Madoff Biographer Describes Beguiling “Wizard of Lies”

Diana Henriques, author of The Wizard of Lies, describes notorious ponzi schemer Bernie Madoff as a quiet man who minded his business until people approached. He would then use what Henriques called his gift for seduction.

“He didn't try to impress you by telling you he was the smartest guy in the room,” Henriques said. “He made you feel like you were the smartest guy in the room.” This gift helped him build the largest ponzi scheme in history, one that cost its victims $65 billion.  

Henriques explained the reviled yet esoteric Madoff to approximately 50 guests Wednesday night at the. This was the first time Hoboken resident Henriques, an award-winning business reporter for the New York Times, spoke here about . The bestseller was published last spring and will be released in paperback in May.

Henriques was the first journalist to interview Madoff in prison. She shared her findings with the library audience, delving into Madoff's mindset and motives, his brazen activity during an era of lax oversight, and what she thinks people can do to protect themselves against fraud.

She described Madoff as a man who from childhood was fearful of following his failed businessman father. Henriques said that pent-up anxiety gave Madoff a “pathological inability to admit failure,” even after his exposure and sentence to prison. Rather Madoff has merely claimed fatigue at having run the elaborate ponzi scheme he said began in 1992 (Henriques said she believes Madoff's cheating started in the mid-1980s, and that the government dates it to the late 1970s).

Henriques said Madoff tricked his victims the way all ponzi schemers do, by making them think he was trustworthy. Further, he played on investors' fears—because he was offering them steady profits, they thought he was safe.  

“Ponzi schemes are so peculiarly horrific because they exploit our capacity for trust,” Henriques said.

Madoff soothed inquisitive investors by showing them fake computer data he claimed was streaming straight from Wall Street. He used a typewriter to forge backdated documents onto old stationery. He eluded foreign investors and regulators by boasting of ties to safe American banks, and told Americans he was equally tight overseas.

Henriques said the Securities and Exchange Commission and other regulators lacked the resources to properly investigate, and even when they tried, Madoff fooled them into searching for the wrong crimes for which they would find him squeaky clean. Along the way Wall Street mores silenced potential whistleblowers. Even the man who finally did tip the government, Harry Markopolos, was himself considered a shaky source.

Markopolos mistrusted Madoff with what Henriques called “a clinical paranoia.” It was only after Markopolos had complained a half dozen times that investigators began finding wrongdoing. Madoff was arrested in December 2008 then convicted and sentenced to 150 years in prison. Five of his alleged co-conspirators await trial.

When the story broke, many observers accused Madoff's wife Ruth and sons Mark and Andrew of aiding the scam. None of the three have been charged, and Henriques said she believes they were never involved. Still, the family is in ruin. Ruth at first supported her husband, but eventually left him. Mark Madoff committed suicide on the second anniversary of his father's arrest. Henriques, who still communicates with Madoff frequently, said he feels tremendous remorse about what happened to his family, though she added that he does not seem to feel the same about his ponzi scheme victims.

Henriques closed by advising how people can avoid falling victim to ponzi schemes. She cited one interested businessman and one non-profit group who met with Madoff but never sent him money because they stuck to tested and prudent rules they had set for themselves. The businessman, whom Henriques has kept anonymous but said is very wealthy, countered Madoff's request for an initial $5 million dollar investment with $250,000, saying he never gave more than that to a money manager he had just met. The non-profit balked when Madoff said he couldn't honor their request to put their money with a third-party.

“They were spared even though they trusted him,” Henriques said.

Henriques said that while all financial investing requires a leap of faith, more awareness would lead people to pay closer attention to where they put their money.

“All of us have the capacity to miss what's right under our noses,” she said. “But knowing we have that weakness can protect us.”

Henriques said that while the SEC has improved its whistleblower program the public should still seek to establish and maintain effective oversight.

“I hope citizens will start asking what to do about making investors safer," she said.

She warned those questions will one day prove important. “There will be another Bernie Madoff,” Henriques said. “We haven't learned anywhere near as much as we need to learn about how to stop him.”

The Wizard of Lies will be released in paperback on May 8. For more information, visit the website of Diana B. Henriques.