Madoff: I'm a Victim, Too

Bernie Madoff is feeling pretty grand these days. He's got reporters (including myself) hounding him for interviews and his insight into Wall Street and its misgivings. He's the toast of the federal prison in Butner, NC., where he's serving a life sentence for carrying out the greatest white-collar swindle of all time -- a Ponzi scheme that cost investors some $50 billion.

And, at least in his mind, he's getting ready to help the prestigious Harvard Business School develop course work for its students from his jail cell at Butner. In one of the handful of interviews he has given since his arrest in 2008, Madoff said that Harvard is interested in his input to develop a course in business ethics. Now he tells FOX Business that the school's focus is in "building an Entrepreneurial course" not just on his career as a swindler (though that will certainly come up), but also his pre-phony hedge fund days, when Bernie Madoff was considered one of the best traders on Wall Street.

The course, according to Madoff, will focus "around my experiences building my market making and Prop trading business and my role in NASDAQ and electronic trading. I have been approached by a number of other business schools but have only committed to Harvard."

What most people forget -- and what Madoff desperately wants everyone to believe -- is that for most of his nearly 50 years on Wall Street, he was a good guy -- a successful trader and a pioneer. He helped invent electronic market-making where computers rather than brokers on the floor of the New York Stock Exchange match buyers and sellers of stocks, culminating in the creation of the Nasdaq Stock Market, where he once served as chairman.

In Madoff's mind, his phony investment business, which he began in the late 1980s, doesn't fully explain his contribution to the modern financial services industry, which is why so many business schools are dying to work with one of the world's most notorious white-collar criminals.

"Some strange turn of events, HUH!" he writes about academia's interest in what he has to say.

Yes, if they were true.

"The entire matter is not true," a spokesman for the Harvard Business School told the FOX Business Network. "The business school is not working with Bernard Madoff on anything."

In fact, it's hard to believe much of what Madoff says about anything. Over the past six weeks or so, I have been having an on-going conversation with Madoff over emails and on the telephone about the investment scheme which brought him down, and what he knows about Wall Street.

On the surface, Madoff appears both candid and believable about his own career and about what he says is the scandal-ridden business he was part of for the past half-century, though many of his musings often lead to dead ends, or like his Harvard connection turn out to be outright lies.

But that hasn't stopped Madoff from trying to change reality and using the media frenzy for an interview to achieve his goals. So far he has been interviewed by a handful of print reporters.

Meanwhile, just about every major television media outlet -- including FOX Business -- is asking for the first on-camera interview with the convicted swindler.

Rumors are swirling that the "Today Show" has been to Butner to shoot footage in preparation for the first on-camera spot with Madoff. Madoff won't comment, other than to say that he has made one commitment to one major network that may or may not pan out and the decision is "weeks away."

While it might be hard to get Madoff in front of a camera, it was pretty easy getting in touch with him. I simply wrote him a letter asking for a meeting. Within days, he contacted me by phone. Madoff was always charming and respectful in person, and he hasn't changed. I had interviewed him several years ago for a book I did about former NYSE Chairman Dick Grasso, and he sounded like the same old Bernie.

He apologized for calling me late in the day; "I know you must be out at dinner so I won't take up too much of your time," he said. He was right; I was getting out of a cab, going to meet people at Sistina on the Upper East Side, the kind of place Madoff would have frequented when he was a free man.

He then told me I need to get on the federal prison email system, which took about a week, before we could begin more formal conversations.

In those conversations, Madoff at times comes off as the ultimate straight shooter. "Let me first say that none of my comments should in any way be taken as justification of my own wrongdoing," he writes in one email. "That would be impossible."

His observations about Wall Street seem pretty spot-on as well. "It is unfortunate, to say the least, that the financial services industry is so corrupt and stacked against the typical investor," he wrote in another email.

One major reason for the corruption, Madoff says, is that people like him play a direct role in regulating Wall Street. He references his role on an influential securities industry committee that worked with federal regulators to develop new standards of conduct.

"I served for longer than any other industry member," Madoff writes. "As you probably know the other members are the general counsel for every major firm and bank. I always felt that it would make a great book except nobody would believe it was not a work of fiction."

But like most things involving Bernie Madoff, if you dig enough, you discover that much of what he says lacks credibility. Moreover, it's hard to believe such statements are not part of a new swindle, only this time, instead of enticing investors into handing him their life savings to invest in a phony hedge fund, he's looking to swindle both the media and the general public to believe that he is both still important, and at bottom, he isn't such a bad guy.

