Bernard Madoff didn’t arrive on the front page of the New York Times this week with a reputation for shining the bright light of truth into the shadows that shroud wrongdoing.
He lives in a federal prison because he lied for years to trusting friends, charities, educational and religious institutions, thousands of investors and at least some family members. He bilked them of $20 billion.
You might expect that having almost two years in prison to reflect, after learning of the suicides, the heartbreak, the financial devastation he left in his wake, Madoff might have used his first newspaper interview to express gut-wrenching remorse, perhaps fling his soul onto the mercy of those he hurt.
Instead, he said of them, “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.”
The fact that they weren’t investing in the market is why Madoff’s in prison. He concocted mountains of phony paperwork to trick them into thinking they were, and that they were doing quite well at it.
As for risk, it’s safe to say he never informed them of the risk involved in putting money into a Ponzi scheme.
Madoff’s point seems to be that, because the market carries risk, and because his victims thought they were investing in it, they should have been prepared for what happened.
Those of us on the outside of the Madoff rip-off can say these people should have been more careful. I’m sure some of his victims think so, too.
‘Doing 150 Years’
For the perpetrator to say so is nothing more than the rationalization of someone trying to share the heavy burden of blame.
At least he didn’t repeat what he said last August when a fellow prisoner taunted him about his crime, according to New York magazine.
“F--- my victims,” Madoff retorted, bank robber K.C. White told the magazine. “I carried them for 20 years, and now I’m doing 150 years.”
That Madoff has a warped view of his crimes is clear. So it’s hard to give weight to anything he says, including his claim that certain unnamed banks and funds “had to know” they were putting money into a fraud.
His word now is worth exactly the value it had when he swore to the U.S. Securities and Exchange Commission that everything about his firm was copacetic, and then cited the SEC’s clean bill of health to wary investors.
Madoff’s statements from prison can’t hurt those he says must have known what he was doing, nor help family and friends he says didn’t.
But pay attention to what he presumably didn’t say in his New York Times interview, or in the e-mail he exchanged with reporter Diana B. Henriques.
He doesn’t offer proof that his primary bank, JPMorgan Chase, knew it was servicing a fraud. He claims banks were “complicit” without saying how, except that they purposefully shielded their eyes from the truth.
He uses some of the same language that bankruptcy trustee Irving Picard uses in a lawsuit seeking $6.4 billion from JPMorgan to give Madoff victims. Morgan was complicit, they both claim. It knew or should have known about his fraud.
The prisoner asserts he gave Picard’s legal team information last summer to help the trustee hunt money for investors who were net losers in Madoff’s scheme. He seems to claim he proved actual involvement in the fraud by some players:
“The banks and funds were complicit in one form or another and my information to Picard when he was here established this,” he wrote Henriques in December.
OK, what form?
(A lawyer for Picard says the trustee never met with Madoff but didn’t dispute that members of the legal team did.)
The Madoff interview, as reported, contained no specifics about a bank or a fund doing anything to knowingly further the scheme.
“Could he describe a meeting where banks caught him red handed and still acquiesced in his conduct?” Columbia University law professor John Coffee asked in a telephone interview.
If he could have, surely he would have, and surely we would have read about it in the Times. Nowhere in 45 column inches does gun smoke waft.
And if Madoff had handed Picard evidence of JPMorgan’s knowing involvement, there’s no sign of it in the 115-page lawsuit Picard filed, either.
To Be Seen
So we’re back to the idea that JPMorgan should have known, but it may or may not have actually known. So what’s new?
Whether “should have known” turns out to be as powerful as “knew” in this case remains to be seen. Unless Picard can prove that JPMorgan was either truly complicit or seriously suspicious, he’ll have a tough time getting the full $6.4 billion he seeks from the bank.
JPMorgan’s defense so far shows it is ready for battle. Its spokesmen say the claims are bogus and its lawyers say in legal papers that Picard is reaching far beyond the law to allege them, especially in bankruptcy court.
If it keeps fighting, the legal dispute over the truth of Picard’s claims would put the question of the bank’s complicity before the public for months, damaging the bank’s reputation as it goes.
Madoff’s claims, on the other hand, were brushed off by investors this week. On Feb. 16, the day the Times lead its front page with the Madoff interview and headlined it with his claim the “Banks ‘Had to Know,’” JPMorgan shares rose the most in five weeks to a 28-month high.
So much for the credibility of one of the biggest con men in U.S. history.
(Ann Woolner is a Bloomberg News columnist. The opinions expressed are her own.)
To contact the editor responsible for this column: James Greiff at email@example.com