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Examining Bernie Madoff, 'The Wizard Of Lies.'

New York Times financial writer Diana Henriques was the first journalist to interview Bernie Madoff after he was sent to prison. Henriques' new book, The Wizard of Lies, details how Madoff created the biggest Ponzi scheme in history after playing a prominent role in shaping modern markets.


Other segments from the episode on April 26, 2011

Fresh Air with Terry Gross, April 26, 2011: Interview with Diana Henriques; Review of Bombino's album "Agadez."


Fresh Air
12:00-13:00 PM
Examining Bernie Madoff, 'The Wizard Of Lies'


This is FRESH AIR. I'm Terry Gross.

My guest, Diana Henriques, was the first journalist to interview Bernie Madoff
after he was arrested for running one of the biggest Ponzi schemes in history.
Now she's written a new book called "The Wizard of Lies: Bernie Madoff and the
Death of Trust."

On the day he was arrested, December 11, 2008, he was supposed to be managing
nearly $65 billion of other people's money. Henriques says if he had actually
possessed that money, he would have ranked as the largest investment manager in
the world, twice as large as Goldman Sachs.

But, very little of that money was actually there. He was faking everything,
from customer account statements to regulatory filings.

Her book is not only about how he did it and the casualties he left behind,
it's about how he helped bring automation to the market, became chairman of
NASDAQ and exploited his knowledge to swindle investors and fool regulators.

Diana Henriques is a financial writer for the New York Times and has led the
paper's coverage of the Madoff story.

Diana Henriques, welcome to FRESH AIR. So how do you interview someone who is
famous as a liar and is an excellent liar?

Ms. DIANA HENRIQUES (Author, "The Wizard of Lies: Bernie Madoff and the Death
of Trust"; Senior Financial Writer, New York Times): Very carefully. Actually,
what I tried to do first was explore factual issues about his life: his
childhood, his father's employment, things that I knew I could check with other
sources that I had. And then again, pushing him towards his early life on Wall
Street, things that I knew I could check.

That factual setting, I felt a little bit more comfortable developing, until I
could get a sense of him a little more. I must say, Terry, though: The man is
the most fluent liar.

The magic of his personality is how easy it is to believe him, almost how much
you want to believe him. For example, he assured me in that first interview, in
emails subsequently that we exchanged, that he wasn't going to talk to any
other writers, I was the only writer he was talking to.

And I of course said: Oh, well, goodness, that's one less thing for me to worry
about. Of course, it wasn't true. It was all a lie. He was talking to other
reporters along the way towards the end. So while I was the first to get in to
see him, I was very aware that you really had to test everything he told you
against, both your own judgment and whatever facts that I could dig up.

GROSS: So are you one of the people who was swindled by Madoff, not
financially, but you knew him from your reporting on Wall Street. He was a
powerful person on Wall Street.

Ms. HENRIQUES: He was, and I think in that regard, he was trying to play it
straight. I knew him as a key figure in the evolution of the American stock
market in the 1990s, when automation and computerization - and even more
importantly, globalization - began to reshape the American stock market.

Bernie Madoff was a key figure in that process. So at conferences and panel
discussions and for Sunday stories that I was working on for the New York
Times, he would be one of the people you would call, one of the thoughtful,
down to earth, kind of plainspoken but very accessible people who would talk
with me and with my readers about these dramatic changes that were happening on
the street.

So he was, you know, one of the sources in my Rolodex. Not, by any means, a
prominent figure, but I still knew that he was very important in the kind of
backstage infrastructure of how stocks are traded on Wall Street.

GROSS: So you were shocked when he was exposed?

Ms. HENRIQUES: I was stunned. I really was. Here was a man who seemed to have
built a legitimate business, a legitimate reputation that had made him both,
very wealthy and very admired, respected and trusted.

The notion that for so many years, behind the scenes, there was this dark
parallel universe of this fraud, was really staggering to me.

GROSS: So let's get back to your interview, well, your interviews, with Bernie
Madoff. What did you learn in those interviews about how he managed to cover up
his fraudulent operation, his Ponzi scheme?

Ms. HENRIQUES: Well, it was a very well-defended fraud. We have to say that
right up front. He is a very inventive man, about how to conceal his tracks.

