Diana Henriques Gets Up Close and Personal with Bernie Madoff in "The Wizard of Lies"

Imus’s goal in talking to Diana Henriques about her new book The Wizard of Lies: Bernie Madoff and the Death of Trust was to get her to explain, in plain English, what Madoff did, and why he got away with it.
 
Henriques, a business reporter for the New York Times, knew Madoff peripherally over the years, and would sometimes use him as a source for stories she was working on. “He seemed to me, in his Wall Street days, as a plainspoken, down-to-earth, accessible kind of guy,” she said, adding, “I think if I met him at a party and had no idea who he was, I’d have said: pleasant, interesting, not particularly memorable.”
 
But being memorable was never part of the plan. “Madoff’s gift was not that he was ever the most charming man in the room,” Henriques said. “He made you feel like you were the most charming man in the room. That was really how he pulled people to him.”
 
During their first prison interview for her book, Henriques immediately noted Madoff’s remarkable weight loss. As for his willingness to tell the truth, Henriques believes he was very forthcoming about his family history. On matters of his Ponzi scheme, she said, “I do not buy his story that it started in 1992.”
 
Save for the disclosure of new evidence, nobody will ever know for sure when exactly Madoff started his grand hoax, but Henriques had some ideas. “I certainly think something shifted in the way he was dealing with his investors in the mid-1980s, at least,” she said. “A huge amount of money started to come in—far more than it’s credible he could have been managing at the level he was.”
 
Though many people surrounding Madoff have denied culpability and prior knowledge of his crime, Frank DiPascali, who worked for Madoff for more than 30 years and was his key lieutenant, has confessed knowing about the scam.
 
“Certainly DiPascali knew they weren’t making any trades,” Henriques said, then described a software program that allowed DiPascali to sit at a computer and look like he was making trades with Europe. In reality, “He was really just trading keystrokes with a guy down the hall at another computer.”
 
To Henriques, the notion that high profile, incredibly wealthy investors, like the Wilpon family, which owns the New York Mets, knew Madoff was conducting a Ponzi scheme and invested loads of money with him anyway does not hold water.
 
“Why would anybody leave themselves so dependent on one man?” she said. To accuse them and others, like the Fairfield Greenwich Group, an investment firm, of conspiring with Madoff is, in Heriques’s view, largely the result of hindsight being 20/20.
 
“You have to look at this within the climate of the times,” she insisted. “Did a lot of people in the hedge fund world think that Madoff was bending the rules a little, cutting corners a little? Probably they did. But everybody was, as we now know.”
 
The 1990s and early 2000s were, “a shabby era,” she said, in which an operation like Madoff’s raised few red flags, or at least did not raise them high enough to warrant an investigation.
 
Madoff’s personality was also key to his success as a Ponzi schemer. “Madoff made you believe he could pull a rabbit out of an empty hat,” Henriqes said, likening him to a magician. “He had that quiet credibility that people were hungry for.”
 
Imus wondered how Madoff might have fared if he’d devoted as much intellect, determination, and discipline to being a lawful businessman as he did to being a fraud. But Henriques pointed out that the wholesale trading house of Madoff Securities was, in fact, a legitimate enterprise, and one of the most respected on Wall Street.
 
Madoff’s ultimate decision to dupe so many of his close friends and family members out of millions came not, Henriques noted, from his need for money—though that was a nice side effect—but from his desire for admiration. “He needed the trust and the belief that people had in him,” she said.
 
He also had an incredible, almost delusional belief in his ability to pull it off. “You’ve got to figure, if he could imagine putting this thing together, he could imagine getting away with it somehow,” Henriques said. “He had to get up every morning thinking there’s some way out.”
 
But when she asked Madoff, in prison, how he thought it was all going to end, “It flummoxed him.”
 
-Julie Kanfer