The Wizard of Lies: Bernie Madoff and the Death of Trust (4 page)

The sons stand firm; they challenge their father’s explanation. Wouldn’t it be wiser to hang on to any windfall in case they need to replenish the firm’s capital? As they persist, their father grows more visibly upset. He rises from his chair, glances past them to the oval area beyond. His office is a fishbowl. How can a man with so much to hide wind up without a single spot in his office where he can talk to his sons in private?

He tells his sons that he isn’t going to be able to “hold it together” any longer. He needs to talk with them alone, and he asks them to come with him to his apartment on East Sixty-fourth Street. He calls Ruth to tell her that he and their sons are heading over.

Memories of their departure are illogically jumbled, shaken to fragments by the events that followed. Eleanor Squillari recalls asking Bernie where they were going and being told, “I’m going out.” Her memory is that Mark whispers something about Christmas shopping. One of the sons gets Madoff’s coat from the nearby closet and helps him into it. He turns its collar up, as if he is heading into a storm. Squillari thinks it is only about 9:30
AM
when she calls down to the seventeenth floor for one of the drivers to go for a car. But the driver later recalls it took nearly ninety minutes to return with the sedan. It seems unlikely that father and sons stood in their winter coats and waited for the car for an hour and a half when they could have hailed a cab or walked to the apartment in less than twenty minutes. It is a detail no one will remember.

Finally, they climb into the big black sedan, Mark in front and Andrew and his father in the back. They seize on a safe topic to discuss in front of the driver: Bernie’s grandchildren. They reach the apartment and take the elevator to the penthouse.

Ruth meets them, and they all file into the study that Madoff loves so much, a dark refuge of rich burgundy leather and tapestry fabric, with vintage nautical paintings on the wood-paneled walls and cluttered bookcases embracing the windows.

Madoff breaks down as he talks with his wife and sons; as he begins to weep, they do, too. He tells them that the whole investment advisory business was a fraud, just one enormous lie, “basically, a giant Ponzi scheme.” He is finished. He has “absolutely nothing” left. The business—the family business, where his sons had worked all their lives and where they expected to spend the rest of their careers—is insolvent, ruined. He says the losses from the fraud could run to $50 billion. None of them can take in a sum like that, but they know that millions were entrusted to him by his own family, by generations of Ruth’s relatives, by their employees, by most of their closest friends.

Madoff assures them that he has already told Peter about the fraud and intends to turn himself in within a week. And he actually does have several hundred million dollars left, he says; that bit is true. Before he gives himself up, he plans to pay that money out to certain loyal employees, to family members and friends.

By now, Ruth and her sons seem to be in shock, almost unable to process the news. Mark is blind with fury. Andrew is prostrate. At one point, he slumps to the floor in tears. At another, he wraps his arms around his father with a tenderness that sears itself into Madoff’s memory. When Andrew’s world stops rocking, he will say that what his father has done is “a father-son betrayal of biblical proportions.”

The brothers leave the apartment and tell the driver to wait for their father. They stumble through some excuse about going together to have lunch. They head south down Lexington Avenue, toward the office, but go instead to see Martin London, a retired partner at the New York law firm of Paul, Weiss, Rifkind, Wharton & Garrison who is also the stepfather of Mark’s wife. London is a formidable litigator, a scholar of securities law, and a richly honored attorney. He is also one of the people who has trusted Bernie Madoff. On Mark’s advice, he has invested with the family genius.

The sons tell him what the family genius has just revealed to them. London is stunned, too, but his legal instincts kick in. He immediately tries to reach a younger colleague at Paul Weiss named Martin Flumenbaum, one of the top trial lawyers in Manhattan.

Flumenbaum, a short, rotund man with a beaming face, is several hours away, at the federal courthouse in Hartford, Connecticut. Following courthouse rules, he had handed over his cell phone when he went through courthouse security this morning. He retrieves it and sees the urgent messages from New York.

When he calls Mark Madoff, who has returned to his downtown loft apartment, he learns about the surreal conversation Mark and Andrew had with their father earlier. Flumenbaum promises to meet them late that afternoon at his Midtown law office, in a sleek tower just north of Radio City Music Hall.

Christmas lights are twinkling in the drizzling winter twilight when Mark’s driver pulls up in front of the building. Andrew is already waiting on the sidewalk, and they walk in together. The driver waits, but after about ninety minutes, Mark calls and tells him to go on to the office party.

Flumenbaum greets them when they arrive. As they settle down to talk, Mark and Andrew repeat the story of their shocking day, adding a few explanatory details. Madoff’s money management business operates from a small office on a separate floor, they said. It has always seemed successful—they know he has a lot of big hedge fund clients, has turned rich potential clients away—but their father has kept it very private, virtually under lock and key. Dozens of family members have let Bernie manage their savings, trust funds, retirement accounts. Mark and Andrew know he hasn’t used their trading desk to buy or sell investments for his private clients—he’s always said he used “European counterparties.” He has a London office and spends time there, so it made sense.

Now nothing makes sense. Their father, a man they have looked up to all their lives, has plunged them instantly from wealth to ruin. He is not the financial genius and Wall Street statesman they always believed he was; he is a crook, a thief, a con artist of almost unimaginable dimensions. How could they have been so deceived about their own father?