When you look at the machinery he had in place to hide this scam, he had fake
clearinghouse screens that you could look at on computers in his office, and
you'd say: Oh, sure, there are the stocks I own right there. But it was all

You would see his key lieutenant, Frank DiPasquale, apparently trading stocks
for you with Europe, when, in fact, he was just trading keystrokes with an
employee hidden in a room down the hall.

He saved old letterhead and old office equipment. So if he needed to
reconstruct a back-dated document to stick in the files, knowing what
regulators would look for, he could do that. It was really brilliant, the way
he covered it up.

So that's one way he was able to keep it going and to carry it out. But another
way, and maybe even more important, was this sort of Madoff magic, the magic of
his personality.

He inspired trust in a very unusual way, Terry. He really was not like any
Ponzi schemer I've ever met before, and unfortunately, I've met more than a few
over the years.

Most of them are kind of swashbuckling characters, you know, the bon vivant,
you know, the most charming guy in the room. And Madoff was never the most
charming person in the room, neither in my interviews or in my interviews with
other people who knew him very well.

He would never be the most charming person in the room. He would make you feel
like you were the most charming person in the room. That was his gift.

GROSS: If you're just joining us, my guest is journalist Diana Henriques. She's
the author of the new book "The Wizard of Lies: Bernie Madoff and the Death of

Let's get back to the system that he created to generate these fake
transactions and a fake paper trail. He had, like Ponzi scheme software that
was created. He didn't create it himself, but did he commission somebody to
create Ponzi scheme software so he could fake all these trades between banks
that never really happened?

Ms. HENRIQUES: Well, we do know that Frank DiPasquale, his key lieutenant, has
pleaded guilty to a set of federal charges that include helping create that
wonderful suite of software, as you call Ponzi software, that enabled them to
both maintain the incredible number of account statements that they had to send
out to thousands and thousands of customers, but also to change those records
with a couple of keystrokes if it was necessary for - you know, to deflect a
regulatory visit or to fool an auditor or an accountant.

You have to remember this: Bernie Madoff helped write the rule book. He knew
what it was to be a regulated entity. He ran a regulated broker dealer, a
wholesale trading house.

So he knew what regulators would look for. And when it came to his Ponzi
scheme, he made sure that what they would be looking for was there. So the
deceptions were all designed with a regulator or an auditor in mind, because he
knew what that experience was like.

GROSS: In a Ponzi scheme, you need to keep getting new money coming in so that
you could pay people at the other end. You also have to have a constant stream
of cash coming in.

So he had to constantly attract new investors. And one of the ways he did that,
he had feeder funds that would be affiliated with him. Explain what a feeder
fund is.

Ms. HENRIQUES: Well, a feeder fund in those - the ones that he used - were
principally hedge funds, which were lightly regulated investment partnerships,
many of them offshore. And their managers had the option of raising money that
they would pass along to another money manager.

So they're really just conduit funds, Terry. They're a little pipeline that,
you know, had an investment manager at one end and Bernie Madoff at the other,
and the money just flowed into the hands of all of these varied hedge funds,
really, all over the world and wound up in Madoff's offices in the Lipstick

GROSS: Why would a hedge fund give its money to Bernie Madoff? I mean, I always
thought hedge funds were supposed to have brilliant investors who managed the

Ms. HENRIQUES: And many of them do, without a doubt. But the – Madoff, really,
almost invented a new species of Ponzi scheme. The traditional Ponzi scheme
exploited investors' greed. And many hedge funds did the same thing, you know:
I can make 85 percent a year for you. I can make 100 percent a year for you, or
in the traditional Ponzi scheme, 50 percent a month.

Madoff didn't do that. A Madoff scheme is different. It exploits, not
investors' greed, but investors' fear; their fear of volatility, their fear of
losing what they have.

And in fact, through many of the years of Madoff's fraud, investors could have
made a lot more money even in some of the very prominent mutual funds like the
Magellan Fund.

But they were willing to give up those greater returns in exchange for the
consistency of Madoff's returns.

GROSS: So hedge funds were very useful to Bernie Madoff, not only because they
were giving him a lot of money, but I think one of the rules in a lot of the
hedge funds is that you can't withdraw the money any time you want to. It has
to stay invested for a certain amount of time before you have access to your

Ms. HENRIQUES: Yes, they're not as liquid as a traditional mutual fund. But
many of Madoff's feeder funds were attractive to hedge fund investors because
they were a little bit more liquid.

Rich investors tended to use Bernie almost as this sort of money market fund
dressed in Armani. I mean, it was a fancy form of investment but one you could
get your money out more easily than from a lot of other hedge funds.

