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In the series finale, reporter Steve Fishman finally reaches the core of Madoff's collapsed star: the forces that pulled $65 billion down a dark hole. With Bernie as our guide, we learn about unseen financial forces that continue to tug on us all, and why they might be impossible to control.

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00:00:00beginner 30 day free trial at audible.com and experience are unmatched selection of audio books and original audio entertainment including add free premium podcast like where should we begin with Esther perel listening as the foremost authority on Modern Love Esther perel meets with real couples and their stories become your stories join audible today and receive a free audiobook on us
00:00:33there's one thing is if someone had some knowledge and was helping Bernie perpetrate the crime or doing something
00:00:40and no time throughout this whole process anybody that the right thing
00:00:58I want to do is go to the Caymans and we can all come it's like this is crazy
00:01:03sugar Freak Show
00:01:19back when Bernie Madoff was still running his racket investors funds would reach out stop by is lavish office call them on the phone they had questions for him they would ask me that
00:01:36ghetto with a smile like you know something to say you know you don't want to talk to him
00:01:51it's all about I would say no not they would laugh and they didn't want to believe it
00:02:01and there you have it turns out Bernie had been confessing 4 years or trying to but actually this moment this is everything the meetings between Madoff in the bank's the feeder funds what happened these are the very institutions that powered and profited from made of they were the winners and it led me to wonder did they really want to know
00:02:30why should we believe that you're telling the truth now
00:02:35well I have nothing to lose and then you know I felt my applications basically to the say that upstanding citizen Bernie Madoff okay don't check all your skepticism but from where Bernice at he had of you unlike almost anyone else of the rig system that was his Edge will hear more from Bernie later my goal now to understand the forces that turned a rickety Ponzi machine into the world's largest kind
00:03:18I set out on the final leg of my journey next stop Greenwich Village
00:03:24alright here we go
00:03:29in Manhattan there's this little fast food joint
00:03:34Taqueria temakeria
00:03:40Steve Brazilian Japanese mashup I stop by with my producers for lunch in a burrito interview the entrepreneur who started this place Cynthia kippers and did you think that you would be starting restaurants in New York City not at all
00:04:06not at all I have a finance background I had work to the hedge funds and for a number of years investing in emerging markets that had gone to business school at Yale and I'm going to come out of its actually on the south side for a little bit working at an investment Bank in Industrials and transportation for Cynthia Sushi burritos on a relaxing second act there a business opportunity she's trying to create the next fast food chain
00:04:32the restaurant world is competitive for sure but for Cynthia it offered an advantage to her it was transparent not like the investment world back in 2006 Cynthia was working for a wealth management firm in San Francisco Presidio when she first heard about Bernie Madoff clients came to us and said hey we find that everybody sort of talking about it would you take a look at it and so she did she was impressed with how consistent the returns were but she didn't understand it if I can't understand it I'm not someone that should have said so if I can't get it
00:05:14somebody else must be able to get it I'm just not going to get there you have to be able to understand all the way down to where something is coming from you I have to do a little work to get there but you should be able to understand what a certain driver is Cynthia doesn't have direct contact with me. She's dealing with Fairfield the biggest of the Madoff feeder funds so she makes a trip to New York City to meet with Fairfield and get more information typically when I'm in New York you can see by funds add a busy day she does remember a few things from her visit to Fairfield office by remember it feeling a little claustrophobic in the there were maybe four of us around a conference table in small room connected to Bermuda fairfield's offshore headquarters I believe I'm on the phone from Bermuda was fairfield's Chief risk officer the person who is supposed to make sure made off is doing what he says he is doing
00:06:13Cynthia asked question after question about the strategy she doesn't need to know the secret sauce but she needs to understand why it is so consistent if she's going to risk her clients money and you don't always get information that's up to the minute with hedge fund managers but they're pretty much always willing to give you back data so you can say I don't need data for the last 2 or 3 years but something 5 years ago that I can look at the stale data it's not really telling me what your secret sauce is but I can press that and understand how that return is generated but Fairfield wouldn't give her anything red flag they told her I had that information and he had done that work but that he couldn't share it with us he would go backs of saying this is a unique strategy that we are in touch with Madoff and we review them on a regular basis the strategy does shift you got started very general type
