities and Exchange Commission, the US Justice Department, the US Marshals Service, the Financial Industry Regulatory Authority, and the Federal Bureau of Investigation, who responded to my countless queries with unfailing patience, from first to last, even when the only possible response was “no comment.”
Earlier drafts were greatly improved by a cadre of trusted critics. Besides Larry Henriques, Barbara Oliver, and Tim Stenovec, they included my dear friend and colleague Floyd Norris, the chief financial correspondent for the New York Times; my cousin Dr. Peter R. Henriques, a notable historian and teacher; and Professor Mark Vamos, a gifted editor and journalism educator, whose elegant brushstrokes are here and there in these finished pages. Special thanks to Christine Bockelmann, for her matchless last-minute quality control.
I also owe a huge debt to the family members and friends who patiently suffered through this project and forgave me for all the missed dinners, abbreviated reunions, forgotten birthdays, cancelled holiday visits, and boring Madoffian monologues. They include my sister, Peggy van der Swaagh; sisters-in-law Noel Brakenhoff and Teakie Welty; cousins Marsha Wolpa, Sherry Stadtmiller, and Nancy Woodburn; and cherished friends Leslie Eaton, who talked me down from the ledge so often; Jaye Scholl Bohlen, who has endured four of my book projects and still takes my calls; and Jonathan Fuerbringer, who always laughs at all the right places. I am also grateful for the encouragement of Dean Michael Brown and my fan club at the Elliott School of International Affairs at George Washington University, and for the patience and support of my colleagues on the board of the Society of American Business Editors and Writers (SABEW), especially Beth Hunt, Bernie Kohn, Greg McCune, Kevin Noblet, and Rob Reuteman.
I cannot begin to thank all the journalists at the New York Times and elsewhere who went out of their way to help. But, with apologies to anyone omitted, I’m going to try: Charles Bagli, Vikas Bajaj, Al Baker, Alex Berenson, Alison Leigh Cowan, Julie Creswell, Eric Dash, Michael de la Merced, Claudio Gatti, Christine Haughney, Jack Healy, Dirk Johnson, Eric Konigsberg, Zachery Kouwe, Steve Labaton, Peter Lattman, Gretchen Morgenson, Joe Nocera, Catherine Rampell, William K. Rashbaum, Nelson D. Schwartz, David Segal, Louise Story, Stephanie Strom, Landon Thomas Jr, Mary Williams Walsh, Ben Weiser, and Julia Werdigier.
I owe an enormous thank-you to my patient and warmhearted newsroom boss, Larry Ingrassia. Add in the other unfailingly supportive Times editors: Bill Keller, Jill Abramson, Glenn Kramon, Adam Bryant, Winnie O’Kelley, David Gillen, Dan Niemi, Mark Getzfred, Keith Leighty, Bill Bright, and Kevin McKenna. And top the list off with Cass Peterson’s wonderful wizards of truth on the business news copy desk, who saved my bacon countless times and never audibly groaned when they saw me racing up minutes before deadline.
In the months between Bernie Madoff’s arrest and his guilty plea, I wrote or worked on about fifty separate stories about the scandal. At least twenty-five other reporters either shared those bylines with me or contributed reporting to those stories. It was the textbook example of a team effort. That is why this book is dedicated not just to my husband, Larry, but also to all the generous and talented people who produce the New York Times every day, to all those who came before us and—please, Lord—all those who will come after.
It has been my honour and joy to serve among you for these past twenty-one years.