That was its principal attraction when times were good, but that was also its
greatest vulnerability when the market turned so desperate in 2008.

GROSS: So he not only got all these hedge funds investing with him, he also got
a lot of nonprofit foundations, endowments, pension funds. How did he enter
that world?

Ms. HENRIQUES: Well, he had a couple of introducers, if you will, a couple of
people who helped open the door. Ezra Merkin, here in New York, was a known
quantity to so many philanthropies and university endowments.

The community from which he drew his early investors were philanthropists, very
generous people, and they had ties to the boards. So he had people who could
make the introductions.

He never pushed hard to get new money. That was part of his genius. He made it
seem that this was a very exclusive club, a very small club, maybe he would
take your money but maybe not.

And so people felt very lucky if they could get Madoff to handle their money,
and that attitude imbued the investment committees of a great many charities
and institutions, as well.

GROSS: If you're just joining us, my guest is journalist Diana Henriques. Her
new book is called "The Wizard of Lies: Bernie Madoff and the Death of Trust."
Let's take a short break here, and then we'll talk some more. This is FRESH

(Soundbite of music)

GROSS: If you're just joining us, my guest is New York Times senior financial
writer Diana Henriques. Her new book is called "The Wizard of Lies: Bernie
Madoff and the Death of Trust."

As you write, you can't really understand what Madoff did or how he did it
without understanding the stock market when he started in the '60s and how it
changed over time.

So let's go back to the early '60s, when Bernie Madoff first starts his
brokerage. How did the Wall Street of then, the stock market of then, compare
to now?

Ms. HENRIQUES: I don't think today's investor would even recognize it. In the
Wall Street of his day, when he first set up his fund, there was the New York
Stock Exchange, there was the American Stock Exchange, and then some of their
sister exchanges around the country, like Boston and San Francisco, all had
stock exchanges.

And that's where listed stocks traded, and principally, their customers were
individual investors, frankly. Big institutions did not invest in common stocks
that much back in the '50s and early '60s.

So those were the listed stocks, the big board they call the New York Stock
Exchange. And those were the blue chips we now think of: the railroads, the
utilities, the big automakers.

But, you know, after the war, coming out of World War II, there were all kinds
of new technologies that were being put to use in the commercial realm, all
kinds of family-owned companies that had a little bit of stock that needed to

They weren't big enough or well-known enough to be listed on these big, formal
stock exchanges, but their stocks still traded hands, and they traded hands in
this over-the-counter market that consisted of thousands of individual dealers
with a list of stocks and a telephone, who would trade with one another, by
telephone, build these relationships and offer quotes on a particular stock.

But you couldn't look that quote up in the newspaper. There wasn't a tickertape
you could check it on, and of course, Bloomberg wasn't even dreamed of yet or
Yahoo! Finance or any of the places that we take for granted today.

So it was a very opaque market, where individual traders could prosper by
buying cheap and selling dear. They could buy a stock at 50 cents a share and,
if they were lucky, sell it the same day for a dollar a share, and those kinds
of profits were not uncommon in that day.

GROSS: So because it was an opaque market, was this a good place for a swindler
like Bernie Madoff to set up a practice?

Ms. HENRIQUES: Well, I don't know that we can be sure that Bernie Madoff was a
swindler when he set up his practice in 1960. There were an awful lot of people
who were going into the OTC market, the over-the-counter market, to trade
legitimately and to make markets in these stocks, and I believe he may well
have been one of them.

However, he did get into trouble in 1962. It was the first near-death
experience that almost derailed his career. He had put his clients' money into
these very speculative, new-issued, over-the-counter stocks, kind of like the
technology stock bubble, you know, flimsy little outfits that might prosper but
usually didn't.

And he invested his clients' money in those stocks, and in a little air pocket
that the stock market hit in 1962, the bottom just fell out, and those stocks
went to almost zero.

Well, Bernie had a choice. First of all, he never should have put such cautious
investors' money in such wild, reckless stocks in the first place. But having
done so, he could have confessed to them: Look, I lost all your money. But he

He covered it up. He bought those stocks back from their accounts using money
that he had borrowed from his father-in-law. He made them think that he had
navigated that very rocky market of 1962 safely and soundly and, you know, sort
of reinforced his reputation as a genius.