00:07:13of answer is he said he's basically saying trust me
00:07:19so that right there is also a red flag and there was another red flag waving in the wind Fairfield told Cynthia that made us fun was closed he wasn't accepting more investment but Fairfield would be willing to sell some of its Madoff Holdings to Cynthia's investors why would you sell me something
00:07:39but you're not going to tell anyone else but makes me special what makes me special
00:07:44and you're not special in this industry if it's a money it's did you ask
00:07:54why you're telling me that this fund is closed and you're going to give me your capacity why would you sell 2 oz of course that's my question that should be is where the really big red flag came in they said they're at capacity they're closed funge but we like Presidio Financial Partners and we like your client base we're going to let you guys in and we're going to sell some of our stake to let you guys in to Cynthia something smelled well fishy and finance and that's the end of the game Cynthia advised against investing this might be a greater force game was Fairfield playing her for the greater fool this is just one person selling on to the next without really a layer Village in a layer of diligence that's due diligence making sure things are
00:08:54they're supposed to be Cynthia couldn't get close enough to see anything to be sure of anything so she walked away remember the guy on the phone in her meeting on it obviously first of all this conversation never took place on The View
00:09:11okay this is a recording of Amit on the phone with Bernie it's a conversation obtained as evidenced by Massachusetts authorities and used in a lawsuit against Fairfield Bernie made this call because he was in a bind he lied to the SEC and he was panicked what would Fairfield say when the SEC called domestic you know the better you are.
00:09:42Venom business for 45 years this is the thing that you also have to understand that you guys are not I'm not part of the of the execution piece of this strategy and that's important of course it's Cynthia says Fairfield told her something very different according to her on that call they claimed they had all the answers
00:10:26Middle School I first eat only SEC he didn't trade options as part of his strategy then oops he told them he did years ago what is the sound that portable bottle don't worry about whether options are involved just tell them you don't know anything at all with these guys because you don't have to be got supposed to have that knowledge
00:11:01who else had heard about made of and seen a big red flag options are traded like stocks what are those Traders heard back then options were traded in the bucket down a few steps like a giant swimming pool and it's filled with Traders it's too loud you're always people sounds like a dim it's like you know a bunch of people yelling and then you have to be able to get something out that sounds slightly different so people can hear you so would you do something to talk I or what is Scream this creamer is Mark Cooper He's a former options Trader is a ton of experience Cooper and heard a lot about Madoff it came up a lot with potential investors at some point The Reeling weather was like on the handshakes good by the Sea by the way what you hear about this made off for you know everybody was asking about it I'll just about made of it made him curious on the market making business for the trading business if Nate off has
00:12:01some way of making money that we could understand and replicate we would want to do it also it's business were there to make money if they could they rip off Bernie strategy so Cooper got his hands on one of Madoff monthly statements actually have the trades on the street so we were very excited to see his transactions for a month to see if there was any kind of pattern or any or something that we could take a look at it and say no this makes sense we want to do it also Cooper poured over the statement trying to determine doesn't make any sense
00:12:43does it you know is it possible that this volume traded that day in at this price in that strike
00:12:52and because the sheets showed that level of detail about Metals options trading he's only trading certain days those days Madoff was trading enormous quantities according to the state volume would have been tremendous to have occurred on just a couple of days a month you know it would have tilted the pitch tremendously the market works on supply and demand if someone buys as many options as Madoff claim to buy prices Skyrocket volume we figured he'd have to do prices would have changed dramatically not even 5 or 10% but like 30-40 50% maybe more to Cooper something does not compute the volume isn't there so this is like this just isn't happening the way it's being presented plus if main office training billions of dollars worth of options
