News & Politics

On Madoff Anniversary, Biggest Secrets of Bernie’s Scheme Still Buried


One year ago today (December 11, 2008, that is), Bernie Madoff was arrested. But after millions of words have been written about his multibillion-dollar Ponzi scheme, we still don’t know exactly how he pulled it off for so long and which big shots were in it with him.

Looks like the biggest secrets are still at the bottom of the Palm Beach pool where Madoff crony Jeffry Picower, carrying the burden of a $7.2 billion federal suit against him, was found dead in October.

The suit is still alive, but who knows what’s going on there? “We are in settlement negotiations, so it would be inappropriate to comment at this time,” David Sheehan, one of trustee Irving Picard‘s lawyers pressing the suit against Picower’s estate, tells the Voice. One thing’s for sure: Picower isn’t going to jail.

Oh, the May 12 complaint against Picower is so tantalizing. Among its many details are the strongest possible hints that Picower, who reaped $2.4 billion from the scheme just in its last six years, knew very well that Madoff was making the whole thing up, that no trades were made.

The trustee’s case against Picower matter-of-factly states, and seems to back up, the assertion that “Picower was aware of the fictitious nature of the transactions.”

There were many, many payments by Madoff to his buddies. Which were part of the Ponzi scheme? Well, Madoff’s specific Ponzi operation, Bernard L. Madoff Investment Securities, LLC, cut separate checks of $10 million or more to a Picower vehicle called JMP Limited Partnership on five different occasions between April 1, 1991, and April 1, 1992, according to an October 1, 2009, exhibit, one of a blizzard of documents in the case.

Those are just a few of many payments from Madoff’s schemes to a whole stream of Picower entities, according to the government’s documents. Picower’s JMP Limited Partnership just by itself received $98 million from Madoff’s Ponzi company over the years. He’s probably one of the biggest recipients of the ill-gotten gains in what’s now called a $21 billion scheme.

Hundreds of thousands more words will be published on the one-year anniversary. Some will reprise the compelling words of Harry Markopolos, who figured out the scheme a few years ago. But no one listened to him until it was too late. Markopolos only figured out the technical details. Madoff’s minor henchmen have been exposed, but what about the big shots? “Answers elude the victims,” says the Financial Times. The rest of us wonder who were victims and who were Madoff’s cronies.

Even earlier than Markopolos’s sleuthing, reporter Michael Ocrant raised giant red flags in a securities industry publication with his May 2001 story headlined “Madoff tops charts; skeptics ask how.”

Exactly one year after Madoff confessed to his sons (so they say) and was arrested, only he and his flunky Frank DiPascali are behind bars. And the government was perfectly willing to release DiPascali on bail while he helped them out, saying he was the key to the puzzle; a federal judge angrily nixed that notion, saying that the government didn’t seem to have “the slightest clue about what turned out to be the biggest fraud in US history” until Madoff confessed. DiPascali is still scheduled for sentencing while he supposedly helps the government, but he wasn’t one of Bernie’s friends who made hundreds of millions from the scheme.

Maybe you’ll get a clue from the 363 documents filed just by Picard in the court system’s liquidation of Madoff’s bullshit company. Start reading.

Archive Highlights