So the first time we can see him actually bending the rules, gilding the lily,
if you will, was in that 1962 crisis. It wasn't a Ponzi scheme, no. I don't
know for sure that his Ponzi scheme dated that far back. But I do know that
that was an experience he had where he confronted the difference between
telling the truth and admitting failure and telling a lie and looking like a

GROSS: Yeah, it's amazing. He had that gift to turn incredible failure into

(Soundbite of laughter)

Ms. HENRIQUES: Well, he could not accept failure. He absolutely could not. I
think that is the fundamental root of his life, the root of his crime was he
could not admit failure.

GROSS: So he's one of the people who, early on, embraced automation in the


GROSS: And that helped lead to his prominence on Wall Street. What did he do to
embrace automation and to help lead on that?

Ms. HENRIQUES: There were so many ways in which he was a pioneer. When I was a
younger reporting working at Barron's magazine, he was one of the firms that I
would call if I wanted to know how late-breaking news was affecting a widely
traded stock.

Once the New York Stock Exchange had closed, Bernie's trading desk would start
trading those stocks overnight. So he did what we call after-hours trading, and
that would be one of the places you would call to say: You know, how did this
news affect General Electric? And he would check with his traders and give you
a report back.

So he recognized that the market, the worldwide market, had become a 24-hour
beast. It wasn't - it was no longer an animal that went to sleep every
afternoon at 4:30, when the stock exchange called it a day. So he developed the
technology and the staffing, the manpower, to trade stocks during the night and
then took it a step further and started trading stocks overseas.

He was one of the first to open a London bureau and start trading in European
securities that could be invested in here. So he saw globalization coming.

His brother Peter was really the technology genius behind the development of
the software that speeded up the pace at which his firm could trade stocks. And
as more mutual funds and hedge funds and big institutions and endowments and
public pension funds started to pour into the stock market, the faster you
could trade, the better they liked it.

So he was in the vanguard in so many ways, and what was important about this,
Terry, was not just that it made his firm an enormous success. It put him on
the side of the regulators.

The regulators, as well, the SEC and the industry's regulators, knew that the
traditional ways of trading stock, you know, standing on a trading floor in a
loud-colored coat, that those days were numbered. And they were trying to keep
the American market competitive vis-a-vis London, vis-a-vis Tokyo.

And they knew that the market needed to automate, needed to get faster and more
competitive and more global, and Bernie was on their side. So that, to some
extent, helped diffuse any suspicions that they might have had about Madoff.

They trusted him. They trusted his advice. He had actually, as they saw it,
been on the side of the angels with respect to modernizing the stock market.

GROSS: NASDAQ was the first market to automate, and he became the chair of
NASDAQ in 1990. That's a really important position.

Ms. HENRIQUES: In a way, it was. It was a very prominent position, a great
soapbox for him to have. It is a somewhat honorary position. He's not an
executive chairman. There were, you know, there were businessmen who were
running the stock market day to day.

But it gave him a great prominence in the industry. He probably affected the
market more, Terry, by his behind-the-scenes work on the committees that were
writing trading rules and that were negotiating with the SEC over regulations.
He probably had more of an impact in those behind-the-scenes ways than he did
simply holding the chairmanship. But as you say, it was a prominent position
that made him even more trusted within the industry itself.

GROSS: My guest, Diana Henriques, will be back in the second half of the show.
Her new book is called "The Wizard of Lies: Bernie Madoff and the Death of
Trust." She's a senior financial writer for The New York Times. I'm Terry
Gross, and this is FRESH AIR.

(Soundbite of music)

GROSS: This is FRESH AIR. I'm Terry Gross back with Diana Henriques, author of
the new book "The Wizard of Lies: Bernie Madoff and the Death of Trust." She's
a senior financial writer for the New York Times and has led the paper's
coverage of the scandal. The book explains how Madoff ran the largest Ponzi
scheme in history while maintaining a reputation as an innovator and leader. He
was influential in the move towards automating the market, became chairman of
the NASDAQ, and used that inside knowledge to swindle investors and fool

One of the turning points in Bernie Madoff's career was Black Monday, October
19th, 1987, where the market tanked, but how did he do?