Madoff contends, for example, that he's not really the world's greatest swindler who, with the help of a few clerks and back-office people, carried out a two-decades-long white-collar crime spree. Rather, he's somewhat of a victim who turned to crime as a way of dealing with unscrupulous Wall Street types that are found all over the financial services business.

His explanation of the Ponzi scheme goes something like this: His investors demanded returns larger than what he could get through normal, above-the-board trading strategies so he began to create fictitious results. When investors wanted to pull out money and pocket their winnings, he would attract new capital in classic Ponzi-scheme fashion, to meet their demands.

He intended the scheme to last just a short time, until market conditions changed and he could crank out the type of returns necessary. But Madoff turned out to be a pretty good Ponzi-schemer as the fake fund kept growing with bigger and more influential clients.

He tells me he was "trapped into the greed of others," such as his large clients who demanded high returns and looked away from obvious red flags about his claims of producing consistent year-after-year high returns, to keep the fraud going.

"I made a terrible mistake with the help of others but the fact that these other complicit parties were complicit does not excuse me for allowing myself to be trapped into the greed of others," he writes in one of his emails. "The only reason my LARGE investors continued to give me money was they all believed that I was front running (illegally trading ahead of customers) like everyone else and they felt this explained my consistent performance."

Madoff adds that "The Swiss were especially fond of this explanation and that rumor swept thru Europe for years. They were sure that it was o.k. because all the other firms were also doing it. In their warped minds this practice was no worse than illegal bank accounts."

The fraud came crashing down, of course, in the fall of 2008, when the big European banks, fearing the Wall Street financial meltdown, began to abandon him and withdrew more money than he could raise.

Madoff doesn't mention how his "terrible mistake" had real human costs -- multiple suicides (at least one investor and his son Mark took their own lives in the aftermath of the scandal), the estrangement of his family who walk around with the curse of the Madoff name (his wife, I am told, no longer speaks to him and his other son, Andrew, openly displays his disdain for his dad in conversations with friends. Lawyers for both declined to comment), or the financial ruin of many of his clients other than the big European banks and investment funds in the U.S. that he holds in such low regard. Madoff's victims include numerous charities and once moderately wealthy individuals who entrusted him with their retirement nest eggs and lost much of their net worth.

But that, of course, wouldn't fit in with the new narrative Madoff is building for himself in jail as that of a reluctant swindler who was in a business that's filled with them.

Consider, for example, his take on the current crop scandals on Wall Street involving using illegal insider information to make money trading stocks.

The Justice Department is conducting a wide-ranging probe that has snared traders at major hedge funds, but Madoff says the government is really late to the game and missing most of the big cases. Insider trading, he says, "goes on at every major firm's Prop Desk and at every level of the Industry in plain sight and is the easiest thing to spot with today's order trails."

He singles out SAC Capital, the large hedge fund run by billionaire investor Steven A. Cohen, as among the chief culprits. SAC, which is being investigated by the Justice Department as part of its probe, says it has done nothing wrong, and neither the firm nor Cohen has been charged with civil or criminal securities law violations.

But Madoff says SAC along with its major competitors has been relying on insider tips for years.

"The only reason the regulators are addressing it now is because of the uproar in Congress (about insider trading abuses) How did Geithner and Paulson escape as they did?" he writes referring to former Treasury Secretary Hank Paulson and the current one, Tim Geithner, though it's unclear what they have to do with insider trading.

"The worst kept secret was Steve Cohen's trading as well as most other hedge funds," he adds.

How does he know SAC relies on insider information? Madoff says that while he "never met Steve Cohen," he once called Cohen and told "him to stop his managers from approaching my traders with their offer to give them info if we let SAC execute our commission business."

But a spokesman for SAC Capital counters that "Steven Cohen has never met or spoken with Bernard Madoff and any such assertion is absolutely false." "SAC is not and has never been a broker/dealer and does not execute trades for other firms."

Making Madoff's claim even less credible is the fact that regulators have routinely pointed out that Madoff carried out his scheme with little if any trading whatsoever.

In fact, the "traders" he was referring to would have worked not for him in the investment fund but for his sons, Mark and Andrew, who ran Madoff Securities, the market-making arm of the Madoff Empire. It was the market-making company that Bernie Madoff basically steered clear of in order to devote his time to run the fake investment fund, according to people with knowledge of the matter.