00:13:50it should have been really easy to track down somebody anybody he was trading with the buyer or the seller versus seller there's a buyer because he's our contracts takes two people to make the contract right in a 2012 deposition Madoff said that if anyone had bothered to call around they probably would have said I can't disclose that
00:14:18but since I wasn't doing business with them they would say no Cooper did call his contacts in the options world and guess what nobody seemed to be training with me taking together one gigantic Market rocking volumes that didn't Rock them or give them to know counterparties Cooper knew it didn't make sense to me it was more the simple math of it this doesn't make any sense there's nothing here during a meeting with investors one of them turns to Cooper and his Partners in kind of stage Whispers by the way what are you guys what do you think of Madoff you know we always start off with this double negative for we don't want to call him a fraud or anyting but you know I wouldn't typically call the chairman of the nesd of bra do you know if you know you wouldn't want to be calling a high-level person on Wall Street is very wealthy and manages billions of dollars anything right so we're just
00:15:18in all we're just turning around and saying if I were you at take a look at the volume hard trying to figure out where the trades are done talked to the counter parties and then we can give a little detail while we have all these people in the bed we saw some people straight and sheets and kind of the transactions didn't make sense against what are guys were trading in the pit and we didn't see the kind of volume that would have been needed for him to be managing billions of dollars
00:15:44Cooper like Cynthia was trying to look inside Madoff separation to see how the sausage was made he got deeper than Cynthia did got access to more information he knew something was wrong so here's the question that bugs me for the people who got closest like the funds why didn't they do the simple arithmetic
00:16:07and this is where my years of research and hundreds of interviews have left me when the sign seem so obvious why did those with power the funds turn a blind eye stay with me more after this break
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00:17:27so here's the question that bugs me for the people who got closest like the funds why didn't they do the simple arithmetic they had thousands of a duster billions of dollars Javier Blakemore the lawyer who sued Santander's optimal fund he is a nickname for the funds he calls them and they blurs and the neighbors were essentially these aggregators of funds but Optima being one of them earn commissions and structurally all they want to do is good retail investors or investors of any size to give them money they can charge a commission on give it to Madoff and the structure itself created and sent it to look the other way and all of a sudden you have the local swindler with a massive distribution Network Javier's lawsuit got tossed out on a technicality but before that happened he got access to information deep inside the optimal operation
00:18:27my producer Kelly Prime and I were slack-jawed at what he found Xavier medicine email about made of written by an optimal employee the day after his meeting with that it's Chris Cooper it says suppose this was the largest Ponzi scheme in history and palatable but we're not the first to suggested that is remarkable
00:18:50they called it so they called it and so the question is you can have all kinds of discussions the point I come back to his why didn't you disclose exactly this to your best and the facts are that optimal North Stanton there chose to disclose the doubts they had and that's why they don't
00:19:16did that's where I got to the end of the alley
00:19:19and it is blind alley the idea of a Ponzi scheme cross their minds but that email goes on to say quote even in a worst-case this scenario is more than a little unlikely quote Optima walk right past it the email went on the raise more questions and ends by saying they should keep raising these questions quote given the size and significance to our business plan quote Madoff was very significant to their business Optima was a 3 billion dollar fund and they got a cut of every dollar they passed along
00:19:55humor me let's follow the stench just a few more steps
00:20:00during the short-lived class action suit Javier took the deposition of Rajiv Jet Li gently is an Indian national based in England he's straight lace proper uses words like shopping bailiwick but in his way he's a badass I like to think of him as a pro wrestler known as the hassle Factor if you got $100 and I'm going to be asking any and he has only got $100 worth the hassle Factor had created a top-notch due diligence operation at another fund Gately thought he been hired to make the optimal due diligence team
00:21:00Top Notch to my direct reports