Ms. HENRIQUES: He actually seemed to be doing very well from the outside. Black
Monday and then Black Tuesday for the NASDAQ market were just dreadful. I mean
it was the scariest time anybody in the market had ever seen. But Madoff's firm
seemed to fare very well. It had actually it was commended later by the SEC for
its performance during that dreadful week. But behind the scenes what we did
not know and what we - what I learned in research for this book was - some of
his biggest investors were totally terrified by that rollercoaster ride of 1987
and decided that they really wanted to take some of their Madoff profits off
the table. They wanted to withdraw money from their big accounts. Now Madoff
felt, and his explanations are very murky, as I say in the book - he claims
that they had an agreement, that they were going to reinvest their profits, let
them roll over, not make big withdrawal demands and then they did. They turned
the tables on him. They left him hanging out to dry, as he told me in my first
interview with him.

Now, that doesn't make a lot of sense. If he was pursuing the investment
strategies he claimed he was at that time, he ought to have been able to get
his footing. But what is certainly true is he faced enormous demands for cash
at that time, after the '87 crash, and at about the same moment he started
soliciting money from hedge funds. It's like a little faucet of cash was turned
on and suddenly became a gusher. So he survived that '87 cash crisis by tapping
into this world of international hedge funds. And as we later saw, Terry, that
just carried him, floated him higher and higher into prominence in the world of

GROSS: So do you date the start of the actual Ponzi scheme to post-Black Monday
and Tuesday in 1987, when investors started withdrawing money because they were
afraid of the turmoil in the market and he had to start paying them off?

Ms. HENRIQUES: I actually have a suspicion it started a few years before that.
I don't think we'll ever know. Madoff absolutely flatly refuses to admit that
the crime started any earlier than 1992. I don't think that's credible. I think
somewhere within the mid-80s you see a textural change, both in the number of
accounts he had, in what he was telling people he was doing with their money,
in the kind of volume of money he was taking in. So I think at least around the
mid-80s he was already committing some kind of fraud on some scale. Maybe he
wasn't ripping off every account, but I think he was starting to cheat by the
mid-80s, and then these withdrawals hit after 1987 and drove him, very quickly,
into trouble, and then he had to really start cheating on a massive scale.

GROSS: And he says 1992 was the turning point in which he really started the
Ponzi scheme. What happened in '92?

Ms. HENRIQUES: Well, in 1992 the SEC launched an investigation of one of the
major pipelines of money into the Madoff fraud. A little outfit called Avellino
& Bienes - lots of individual investors who had invested for a generation or
two generations with this small operation that grew out of Madoff's father-in-
law's accounting firm. That operation came under SEC scrutiny and was
investigated. Madoff had to suddenly scramble in two ways. He had to get
records concocted that would satisfy the SEC about these accounts. And he had
to come up with enough money to pay all these investors back at the SEC's

If you look at the steps that were documented that he took in the days of that
summer of 1992 it really is impossible to believe that he was not already
operating a fraud at that point.

GROSS: What do you think his motivation was for operating this fraud, this
Ponzi scheme? Was it for personal gain? Was it just to save himself because he
was over his head and he needed money to pay off investors? Was he just so deep
into deception? Did he like the game of deception? Do you have any idea what
his motivation was?

Ms. HENRIQUES: As I said, Terry, I think his motivation was this utter
inability to confront failure in himself. As long as he could succeed,
legitimately, he did. And when he could no longer be the huge success he wanted
to be by trading legitimately, he cheated. And I think is that hubris, that
unwillingness to admit defeat.

I have to tell you, in both of the prison interviews that I did with him, he
insisted to me that he hadn't really been defeated by the market turmoil of
2008. I mean he could have kept the fraud going. Even though the stock market
was in a death spiral and we were all scared to death, he insisted over and
over and in emails, you know, I had plenty of people who wanted to give me
money. Even then I wasn't defeated. I didn't fail in this fraud. I just got
tired and quit. And I felt that was so telling that he couldn't even admit
being a failure at his fraud. He had to claim that he was really in control and
he had just decided to stop rather than having been defeated by the failure.

GROSS: Yes. But he's very contradictory, because he also told you that he was
in so over his head. He said it was almost like, it sounds horrible to say it
now, but I just wanted the world to come to an end. When 9/11 happened I
thought that would be the only way out. The world would come to an end and I'd
be dead and everyone would be gone.

Ms. HENRIQUES: A shocking statement, isn't it?

GROSS: Yeah. That's the most shocking thing I've read I think.

(Soundbite of laughter)

GROSS: I mean...

