Some wished he had died sooner.
“One less thief in the world,” one Philadelphia-based investor in the $65 billion Ponzi scheme said upon learning the news.
Others wanted him to live a long, tortured life in jail. Many who lost vast sums have moved on with their lives, and didn’t want to be identified by name because of the pain and embarrassment.
Bob McMahon, a former IT employee for Madoff’s firm, said: “His fate was just a matter of time. He was never going to leave prison. In retrospect, it was such a tragedy. It was such a waste. He saw the advantages of technology, and pushed for that on Wall Street.
“Why didn’t he do something good with that?” said McMahon, who helped maintain some of the computer software.
On June 29, 2009, Madoff was sentenced to the the maximum allowable 150 years without parole. He served just under 12 years in a federal prison in Butner, N.C., before dying there .
Madoff was the ultimate villain — the public face of the Great Financial Crisis of 2008.
Victims of Madoff’s investment fraud scored a dubious honor: They had been swindled in one of the first-ever global scams.
Investors hailed from across the United States, dozens of countries, a few continents, and across social classes. His victims included Madoff’s Palm Beach country club pals; retirees in Chalfont such as Michael DeVita and his elderly mother, Emma; Holocaust survivor Elie Wiesel, whose nonprofit lost $15 million; Hollywood movie producers such as Steven Spielberg; and stars such as Philly’s own Kevin Bacon and wife Kyra Sedgwick.
Madoff proved that investment fraud can happen at the highest levels. His lengthy sentence was one of the very few to result from the 2008 crash for white-collar stock crooks, who historically are treated far less harshly than other criminals.
Just more than a year ago, Madoff and his lawyers petitioned for early release, citing his terminal illness. He was denied. When the court sentenced Madoff, it was clear that the 150-year prison sentence was symbolic for retribution, deterrence, and for the victims.
Some sounded the alarm in the years leading up to Madoff’s arrest in 2008.
Harry Markopolos, a competitor to Madoff, spent years chasing the man known as the “godfather of Wall Street.”
Markopolos sent lengthy letters to regulators warning that Madoff’s returns were too consistent and impossibly high, especially when the stock market was down, but as he penned in his book, “no one would listen.”
After Madoff’s arrest in December 2008, Markopolos’ testimony in front of Congress resulted in the Securities and Exchange Commission setting up a hot line and a powerful whistleblower program in 2011 that today pays out record amounts of money.
Chicago-based securities lawyer Andrew Stoltmann said that “the failure of the SEC to stop him despite detailed warnings by a whistleblower dramatically changed how the SEC handles tips related to investment scams. While his actions were horrific, his impact on those who are supposed to stop criminals like him was extraordinary.”
Decades of phony statements
Madoff’s $65 billion Ponzi scheme included phony profits dating back decades. According to the FBI, the actual cash stolen totaled about $20 billion.
So far, the court-appointed trustees in charge of sorting out who is owed how much have recovered roughly $15 billion of that — an unusually high recovery rate of 75 cents on the dollar.
On Tuesday, Irving Picard, the BakerHostetler lawyer appointed as trustee, issued a statement: “The pain experienced by the victims of Mr. Madoff’s fraud is not diminished by his death, nor is our work on behalf of his victims finished. My legal team and I are committed to continuing to identify and recover Mr. Madoff’s stolen funds and return them to their rightful owners.”
Madoff’s crimes lasted roughly 45 years, according to FBI Special Agent Patrick J. Duffy, who helped oversee the government’s probe. A South Jersey native and a 2002 LaSalle University graduate, Duffy worked as a KPMG accountant in Philadelphia before joining the FBI in 2008.
He and Special Agent Paul E. Roberts, who trained as an actuary, are the authorities on the six-year-long Madoff investigation. On Tuesday, they declined to comment on Madoff’s death.
The case involved the efforts of 14 agents, forensic accountants and financial analysts, and a platoon of prosecutors.
“A lot of Madoff victims thought it was too good to be true. But they were OK with that, they went along with it,” Roberts said in an interview in 2018. “Greed can silence people.”
Madoff’s crime dated to the Lyndon Johnson presidency and possibly earlier.
“In the early to mid-1960s, the scam began after Madoff opened up shop,” and later his brother Peter Madoff joined, Roberts said. He kept raising new money to pay off earlier investors.
To uncover the truth, FBI agents spread out in Madoff’s offices in New York’s Lipstick Building to investigate.
“We knew it was ground zero for the fraud. We needed a chain of custody for all the documents. It was important to organize,” Roberts said.
There, the FBI discovered nearly 1,500 boxes of paper documents and the keys to a Queens, N.Y., warehouse storing an additional 10,000 boxes of records — much of which the team combed through by hand.
More than a dozen Madoff employees helped manufacture phony statements, account balances, and profits, that the agents found. Madoff kept his darkest secrets from everyone — his investors, regulators and financial examiners, and even the workers upstairs where the firm’s legitimate broker-dealer operated.
At the time that Madoff started his phony hedge fund, Bernie and his brother Peter started a legitimate trading firm that grew to represent as much as 10% of all the volume on the New York Stock Exchange. Though successful for some years, the brokerage ended up becoming just a storefront for the Ponzi scheme.
The key players were Madoff’s right-hand man Frank DiPascali and “the Madoff five,” Duffy said in an interview in 2018.
They included Daniel Bonventre, who ran Madoff’s legitimate broker-dealer unit and who kept hidden a JPMorgan Chase bank account handling the fund’s money; Annette Bongiorno, a Madoff secretary for 40 years who also ran the investment advisory business; Joann “Jodi” Crupi, who managed large accounts; and computer programmers George Perez and Jerome O’Hara, who automated the production of fake records.
What was the key to Madoff’s made-up profits?
“There was never any real trading going on” at Madoff’s hedge fund, Duffy said.
Madoff’s staff would look at the day’s real trading from the upstairs brokerage firm, cherry pick winners, and create phony profits and losses using an IBM/AS 400 computer dating to the 1980s. They would then print out paper statements and mail them out — for decades.
Madoff would wire millions in and out of his checking account at JPMorgan Chase titled Account 703. And yet the bank didn’t flag Madoff for suspicious activity reports because “it was too profitable,” Roberts said.