INDEX
A&A and A&B account, 37–38. See also Avellino & Bienes
ABC News, 289
Abu Dhabi, xxiii, 171, 212
Access International, 170, 178, 233–34, 300, 318
accredited investors, 126–27, 172
Ackerman, Gary L., 241
affinity fraud, 214
Akroyd & Smithers, 71
Alger, Fred, 130
Alpern, Benjamin (wife’s grandfather), 33
Alpern, Joan (sister-in-law), 34
Alpern, Sara (mother-in-law), 33
Alpern, Saul (father-in-law), 33–34, 54–55, 77, 132, 149, 254
family and friend accounts and, 36–39, 41, 46, 58, 63–64, 66, 335
loan of 1962, 28–29, 36–38, 93, 225
retirement of, 38, 50–51
A.L.S. Steel, 27
Ambrosino, Dominic, 275
American International Group (AIG), 21, 194, 195, 206
American Jewish Committee, 186
American Jewish Congress, 88, 214
American Stock Exchange, 70–71
Amsellem, Jacques, 65
Anchor Holdings LLC, 171–72
Anheuser-Busch, 25
anti-clawback bills, 324–26
Anti-Defamation League, 213
anti-Semitism, 212–14, 273, 276
arbitrage, 53, 58–60, 62, 66, 74, 133, 334–35
alleged falsification of trades, 314
riskless, 38–41, 75, 94
Ariel fund, 111–12, 202–3
Arthur D. Little Inc, 105
Arvedlund, Erin, 119, 121
Ascot Partners, 113–15, 235
auction model, 44
auction rate securities, 301
Austria, 239, 299
automation (electronic trading), 42–50, 57, 68, 86–87, 92, 103, 116, 118–20, 136, 143, 180
Avellino, Frank, 37–38, 46, 50–51, 53, 55–56, 77–78, 95–98, 101–2, 254, 320–21
Avellino & Bienes, 38, 46, 66, 69, 86, 90–92, 117, 127, 132, 335
devote business to Madoff, 77–78
“lenders” and, 50–56
SEC shuts down, 94–104, 113, 272, 320–21
Sorkin and, 248
Bacon, Kevin, 212
Baker & Hostetler, 217–18, 222, 313
Banco Bilbao Vizcaya Argentaria (BBVA), 174
Banco Santander, xxiii, 150, 171, 178, 206–7, 211–12, 299
Bank Austria, 169
Bank Medici, 166–67, 169, 171, 197, 211, 239, 243–44, 299, 320
Bank of America, 194–95
Bank of New York, 162
bankruptcy court, 210, 219, 234, 239–40, 305, 313–14
bankruptcy laws, 44, 234–35, 239, 246, 256–57, 260, 265–66
banks, 174–75, 196–97, 266, 301, 313. See also specific banks
Banque Privée de Gestion Financière (BPGF), 74–75
Barclays bank, 144–45, 162
Bard College, 114
Barnes-Hind, 25
Baroni, Lisa, 248–50, 279
Barron’s, 119–21, 125, 131, 140–41, 295
Bayou Group, 147–49, 152, 166, 236
BBC, 243
Bear Stearns, 20, 186–87, 194, 206, 228
Bell, Kevin, 244
Benbassat, Mario, 168
Bennett, Gordon, 232–33, 341
Benton, Thomas Hart, 317
Bernanke, Ben, 228
Bernard L. Madoff Investment Securities. See also feeder funds; Madoff, Bernard L.; Madoff Securities International, Ltd; Madoff victims; Securities and Exchange Commission; and specific employees, family members, feeder accounts, and investors
appearance of prosperity, 137–38
arrest of Madoff and takeover of, 1, 10�
��12, 17–18, 21–23, 209, 222
assets frozen and sold, 245–46
audits of, 89, 254–55
automation of, 43–44, 47, 49, 68, 86–87, 92
automation of, and Ponzi records, 103, 119–20
Avellino & Bienes and, 38, 51, 77–78
back-office manager, 43
Black Monday of 1987 and, 84–85
bull market of 1980s and, 80
Christmas parties, 10–12, 182
Cohmad and, 73–74
early arbitrage by, 38–41
early investors and feeder funds and, 58–69, 89
early offices of, 43, 47
employees, 81, 182
employees, after arrest, 223, 259
employees, clawbacks and arrests of, 309–10, 314–15
founding and early years of, 25–27, 34–35
front-running accusations, 143
hidden investment operation and, 92–94
legitimate trading of, 17, 22, 49, 92, 136, 143, 152–53, 157–58, 160, 178, 186
Lipstick Building offices of, 2, 72, 81, 90, 103, 112, 120
Lipstick Building seventeenth floor, 2–3, 7–8, 11, 14, 17, 22–23, 72, 103, 136, 139, 150, 160, 181–82, 195, 199, 205, 223–24, 246, 309, 315
liquidation of, 216–24, 234–37, 239–40, 242–47, 259–66
Madoff as sole owner of, 286
Madoff sons join, 82–83, 286
market-making profits of, 178
NASDAQ bid-rigging scandal and, 107–8
net worth of, in 1980s, 80, 82
net worth of, in 2004, 138