00:21:13I basically said no everything according to jaitley he thought his boss Manuel echeverria didn't want the hassle Factor rocking the boat I think he was I would spoil a very good relationship why do you believe that he saw you make the meeting that I had in February 2006 with my dog
00:21:55manual how to play meeting with my dog to get answers and once he got in the ring he was relentless
00:22:36I know you wanted to see a trade just one trade from beginning to end how to do his job to write up a due-diligence report but gently didn't feel he had enough information to work with I think they were more concerned about having reports that a whole lot in Jay please view but alright Jake Lee came up with a workaround he asked his colleagues on the investment side to verify the trays you know at least one
00:23:36when I then right now to see how to dry in a we have to calm you down at this point to be a grease right so gently rolled up his concerns but according to Jade Lee that wasn't the kind of report his bosses wanted his bosses told a junior investment analyst draft a new report to jaitley this was an insult the publication that Junior analyst said he was in touch with Fairfield who said that they told him that they had been able to verify a trade never mind that Fairfield said that
00:24:36was more than a decade ago the junior analyst wrote up his report after report in the picture looks like remote
00:25:13I mean if you tell your inventor that you know you're investing blind and he brought it up with this ring manuals approach to most things when they was the antagonist in the zip code for sale well you know where can I get paid and ready one conflict between I resigned was because I felt the spirit and so so the hassle Factor quit and Optima it's 3 billion dollars with Madoff
00:26:13show me what manuals salary of a thought it was but this one and a half percent of a lot it's a lot of course I didn't withdraw its money and lost everything. Was charged with criminal Mis management and unjust enrichment in Switzerland the judge considered Jake me story but decided that made all had such a sophisticated fraud at you Maria could not have been expected to uncover it she found him not guilty after the ruling echeverias lawyer crowed the decision gives echeveria back his dignity honesty and integrity and he's glad he's been recognized as a victim
00:27:07what do you think of that
00:27:09I think it's a tragedy attorney Javier Blackmore again he had all the indications that Madoff was a fraud without being able to prove it and he look the other way I don't know how you keep your dignity when that is the case
00:27:25it feels counterintuitive but it is true optimal and echeveria they didn't violate any laws this isn't that normal illegal incorrect it is exactly what is required of funds that's all a spokesperson for San Tan dare Optimus parent thing sent me this statement
00:27:46optimal investment Services acted diligently and used all appropriate measures in accordance with industry standards to supervise its investments in Madoff securities
00:27:59so what happened to the investors well the bank stepped up right away and offered them a deal not all of them took it folks like Javier's class-action participant's didn't but the vast majority did like over 90% And the bank settled with the trustee the upshot the investors are still waiting to see how it all turns out but Optima was only one of many funds it wasn't even the biggest the biggest fun was Fairfield the fun that Uma temakeria Cynthia met with Fairfield to the commission on the every dollar that passed on tomatoes and they passed on 7 billion dollars according to Bernie for the Fairfield Inn admit any wrongdoing they settled a fraud suit with Massachusetts authorities and um it was not criminally charged in other words Fairfield
00:28:59and I'm at Vijay bergaya they didn't break the rules a lawyer for Amit told me that I'm a did his job well that job was limited to making sure the trades reported by Madoff where within the parameters agreed upon years before he also told me that I'm its reaction on hearing that Madoff was a fraudster was quote complete and utter shock and disbelief unquote
00:29:27and so we got one more stop on this Mystery Tour I started with Bernie went inside his operation where his unflappable crew made it all seem real or real enough for the SEC at examine how Bernie's meltdown wreaked havoc with victims lives that is let me to the funds in the banks the best financial Network that took that local swindler around the world and that's where the story changed for me yes Madoff was patient zero but it was the bank's the funds which transforms into a pandemic they marketed him around the world that promise to safeguard their clients money but to me they seem to ignore the war to me didn't seem fair like a lot of the public I wanted some answers at least a chance to ask questions
00:30:23I sat down with us attorney for the southern district of New York preet bharara about those feeder funds it was as if Madoff was saying to these funds
00:30:36here's a hundred million dollars let's just keep this quiet now okay didn't really say that but he kind of did