These are not Marty Flumenbaum’s immediate concerns. Madoff has made it clear to his sons that he intends to continue his criminal behavior for one more week, distributing what prosecutors will soon be calling “ill-gotten gains” to his relatives, employees, and friends. This vast crime isn’t over; it is a work in progress. Madoff’s sons have no choice, Flumenbaum tells his new clients. They must report this conversation—this confession—to the federal authorities immediately.

Flumenbaum knows very senior people at the U.S. Attorney’s Office in Manhattan and at the New York office of the Securities and Exchange Commission. He makes some calls. When he reaches his contact at the SEC, he sketches out the afternoon’s events, the Ponzi scheme allegations, the estimate from Bernie himself that the losses could reach $50 billion.

There is a pause at the other end of the line, then the taut question: Is that
billion
, with a
B
?

Yes.
Billion
, with a
B
.

The investigative machinery grinds into motion. The FBI musters its financial crime team. The SEC, not for the first time, opens a case file labeled “Madoff, Bernard L.”

It’s not precisely clear how Madoff spends the rest of this day, the last day he will be able to go anywhere unrecognized. He recalls returning to the office; he remembers Andrew being there and telling him that he and Mark would be consulting a lawyer. As Eleanor Squillari remembers the afternoon, he does not return to his office on the nineteenth floor; she recalls trying to reach him on his cell phone numerous times but getting only his voice mail.

Mismatched memories also distort what happens on the rest of this bizarre day. For Bernie Madoff and his family, today is already etched in acid in their minds, in their hearts—but for the drivers and other junior office employees, it is simply the day of the annual office Christmas party. For them, its devastating significance will not emerge for another twenty-four hours. So, inevitably, some pieces of this puzzle simply won’t fit.

Still, Squillari feels sure she would have seen her boss if he had returned to his own office. There is a hand-delivered letter waiting for him there from Jeffrey Tucker at Fairfield Greenwich. In it, Tucker apologizes for not keeping Madoff better informed about pending redemptions and promises to do better in the future. “You are our most important business partner and an immensely respected friend…. Our mission is to remain in business with you and to keep your trust,” the letter says.

Perhaps Madoff simply goes directly from the lobby to the seventeenth floor, where Frank DiPascali and some of his small crew are working on the checks Madoff plans to distribute.

After the long meeting with Flumenbaum, Andrew Madoff returns to his sleek, airy apartment on the Upper East Side. Without even removing his coat, he lies motionless on his bed for hours—waiting, perhaps, for his world to stop reeling.

It never occurs to Mark or Andrew to attend the Christmas party already under way at Rosa Mexicano, a cheery Mexican restaurant where the firm held last year’s party. Tonight’s party is happening in the world they used to live in. They can’t get there from the world they live in now.

It does not occur to Bernie and Ruth
not
to attend the party. They are on autopilot, trying just to function. What possible explanation could they give for not showing up? Neither of them could even phone in their regrets without breaking down. Perhaps attending the party is simply the path of least resistance, the only option that will keep reality at bay for a few more hours, a few more days.

Like the images of the day, the memories of this evening’s party will collide and conflict, shift and shatter.

One person recalls that Madoff surprised the staff by holding the party a week earlier than usual. But it is being held the same week, almost on the same date, as last year’s—and not even Bernie could commandeer a popular restaurant on short notice during the holidays.

Some say Madoff never says a word tonight, just huddles silently with Ruth at a corner of the bar and avoids the crowd. Others say he has “a look of death on his face,” with “that thousand-yard stare,” and seems stunned, very tense, “out of it.” But Squillari remembers the Madoffs as their normal selves, “as if they didn’t have a care in the world.” Two other guests and longtime friends agree, except they say Madoff seems maybe a little more emotional, hugging and kissing family members and friends a little more than usual. Ruth chats with a few employees, too, going awkwardly through the familiar party rituals. But it must be a strain—after a half hour or so, she is ready to leave. Madoff recalls that they stay on “for a couple of hours.”

Everyone recalls “a taco station, a guacamole station, a buffet bar, and waiters walking around with frozen pomegranate margaritas, two of which could put a person out for the night”—and one of which could put clear, orderly memories of this ephemeral evening out of reach forever.

Besides the food and drinks, there is one other thing everyone agrees on: Andrew and Mark Madoff are expected to attend the party, and neither ever arrives.

As he and his wife head home, Bernie Madoff clearly does not expect events to spin out of his control as quickly as they will. His sons had ample time that afternoon to turn him in, yet no one has shown up at the office or the apartment to arrest him. No one has called to demand he come in for questioning. He feels confident that he still has several days to settle matters before he turns himself in.

T
HURSDAY,
D
ECEMBER 11, 2008

At about 7:30 on this rainy morning, FBI special agent Ted Cacioppi and his partner, B. J. Kang, drive up to Madoff’s apartment building at the corner of East Sixty-fourth Street and Lexington Avenue. Cacioppi, a powerfully built young man with close-cropped brown hair, has been up since 4:00
AM
, discussing the delicate nature of this assignment with his superiors, federal prosecutors, and SEC attorneys.