Primex and, 118
regional brokerage firms and, 66–67
regulatory compliance and, 49–51
SEC investigation of 1992, 94–102
SEC investigation of 2001–4, 138, 140, 145–46
SEC investigation of 2005, 139–46, 151
SEC investigation of late 2005–6, 153–59, 162–66, 172, 227, 271–72
September 11, 2001, attacks and, 125
SIPC and, 44, 221
third market and, 49, 108
victims fund and, 245
Web site of, 296
Bernfeld, Ellen, 232
Bharara, Preet, 328–29
Bienes, Emily Picower, 64
Bienes, Michael, 37–38, 46, 50–53, 55–56, 77–78, 102, 254
lawsuit vs., 320–21
marriage of, 64, 132
SEC investigation and, 95–98
blue-chip stocks, 24–25, 53, 85, 93
Blumenfeld, Ed, 3
BNP Paribas, 212
Boesky, Ivan, 133, 333
bonds, 39, 130
Bongiorno, Annette, 14, 81, 179, 310–11, 315
Bonventre, Daniel, 81, 150, 152–53, 158, 160, 314–15
Boston Security Analysts Society, 122
Boston Stock Exchange, 39
Braman, Norman, 4, 212
Brazil, 89, 105, 212
Breeden, Richard, 327
Brighton Company, 58–59
British Petroleum, 265
brokerage firms
bankruptcy and, 44, 65
crackdown of 1960s, 35–36
fixed commissions and, 65–66
paper crunch and, 42
top, of 1950s, 33
Brown, Matthew C., 109
Buffett, Warren, 60
bull spread strategy, 75
Bunker Ramo, 46
Butner Federal Correctional Complex, xviii–xx, 332, 333, 344
Cacioppi, Ted, 12–14, 248, 250
Calamari, Andrew, 17, 21–22
California state pension funds, 129
Cannon Mills, 25
Caribbean, 48, 109, 169, 265, 319
Carnegie Hall, 114
Carolan, Kate, 232–33
Casale, Nick, 227
Cayman Islands, xxiii, 1, 171, 245
Cédille, Jean-Michel, 74–75
Ceretti, Federico, 130, 169
Chais, Pamela, 57, 58–59
Chais, Stanley, 3, 57–60, 68–69, 74, 86, 89, 92, 117, 137, 200–201, 214, 335, 341
clawback suit, 257
SEC suit vs., 301
Chais family trust funds, 58, 60
Chais foundation, 211
Chaitman, Helen Davis, 260–62, 268–69, 306–8
Chapman, Peter, 48
charities and endowments, 110–11, 117, 133–34, 214–16, 276, 320, 340
Chavkin, Peter, 248, 274–75, 288–89
Chemical Bank, 55, 105
cherry-picking, 144
Cheung, Meaghan, 155–56, 162–63
Chicago Board Options Exchange, 128
Chin, Denny, 248–53, 273, 275, 277, 279–80, 288, 332
Cincinnati Stock Exchange, 68, 86
Citibank, 175
clawback lawsuits, 257–58, 266–68, 313–15, 318–22, 325, 328, 330
Club No One Wanted to Join, The (essay collection), 311
Cohmad Securities, 3–4, 71–75, 92, 117, 137, 149, 186, 198, 257, 300–301
Cohn, Delaire & Kaufman, 71
Cohn, Marcia Beth, 72, 74, 77, 137, 186–87, 257
Cohn, Maurice “Sonny,” 3–4, 14, 70–74, 76–77, 137, 167, 257, 300
Congressional Research Service, 172
Contrafund, 106
convertible securities, 39–41, 53, 59, 62
Cotellessa-Pitz, Enrica, 314
Cowen & Company, 72
Cox, Christopher, 227–28
Creditanstalt, 169
credit markets, 181, 266, 302
Credit Suisse, 105, 131, 138, 141
criminal forfeiture laws, 274
Cross & Brown, 62–63
Crupi, JoAnn “Jodi,” 208–9, 315
De Bello, Nicole, 16, 19–20, 224, 270
de la Villehuchet, René-Thierry Magon, 170–71, 233–34, 318
Della Schiava, Yanko, 109, 202
demand notes, 56
Denver, John, 212
Depository Trust & Clearing Corporation (DTCC, or DTC), 119–20, 150–51, 159, 164, 245, 255, 272, 296
deregulation, 79–80, 86, 121–22, 176, 228
derivatives, xxiv, 131, 155, 173–76, 194–95, 201–2, 319
DiPascali, Frank, 3, 11, 153, 160, 195–96, 199–200, 205, 207–9, 272
arrest of, 225, 252, 297–99, 301, 309, 315, 326
false records and, 98–100, 102–3, 106–7, 119–20, 136, 150–51, 157, 298, 309–10
history of, with firm, 81–82
income of, 178–79
Madoff arrest and, 14, 18, 22, 223
Picower and, 133
SEC investigations and, 99–100, 139, 142–43, 145, 158, 272
disclosure requirements, 73
Dodger Sporting Goods, 31, 33
Donaldson, William H., 126
Donghia, Angelo, 81
Donnelly, Shannon, 183–84
Douglas, Michael, 212
Dow Jones Industrial Average, 25, 83, 186
Dreier, Marc S., 19
Dreyfus, Jack, 35
Dubai, 171, 204, 212
Dutch, 1, 171, 212
Eaton, Douglas, 19, 225–26, 237
Ebel, Maureen, 252, 275