What is motivating Madoff, who will die in federal prison, to continue to spin what looks likes tall tales? Dr. Keith Ablow, a psychiatrist and Fox News contributor says that in order to carry out Ponzi scheme for so long, "Madoff developed an artificial sense of reality. Now even in prison he is trying to do the same thing."

Ablow also says that enticing the media to believe he is still important with places like Harvard, or has inside knowledge into how Wall Street really works fills a "pathological need for Madoff to make people believe he is special and capable of extraordinary talents as he has done for so long in his life." Ablow believes it's that "pathological narcissism" that drove Madoff to prove to the world he was a great investor even if he had to lie and cheat his way to the top.

And that need to make people think he is not such a bad guy and really important will only grow, Ablow says. One reason: As Madoff shops himself to various news organizations his son Andrew may soon be coming out with his side of the story that competes with his father's jail-house version.

Madoff told me during a recent telephone interview that Andrew "is talking with '60 Minutes,'" the television news magazine, about an interview. "Well that's good, or maybe not so good," I responded, knowing Andrew's anger toward his father.

"Yeah, probably not so good," Bernie said with a dry laugh.

Aside from losing his brother, Andrew, of course, lost his career on Wall Street. Many people on Wall Street still believe that he and Mark knew about the scheme or were complicit in it even though to date, neither has been charged with any role in their father's investment scheme. Bernie Madoff says he acted alone.

But Irving Picard, the court-appointed trustee whose job it is to return money to Madoff victims, isn't buying these accounts. He says both Andrew and Mark lived a lavish lifestyle paid for at least in part by money their father stole from the investment fund, and has sued both brothers to return millions of dollars he says was improperly siphoned away from investors.

An attorney for both men has said the suit is "without merit," and a few people on Wall Street agree that the sons were victims as well. "The kids basically ran the clearing business that the old man had almost nothing to do with other than the name," said one senior Wall Street executive with direct knowledge of the Madoff clearing business. "But when the scandal hit, and [the] Madoff name turned to mud, the clearing business was toast. No large investor would send [an] order through anything named Madoff. Andrew has every reason to be pissed."

As far as a television interview goes, neither Andrew's attorney nor a spokesman for "60 Minutes" would comment on the matter. But a person close to "60 Minutes" tells FOX Business an interview with Andrew is clearly in the works. "It's still in the talking stage," this person said. "It's a plan, and until the guy actually sits down you don't know if it's ever going to happen."

If Andrew does tell his side of the story, Bernard Madoff may face the most formidable obstacle in his attempt to recreate himself beyond his reputation as one of history's greatest crooks, which may provide a clue as to he's looking for a major media splash of his own.

During our emails and chats, Madoff canceled a face-to-face meeting with me scheduled for this week because he "agreed to hold off on any interviews" until the network he has the prior commitment with can "do their program."

When will that happen, I asked? "It is weeks away if at all," he told me during a recent telephone interview, adding that I should "be patient" and that my turn will come.

Maybe so, but keep in mind, one way Madoff built up demand for his phony investments -- aside from boasting returns of 12 percent to 15 percent a year in every year of its existence -- was his exclusivity. Not everyone could get into the fund.

By making entry so difficult, many investors looked beyond the fact that such consistent returns are a mathematical impossibility, thus they accepted Madoff's boasts of high returns and denials that he was cheating even as these statements were questioned by few more sober analysts over the years.

Is the exclusivity of a Madoff interview now making competing news channels forget they are dealing with one of the world's best liars who is intent on remaking his image? According to media experts, it's easy to be manipulated, particularly by someone as skilled as Madoff, when a major scoop is on the line.

"Now with heightened competition from the Internet, bloggers and shows like TMZ, mainstream journalists are facing even more pressure to get the story first including this one," says Robert Steele, Distinguished Professor of Journalism Ethics at DePauw University. "Interviewing him is one thing, but to give someone like Bernie Madoff who has hurt so many people, a media megaphone to lie is counterintuitive of the values of the journalism profession."

Ethics aside, the race to be the first network to put Madoff in front of the camera goes on, as does Madoff's desire to make himself into a different person. "I could go on with this subject forever but it will have to wait for a later date," Madoff concludes in one of his emails. "I will leave you with one thought. If it was my intention to steal people's money as is being depicted, I would have taken the 5 billion in cash and financial instruments that was in my Chase and BNY bank accounts and disappeared. I certainly had the time and Banking connections to accomplish this once I realized that I could not dig out of my hole."

That excuse sounds so good it's hard not to believe him.