Ms. HENRIQUES: It stopped me in my tracks too when he said it in that visiting
room. When he said it he glanced over at his lawyer and kind of shrugged and
looked a little baffled by what he said. I think it surprised him too. What he
was saying in that, Terry, I think was he just could not see any other way out.
And he's right, frankly. I mean the ironclad logic of a Ponzi scheme is you
flee. You're arrested. Or you kill yourself. I mean there aren't that many exit
strategies to a Ponzi scheme. And I think he recognized that, that he was just
never going to get out of it.

GROSS: Well, he had to give up in 2008 because he was in so over his head there
was no way out. Bear Stearns collapsed. Lehman filed for bankruptcy. Fannie and
Freddy were bailed out. The market collapsed. How did that affect Madoff? How
did he know, then, his time was up?

Ms. HENRIQUES: Well, money was flowing out, in part, because he had left
himself so vulnerable by accepting these very liquid accounts. Other hedge fund
managers around the world were being faced with demands from their investors
who wanted their money back. Some of their money was locked up in liquid
investments or in stocks that had suddenly taken a nosedive, but if you had
money with Madoff, you thought well, that's pretty liquid money. That's almost
like my money market fund. So that was the first money they started to tap to
repay their investors, and it became this deadly game of dominos falling, where
they would take money out to pay their investors and that would require their
feeder fund to take money out of Madoff - and Madoff kept paying those amounts,
paying those redemptions, but he could see that more money, far more money was
flowing out than was flowing in. He told me that by about Thanksgiving of 2008,
he was pretty sure he just wasn't going to keep this going.

Now I would say he was pretty sure he couldn't keep it going. But what he said
was, he didn't think he wanted to keep it going anymore. It was going to be too
much trouble to keep it going. So he could see the writing on the wall about
the end of November of that year.

GROSS: And he turned himself in, eventually.

Ms. HENRIQUES: Well, eventually he confessed to his sons. He planned to turn
himself in, but not on that timetable. He had an appointment with his defense
lawyer for the Monday after the day he was arrested. I think he thought he was
going to tidy everything up, stay right in control, get everything organized
the way he wanted to, had a bunch of checks he wanted to write out to family
and friends with the couple of hundred million dollars that was left in his
bank account - and then he was going to go to his lawyer and they were going to
go together and turn himself in. But it didn't turn out that way.

As I describe in the book, he was confronted by his sons about these plans to
make these big payments. And when they started to question him he lost his
composure and asked them to go with him to the penthouse nearby. And he sat
down with Ruth and his two sons in the study that he loved so much and told
them that it was all a fraud. That the firm was insolvent, that they were
ruined. And for some reason he seemed to think that having told them, he had
told his brothers the night before, that he still was in control. That he told
them I'm going to turn myself in. I just have a few more things I need to do.
And I think he expected that he was still in charge.

We know, of course, that what happened was his shattered sons immediately went
and consulted with a lawyer who said listen, you can't wait for him to turn
himself in. This is a crime in progress. We have to report it. And they did.
And he was, to his surprise, arrested the following morning. So that's when
things kind of spun out of his control.

GROSS: If you're just joining us, my guest is New York Times senior financial
writer Diana Henriques. Her new book is called "The Wizard of Lies: Bernie
Madoff and the Death of Trust."

Let's take a short break here then we'll talk some more.

This is FRESH AIR.

(Soundbite of music)

GROSS: My guest is journalist Diana Henriques. Her new book is called "The
Wizard of Lies: Bernie Madoff and the Death of Trust."

Now one of the things Bernie Madoff told you, and this is now a very famous
quote, is that the banks and the hedge funds he was dealing with, he said they
had to know. But the attitude were sort of if you're doing something wrong we
don't want to know. The implication being everybody was making so many profits,
so much profits they didn't want to know. They just wanted to keep making the

So what's your reaction to that quote?

Ms. HENRIQUES: Well, Madoff came to that opinion somewhat late. He did not make
that statement in my first visit with him in August. At that point I asked him
directly who else knew. And the only person he conceded might have suspected
was this large private investor, Jeffry Picower, who drowned in his swimming
pool about nine or 10 months after Madoff was arrested. He said Jeffry might
have known. How could he not have known? But he did not identify anyone else as
likely having known.

Now when I went back for the second interview in February, that's when he
trotted out this idea that well, the banks had to know. They must have known.
But the banks, of course, insist that he fooled them just as effectively as he
fooled everybody else, and those are going to be epic lawsuits, Terry. I can't
wait to cover them. The banks are fighting those allegations that had been
filed by the Madoff trustee and those cases are going to be extremely
interesting and hard fought.

