Madoff on Madoff: Wealthy clients help his stock rise on Wall Street
This is the second instalment in a five-part series on the exclusive Financial Times interview From Behind Bars, Madoff spins his story – the second interview Bernie Madoff has given since he was sent to jail for life for fraud charges in 2009.
Madoff begins the interview by saying: “I take full responsibility for what I did. I was aware of what I was doing.” He then begins to tell his story to explain, in his view, how it all happened, beginning with the story of his father.
Madoff was born in 1938, the son of Ralph and Sylvia Madoff, a Jewish couple from Queens, New York. His father ran a “moderately successful” sporting goods business which failed when Madoff was a young man. He started out in business with no family money and few academic credentials. He implies that his early years had a profound effect on him.
“You have to understand my history. I started with $500 in capital,” he tells the reporters. “I watched my father go bankrupt. I was very driven. I was always outside the club, the club being the New York Stock Exchange and white shoe firms. They fought me every step of the way.”
He started a small brokerage company in the 1960s called Bernard L. Madoff Investment Securities. Madoff claims that he ran a legitimate business starting in the 1960’s with four prominent clients – Jeffry Picower and Stanley Chais, both investors; Norman Levy, a real estate developer; and Carl Shapiro, a Boston clothing manufacturer. These are the guys that went on to make millions from Madoff’s Ponzi scheme.
In the 70’s and 80’s, taxes were high and many wealthy investors sought creative ways to reduce taxes and grow their money. Madoff says that he successfully invested their money in capital markets – deferring taxes and reinvesting it.
Everything changed when the market crashed in 1987 and his clients started to panic, wanting to liquidate their investments. He says that he wasn’t in a position to get out of the US equity market quickly. He had to find other clients, and he did, with the help of his big four.
Next: Madoff says when the Ponzi scheme began and explains why he did it.