Bernard Madoff says banks and funds were 'complicit' in $90bn fraud

Bernard Madoff says banks and funds were 'complicit' in $90bn fraud


Top banks and hedge funds must have known Bernard Madoff was running a giant Ponzi scheme, the convicted fraudster said in the first public interview since his arrest in 2008.

"They had to know," Madoff told the New York Times. "But the attitude was sort of, 'If you're doing something wrong, we don't want to know.'" He told the paper that financial institutions, "banks and funds were complicit in one form or another".

Madoff's statements will come as another blow to the reputations of banks including HSBC, Citigroup and JP Morgan that are facing lawsuits brought by Irving Picard, the trustee representing Madoff's victims. Over the past few months Picard has filed suits seeking $90bn (£56bn) in damages arising from the fictional profits he claims the banks and others withdrew from Madoff's scheme over the years.

Picard has alleged that the banks ignored suspicions about Madoff as they reaped millions in fees. JP Morgan bankers, for example, speculated that Madoff was running a Ponzi scheme in internal emails and even went as far as to warn the UK authorities of their suspicions while continuing to act for Madoff, according to Picard. All the banks have denied any wrongdoing.

In an interview and emails, Madoff said that he was surprised to learn about some of the emails and messages that Picard had uncovered from the banks that raised doubts about his financial results before his scheme collapsed. "I'm reading more now about how suspicious they were than I ever realised at the time," he said.

Speaking from jail in Butner, North Carolina, where he is serving a 150-year sentence, Madoff claimed that he had been helping Picard in his efforts to recover assets. He said that he had given Picard's legal team "information I knew would be instrumental in recovering assets from those people complicit in the mess I put myself into".

"I am saying that the banks and funds were complicit in one form or another, and my information to Picard when he was here established this," he said.

Madoff did not name specific banks or institutions. Picard did not return calls for comment but lawyers close to the case have reportedly called Madoff's claims a lie.

Pathological liar

Talking to the Guardian, Harry Markopolos, the whistleblower who first exposed Madoff's fraud, said that Madoff was "evil" and a "pathological liar" but it was apparent that the banks must have known something was wrong. He said it was clear, at the very least, that they suspected he was running a fraud, and that anyone knowledgeable who looked at his numbers would have heard alarm bells.

Madoff's crimes had destroyed thousands of lives but he at least had been punished, said Markopolos. "The banks were much bigger winners than Bernard Madoff. Bernard Madoff is in jail for life and the bankers are still getting millions in bonuses. Ask yourself if justice was really done."

No One Would Listen, Markopolos's updated account of his struggle to alert the authorities to Madoff's crimes, is released in paperback next month. Just as Picard has alleged that Madoff's banks ignored the warning signs, Markopolos said: "It's clear to me that the US and UK governments turned the other way when it came to the banks."

In the interview Madoff confirmed that he had not shared information with the federal prosecutors working on criminal cases related to his fraud. He said that he was willing to give prosecutors information "to help recover assets only. I refused to help provide them with criminal evidence". Markopolos said that the fraudster was protecting his own. From his reading of all that has come out since Madoff's conviction, he believed that Madoff had been operating on the wrong side of the law since the 1960s and that those close to him must have known. "A leopard doesn't change his spots," he said. "He was born to be bad."

In December, Madoff's eldest son, Mark, committed suicide. Madoff called the resulting media coverage "disgraceful" and disputed reports that he had refused to attend the funeral service. He said that prison authorities had informed him they would not approve a request for him to attend because of public safety concerns and that, had he attended, the funeral would have been "a media circus".

Diana Henriques, who interviewed Madoff for her forthcoming book The Wizard of Lies: Bernie Madoff and the Death of Trust, described him as "frail and agitated" and "looking noticeably thinner and rumpled in khaki prison garb". He insisted that his family knew nothing about his crimes.

Investigations

At his trial, Madoff claimed he had orchestrated the massive fraud alone, although a number of his associates have subsequently been charged with aiding and abetting him. So far US authorities have not pressed charges against Madoff's family members but their investigations continue and the family face a series of civil lawsuits and the potential forfeiture of most of their assets. Nor have any of the banks named in Picard's suits been charged with wrongdoing by US authorities.

Markopolos, who has liaised extensively with Madoff investigators, believes that is a situation that will change. Announcing charges against two of Madoff's back office staff last year, the US attorney in Manhattan, Preet Bharara, said that the investigation related to Madoff's "epic crime" was "very much ongoing".

"This case is a long way from over," Markopolos said. "It won't be just Bernard Madoff who goes to jail."

In the meantime, Hollywood is working on a film. A number of studios have approached Markopolos to make a movie out of No One Would Listen, with Tom Hanks, Christian Bale and Nicolas Cage all tipped to play the whistleblower. Markopolos said that he had no clue who would get the villain's part, although he added: "I think Mel Gibson would be perfect. He has so much charm but he's also scary."

However, Markopolos has reservations about Tinseltown. "Hollywood is the only industry that preys on Wall Street," he said. "They make most bankers look like amateurs."

source: guardian.co.uk