It's well known that Bernard Madoff, who died on April 14 at 82 while serving a 150-year prison sentence for a nearly $65 billion Ponzi scheme, was one of the greatest swindlers of all time. It's less well known that he also ran an honest and successful market-making business, that he was one of the fathers of the NASDAQ stock market and that he pioneered the practice of trading firms paying retail brokers for the right to execute their customers' trades (Robinhood, for instance, the company in the middle of the run-up of GameStop and other stocks this winter, receives payments from trading firms for its customer order flow). And it's also less well known that other people who have never been prosecuted made far more from Madoff's crimes than he ever did and that authorities had evidence of his fraud for years before they ever did anything about it.
In Madoff Talks (McGraw Hill, April) investigative journalist and syndicated radio host Jim Campbell writes a fast-paced, comprehensive account of the fraud: how it worked, who benefited and how regulators managed to miss it for years and in some cases ultimately victimized Madoff's victims again. Campbell got extensive cooperation from Madoff himself (who continued to lie about many things years after the fact) and from members of Madoff's family whom he found more credible. He spoke at length to Madoff's wife, Ruth, and her late son Andrew (he and his brother, Mark, both worked for their father's legitimate business. Mark hanged himself two years to the day after his father's arrest. Andrew died of cancer in 2014). In a wealthy and close-knit family like theirs, though, mustn't the other Madoffs have known what was going on? In this excerpt, Campbell tries to answer definitively the question: Did Ruth know?
"What's a Ponzi Scheme?"
Ruth revealed to me, her voice lowered, after hesitating for a second with a faraway look as if she'd transported herself back to the painful moment, her first response to Bernie's confession: "What's a Ponzi scheme?"
I would tell Ruth bluntly, everyone I communicated with expressed disbelief she couldn't have known.... When I texted as much to Ruth, she responded almost instantly, "Jim, my integrity means everything to me." When people would ask me how Ruth could not have known, I would ask them if their spouse were embezzling money at work, would they necessarily know? Universally the response was, "No."
I wasn't trying to defend Ruth so much as explain how it could be possible she didn't know. But she unquestionably had a hard time decoupling from Bernie, having been with him since the age of 13. Some in the family likened it to having been in a cult and requiring deprogramming. She chose to believe his initial denials minimizing the scope of the fraud. [Bernie's brother] Peter Madoff 's wife, Marion, told a source: "Ruth will always choose Bernie over the kids." The boys deeply resented it.
By the time I met Ruth, she was claiming that, in her mind, if not Bernie's, she was estranged from him. He was still emailing and calling her. She wasn't visiting him in prison. Ruth also intimated to me her anger and disdain apart from the criminal side, on a personal and deeply painful level: "You know Bernie cheated on me." It made me uncomfortable. I only responded that I knew.
Diane Francis, an expert on the psychological profile of business fraudsters, who participated in a documentary on Madoff, explained to me how no one else could have known. "The thing that marks them is they are the only guy who knows everything. They're the mastermind. That's the way you keep it tight. The people on that 17th floor in the Lipstick Building only knew the job they were doing. They knew it was not nice, but they didn't know everything else that was going on. They didn't know the scale. They were just painting the tape and fooling around with stock values and doctoring the books, and all of that. But only Madoff knew who was doing what to whom and when. And how the pieces all fit together. And that indemnifies the other people around them. When he was arrested and everybody said, 'Oh, his kids, of course they turned him in. They were part of it.' No, they weren't...."
Did Ruth Madoff Have Advance Knowledge?
Ruth had told me she first heard the news at the December 10 afternoon family confession. We now know, however, from Madoff 's secretary Eleanor Squillari and Madoff 's Chief Fraud Perpetuating Officer, Frank DiPascali, that Ruth appeared highly distraught in the office earlier that same morning and suddenly withdrew $10 million from their account.... Bernie had obviously informed her something was going down.
Sources close to Ruth Madoff 's legal team still believed she only learned of any criminality in that same meeting with her sons. They assumed Bernie might have told her things were suddenly coming to an end and to take out the $10 million but that the actual full confession took place during the meeting with Mark and Andy. Her legal team provided me with an interesting insight into Bernie's psyche: that it was perfectly in keeping with Bernie's character to keep Ruth ignorant. In their view, he could never have told his wife. He was too much of an egotist, they thought, to have ever revealed he had turned to a criminal enterprise to keep [Bernard L. Madoff Investment Securities] floating—an unlikely admission of weakness. Squillari had her perspective: "I don't think all these years Ruth knew, but I think she knew way before everybody else knew. They were very close. He told me once, 'Ruth is a great partner.' I think he was just, 'This is what's going to go down. You need to know about it.' I think she stood by him hoping that he would get out of the mess. I really don't think Bernie thought he'd go to jail for the rest of his life, his family would be tormented. I don't think he'd thought about that."