But Madoff's own perceptions - in fact he told me in the second visit, he said
he did not realize until he read some of the trustee's lawsuits against the
banks how suspicious they were becoming of him in the summer of 2008. He didn't
realize that they were starting to look askance at him and starting to have a
few little doubts. The trustee's lawsuits raised some emails, some
communications back and forth that suggest that some bank executives were
starting to have their doubts.

But Madoff told me in February that he was not aware that they were suspicious
of him at that time. So I think we have to take what Madoff says about who did
know, who should have known, who might have known - we have to take that with a
grain of salt. Now let me say this though. Did they suspect that he was cutting
corners, maybe bending the rules a little bit? Probably. But remember the
times, Terry everybody was - as we now know. This was a time of very shabby
behavior on Wall Street as we look back on it now. So if Bernie wasn't
scrupulously dotting every I and crossing every T, that would not have looked
that unusual to the Wall Street of that day. It would not have automatically
suggested to suspicious bankers that he was running a Ponzi scheme. It would,
perhaps, just have suggested that he was, you know, no better or worse than
most of us on Wall Street.

MARTIN: Meanwhile, there's so many lawsuits now, pertaining to the Madoff Ponzi
scheme. It's raising a lot of questions like who has the right to sue; who can
really be held liable for the losses? Can investment banks, can hedge funds be
held liable? So what are some of the questions the lawsuits are raising now?

Ms. HENRIQUES: Well, we all have a stake in the outcome of them, in fact. One
of the biggest questions that's pending before the appellate court here in
Manhattan now is if you're trapped in a Ponzi scheme how are your losses going
to be calculated in the bankruptcy courts?

There is a heartbreaking division among the Madoff investors between those who
had managed to withdraw all of their original cash investment before Madoff
collapsed and those who had never taken out a penny and therefore lost all of
the cash that they had invested. That battle is going to shape a lot of what
the rest of us experience in terms of the law in the future.

As you pointed out, there are private lawsuits that are making their way
through the courts that are going to determine whom you could hold responsible
for misleading you if you find yourself in a Ponzi scheme like this. Those are
going to be important cases.

Another important issue is what happens to indirect investors? Many, about
5,000 investors had accounts directly with Madoff. And when I say investor,
that investor might have been an investment club with dozens of members, an
extended family, even a pension plan with hundreds of beneficiaries. But there
are about 5,000 direct accounts, more than twice that number of indirect
accounts, accounts with the feeder funds or with a fund that was a feeder fund.
So those indirect investors and their fate is another issue that's before the
courts. It's going to take years to wrangle these things out but we all have a
stake in how these turn out.

GROSS: The tragedy of the Madoff Ponzi scheme is not just like the gazillions
of dollars that private investors lost. It's also the deaths. I mean people
committed suicide after this. One of those people was Madoff's son Mark, but
others committed suicide too.

Ms. HENRIQUES: They did. And, you know, one of the most shocking things about
my interview with Madoff in August of last year was when he told me that, you
know, doing this little quick calculation, he figured that with the money that
the trustee might recover and the money that his early investors had already
gotten out of their Madoff accounts, that they probably were going to come out
better than people who had legitimately invested in the stock market. And then
in February he said well, look at all this money the trustee is gathering, and
I think everyone is going to come out whole. And it was so shocking to me that
he's just talking dollars and cents.

You can't come out whole. You have all these bereaved families. You have
investors who, as you say, faced with their losses, could not go on and killed
themselves. You have beloved homes that had to be sold, college educations that
had to be aborted. The human and personal wreckage that flowed from the
dollars-and-cents losses can never be repaired. And that's what is so
surprising to me that Madoff still does not see that deep human pain and
dimension that was caused by this crime.

GROSS: Were you able to gauge if the suicide of Bernie Madoff's son Mark had
any impact on Bernie Madoff?

Ms. HENRIQUES: I was. The physical deterioration I saw between my visit in
August and my visit in February was really shocking. I was quite stunned by it.
He'd gotten so much thinner, haggard. The belt around his trousers had to be
sort of looped under.

And whereas, in August he'd been very natty and very crisp in his uniform, when
he was talking with me in February there was a button unbuttoned on his shirt
halfway down and he hadn't noticed until halfway through our interview and then
he quickly buttoned it. But he was rumpled and disheveled and very intense. He
really did seem shattered by Mark's death, although he was very reluctant to
talk about it.