00:30:43did you see that
00:30:46if the question is was there a lot of sleazy self-interested conduct over the course of years so the people can make a lot of money and not have to start out the truth and not upset the apple cart or slay the Golden Goose whatever their metaphor is appropriate to use the answer is yes
00:31:07that stinks
00:31:09I pressed him why haven't we seen more prosecution's of fun managers folks who poured gasoline on this dumpster fire why haven't the US attorney rounded up the lot of them these Savvy professional who managed to hold their hands out while tucking their heads into the sand as a blunt tool criminal prosecution this country is hard it's supposed to be hard the founding fathers made it hard and you have to prove a crime to delete crime in which you have to show that what was going on the person's mind was corrupt and they had in 10 do something a knowledge about something
00:31:49Beyond Reasonable Doubt to unanimous Curry from the general public and it's not always possible if you don't have a cooperating witness we're going to the statute available or you don't have a recording to prove that somebody committed a crime you don't have the oven to do so so if that's an unsatisfactory answer the world limited by what the law allows and what the facts show
00:32:14but preet bharara tells me that in this case he did get the bad guys 15 people that we have proved criminally in a court of law either a trial or through guilty plea after they had some responsibility for this frog most of them have gone to jail he's referring to mid-off back-office people folks like Frankie pascali and the one man in charge of the one-man accounting firm working out of a strip mall I mean 15 people were in 5.5 Madoff employees Went to went to prison
00:32:51in a way they're low-hanging fruit I mean they like notebooks at high school diplomas to the outside it looks like
00:33:01nobody who has a Savvy Financial history nobody's experience in the financial services industry nobody with an MBA Goes to Jail in the Madoff case I mean why weren't the people at the hedge funds held accountable if you hold accountable criminally people who you can prove had knowledge and violated the law Beyond A Reasonable Doubt front of a jury and we prosecute all the people so far that we were able to prosecute and said we are left with only made off in his back office crew locked up and for the rest of the financial system business as usual what people don't recognize is the fact that Madoff was so very much you sent part of the fabric of the financial communicate this is David Sheehan head honcho of the cleanup crew tasked with recovering money for victims
00:34:01we're going to protect against all that is part of the fabric is that what happened with Madoff as you got bigger and bigger
00:34:13and you need it more more cash but that's the mother's milk of a Ponzi scheme is cash so he has to go out and get more of it creates bigger and bigger funds get more more colleagues all bringing money in the thing is this I don't want to overstay to Bernie was her I did I certainly don't think it was any genius mathematically or otherwise he certainly wasn't a computer genius who was none of those things right with someone who took advantage of a brokerage system in this country that if someone wants to
00:34:45perverted as he did and make it into a Ponzi scheme
00:34:49they can Bernie couldn't agree more it's a total disaster and where we begin with Bernie Madoff the Ponzi Supernova who burn so brightly for a time I operated at every level of this industry and was witness to all the rules regulations I was on the committee that build them I showed them the Federal Regulation committee which general counsel's of every firm primary for a wall speed and for longer than anybody in the industry and I watched general counsel's of major Farms knowledge at the Brunswick violating the Wolves left and right the CEOs knew what was going on so
00:35:47none of this makes me feel any better okay and if anybody else could be better but
00:35:57it's it's it's it's pathetic but that's what it is that's what it going on and it's something that I knew all along and maybe he has a greater impact on my psyche than I thought that about to to-do list but as to whether or not to leave me an address line to know one way or the other will do the right thing the right thing in the morning but I feel like at this stage of the game it's it's what I want to do
00:36:55thanks to my reporters for Latin American victims Martina Castro Pablo Muller and Sarah quevado and translator Philip K and thanks to ireporter for us victims Jane Cowan special thanks to Danielson eat Dan Lakeman Kathleen Brady and Amanda Remus a very special thanks to the whole audible Originals team Eric nuzum Jesse Baker Vanessa Harris Olivia Nate Norman and Beverly see original production or production team is Kelly Prime and Todd Whitney with help from Jen Cohen I'm produced by Alan horn Colin Campbell is our editor our score was created by Darren gray Mike Cruz in Glencoe tri-r audio is mixed by Mike Cruz Ponzi Supernova. Com
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