I had assumed Ruth had long given up working the financial books at BLMIS. But it turned out, Ruth continued to balance the [firm's] checking account through 2007. I asked the forensic lead, Bruce Dubinsky, if he thought she would have known what she was looking at: "When you look at the 703 [firm's checking account] on a daily basis, there were hundreds of millions of dollars in and out of that account. She wouldn't have been any wiser or dumber to go: 'I see $40 million. I know he's doing a lot of movement of money trading.' I never met the woman, but my guess is she was not smart enough to think, where is the money going to a trade counterparty?' She probably didn't even understand how a trade works."
I asked Squillari if she thought balancing the 703 implicated Ruth: "I don't see Ruth as a criminal. I see her as doing the wrong thing when push came to shove. I just see her as somebody who was obsessively in love with her husband. He could do no wrong. She was going to help him however she could. She even said it once in one of the interviews, that had she known, she probably wouldn't have turned him in. Ruth is not a stupid woman. Ruth has a master's degree in nutrition. She wrote a book. She was in this business with him from day one. What she chose to see, what she didn't choose to see, I can't say. I don't think all along Ruth had to know this because she wouldn't have had her family invest. She wouldn't have had her sister invested, because her sister got ruined. And her friends, I don't see Ruth allowing that to happen. Why do you think she never divorced Bernie? Because when you're married to somebody, you can't testify against them."
Ruth's sister and brother-in-law did wind up losing everything and ended up opening an airport limo service in order to survive. She lived with her sister in Florida for a while, too. It is unlikely they would have taken her in if they thought she was complicit in stripping them of their wealth. Ruth's obsessive love may have been misguided, but she wasn't a sociopath. →
From Madoff Talks: Uncovering the Untold Story of the Most Notorious Ponzi Scheme in History by Jim Campbell Copyright 2021 by McGraw Hill.
Q&A with author Jim Campbell
By: Peter Carbonara
Why another Madoff book?
My interest was to present the first overall architecture of the scheme including the systemic failure that made it possible. I think people will be surprised by how much they don't know about the story. I want it to stand as the definitive account.
Hadn't the Madoffs spoken to many other journalists before you?
Compared to other journalists, I had the most extensive relationship with Bernie, by his admission. Ruth did speak briefly on 60 Minutes and with Laurie Sandell (author of 2011's Truth and Consequences: Life Inside the Madoff Family) previously, but she told me she didn't like doing it; that she was kind of forced into it by Andrew. She would not speak to anybody else besides me, something she has honored.
You caught Madoff in a number of lies. Did Ruth also try to spin you?
I think she is capable of spinning to a better degree than she plays.... I believe her inherent honesty overall. I believe she did not know, although, as I say at the end of the book, I can't guarantee she did not know up until when she represented to me she knew. It may have been a little earlier. Considering her demeanor and in light of all of the investigation, I come down—I don't think "sympathetic" is the word because I view myself as being completely objective, though I like her. Bernie's likable too, but he's a pathological prevaricator—I come down that she's fundamentally credible. Should she have been charging $50,000 a month on the corporate credit card? No. Is that a Ponzi scheme related thing? No....When I say [the family] didn't know, that doesn't mean that they shouldn't have known necessarily. It doesn't mean they shouldn't have smelled something.... As Bernie himself told me, he set it up so they would not know, and if the SEC couldn't find it, why should his family have been expected to find it?
Have you heard from her since you finished the book?
I texted her, and she texted back immediately saying she wasn't going to talk.... She revealed herself to me and—she's very, very private, and she had never really done that—and she facilitated anything I asked her up until she stopped talking. If I seem sympathetic that must be a reflection of who she really is and the truth as I uncovered it.
Are regulators any better positioned to protect retail investors now?
The SEC is much better positioned to find Ponzi schemes. They never really had the right people on the case. In the book, I call for 30 regulatory reforms or history will be destined to repeat itself on Wall Street.