GROSS: Do you see Madoff as something, a not - excuse me for asking you to
diagnose him, but do you see him as something as a sociopath?

Ms. HENRIQUES: I swore off armchair psychology years ago. I'm not even sure I
know what sociopath means. I find him a fascinating character. I think we're
fooling ourselves if we think that he is somehow unique or rare in our market
environment. That's why I warn in the book against seeing him as some sort of
monster, some sort of inhuman psychopath, you know, who arises and can't be
stopped. He is not, as I said, he is not inhumanly monstrous; he is monstrously

GROSS: Diana Henriques, thank you so much for talking with us.

Ms. HENRIQUES: Glad to be here.

GROSS: Diana Henriques is the author of the new book "The Wizard of Lies:
Bernie Madoff and the Death of Trust." You can read an excerpt on our website,

Coming, Milo Miles reviews a new CD by a singer and guitarist from Niger. Milo
says he could become a star in the West.

This is FRESH AIR.
Fresh Air
12:00-13:00 PM
Bombino: High-Energy Sounds From 'Agadez,' Niger

(Soundbite of music)


Since the 1960s, the electric guitar has provided a bridge between
international folk cultures and modern pop music. An example today is the West
African singer and guitarist Bombino. His album "Agadez" is named after the
desert town he's from.

(Soundbite of music)

MILO MILES: The Tuareg people have lived in the Sahara desert of Western Africa
for thousands of years. The harsh desert environment gets woven into those who
can adapt to it. So the Tuareg have long been very protective of their
independent, nomadic-herder culture and society. But not unlike the European
Roma, Tuaregs have a tense, occasionally violent, relationship with central
governments. And as with the Roma, the Tuareg's modern music has become a prime
vehicle for both defiance and unification.

In the early 1990s, during an armed struggle with the Niger government over
water, land and independence, the child Omara Moctar, now known as Bombino,
fled with his family from their home in the city of Agadez. While exiled in
Algeria, the 12-year-old Bombino first heard electric guitar and was

By 2010, guitar players were no longer considered symbols of insurrection and
Bombino could return to Agadez and play openly. Based on his new album, he is
clearly a young performer with the charisma and probing imagination to become
the first Tuareg star. Here he addresses the oldest theme of all in "Tar Hani,"
which means my love.

(Soundbite of song, "Tar Hani")

BOMBINO (Musician): (Singing in foreign language)

MILES: It may sound peculiar to suggest that could be the hit single from the
album "Agadez," but currents of blues and rock run through Bombino's guitar
work, picked up from Jimi Hendrix records combined with influences from the
group Tinariwen, the founders of electric Tuareg music, and guitarists from
Mali like Ali Farke Toure.

Bombino is another example of a player who seems to plug in himself when he
plugs in his guitar. Still, he can cast a charming trance on acoustic,
particularly resonator guitar, which he often reserves for folk tunes such as
this one dedicated to the desert, my home.

(Soundbite of song, "Tenere")

BOMBINO: (Singing in foreign language)

MILES: The Tuaregs are Muslims most in tune with the Sufi tradition that
treasures poetry; music that draws the community together in festivals of
culture. Often, Bombino offers a stripped-down, garage-band treatment of the
tradition, with only a second guitar and some gourd percussion and handclaps to
back him up.

At times, I miss the richness of the Tinariwen band, and their album "Aman
Iman" remains the ideal introduction to Tuareg electric. But if you enjoy the
style at all, "Agadez" has to be part of the package. Bombino makes for a
strong frontman - he feels less like a collective than Tinariwen does - and
there's no resisting his headlong, six-string rave-ups.

(Soundbite of music)

MILES: Bombino's future is open. He says he's as happy to celebrate peace with
his music as to use it as a Tuareg call to arms. He'll spread the word this
summer on his first extended American tour. In the meantime, you can visit
YouTube for some hi-energy performance selections from a recent documentary
about Bombino. The clip that's listed as "Bombino Concert, Agadez" captures the
essence of his populism and joy.

GROSS: Milo Miles lives in Boston. He reviewed "Agadez" from the West African
guitarist and songwriter Bombino. You can watch the YouTube video Milo
mentioned on our website,

I'm Terry Gross.

Transcripts are created on a rush deadline, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of Fresh Air interviews and reviews are the audio recordings of each segment.

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