Last Updated Feb 16, 2011 12:21 PM EST
As befits this Dickensian tale, there are moments of tragedy, as Madoff discusses his son's recent suicide, and dark comedy. In one email to the author of the story, NYT reporter Diana Henriques, he actually defends his investment record by saying that many of his long-term clients made money with him -- until they didn't, of course:
"I would have loved for them to not lose anything, but that was a risk they were well aware of by investing in the market," he wrote.Caveat emptor, people. What I don't find hard to believe in the least is Madoff's main assertion -- that the big banks and hedge funds that funneled money into his $65 billion Ponzi scheme knew something was fishy, but chose to look away:
"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.' "That's certainly in line with the prevailing ethos during the financial crisis. Banks didn't want to know the loans they sold were wired to self-destruct. Investors didn't want to know where banks were getting the loans. Regulators didn't want to know what banks and investors were up to. And homeowners didn't want to know that home prices sometimes go down. It was a daisy-chain of willful ignorance.
Madoff's accusation also tracks with evidence that Irving Picard, the court-appointed trustee trying to recoup money for people swindled in the affair, has uncovered showing that the Wall Street firms that did business with the investor long-suspected he was crooked.
Yet Madoff, who says he is cooperating with the trustee in his investigations, stops short of claiming that any financial firm directly participated in the scheme. He says only that they played a role, although exactly how he doesn't say:
"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."Wall Street: Sap or Accomplice?
Except that "one form or another" could mean just about anything. It's one thing to show that banks like JPMorgan Chase (JPM) and UBS, which Picard is suing for billions of dollars as part of his recovery mission, questioned Madoff's improbably consistent returns -- quite another to say that the firms were in on the scam. But it might be sufficient to convince a court that banks and other investors that profited for years from Madoff's business should really give that money back.
Madoff makes another interesting, if similarly ambiguous, claim. He says that some banks and funds have struck settlements with some of his former investors specifically to keep him quiet about what part these firms may have had in the affair.
At the same time, he is also somewhat inconsistent. While Madoff claims that banks and investment firms were onto him, he also expresses surprise that they weren't fooled along with all the other saps:
Mr. Madoff said he was startled to learn about some of the e-mails and messages raising doubts about his results -- now emerging in lawsuits -- that bankers were passing around before his scheme collapsed.So which is it, Bernie -- were they accomplices or dupes? And if you have evidence of the former, why don't you say so loud and clear? What do you have to lose, gazing out at the prison yard?
"I'm reading more now about how suspicious they were than I ever realized at the time," he said with a faint smile.
That's perhaps the greatest reason to doubt Madoff's allegations. Implicating others in his villainy is a way to diminish his crime. But the unfortunate reality for Madoff is that the truth can't set you free if no one believes you.
Thumbnail from Flickr user Casey Serrin; Madoff photo from Wikimedia Commons
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