March 23rd, 2009
06:54 PM ET

Madoff Employee Breaks Silence

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/US/03/19/madoff.victims.dinner/art.bernard.madoff.gi.jpg]
The Daily Beast
Lucinda Franks

In a Daily Beast exclusive, one of the fraudster’s employees tells Lucinda Franks that the supposedly legitimate brokerage operations were in fact just money-losing fronts for the fraudster's scheme. Plus, what Madoff’s sons told staff the day after Bernie’s arrest, trips to the company’s secretive 17th floor, Bernie’s obsession with the color black and employee neatness, the roles of other family members, and visits to the founder’s Montauk home.

An employee of Bernard Madoff’s legitmate brokerage operations, which were described by the fraudster in his plea agreement as being “successful and profitable,” has told The Daily Beast that they were in fact money-losers that acted as a front for his Ponzi scheme.

He said that these businesses, the proprietary and market-making arms on the 18th and 19th floors of Madoff Securities, were designed to lure investors in, especially highly placed figures in society, and to fool the SEC into thinking that he had a large and impressive galaxy of businesses.

But behind the façade, these businesses were a shambles. They were excessively staffed with grossly overpaid people, and run with marked inefficiency, he said.


Filed under: Bailout Turmoil • Economy • Keeping Them Honest
soundoff (17 Responses)
  1. meenas17

    Apperances are deceptive.
    Physical makeups hide your age and blackspots.
    Business make up conceal the discrepencies and losses.
    Both present an appealing exterior, the former for attraction, the latter for profitability.

    March 24, 2009 at 9:45 am |
  2. Bob Williams

    Those who don't want regulation of our financial system should step back and look at recent history. The regulation is NOT just regulation of the process. And it doesn't move us toward socialism as some have claimed.

    Properly implemented, regulation is a way to protect us all from greed that is "hardwired" into our financial moguls. Profit is important, but so are ethics. If we don't have ethics, then we need to legislate them! That is what the SEC, EPA, FDA in part does; protect us from ourselves!

    March 24, 2009 at 9:29 am |
  3. Sharon S

    There is nothing wrong with liking the color Black I myself am a Black fan I love black but I am not a criminal!!!

    And I'm also a neat freak, does that mean I may be on my way to being a millionaire someday???

    Seriously though I think we all know Madoff's family was involved the sad thing is the Feds and regulators who got paid off to let this go on, well there really is no justice here on earth but we all know he will definitely pay for it in the end!

    March 24, 2009 at 6:44 am |
  4. J.V.Hodgson

    Money, Money, money, greed, greed, greed.
    You only ned to think of the seven deadly sins and the above lead to Lust, crime and immorality.
    When will we go back to a basic of If you do not own it and have paid for it 100% you cannot sell it.
    And yo cannot borrow more than 50 % on top of your net worth with no assets or liabilities off Balance sheet.
    $147 a barrel of oils had no economic justification or supply demand reality just money, money, money, greed, greed ,greed!!
    Yawn, yawn!!

    March 24, 2009 at 4:57 am |
  5. KIm

    He didn't want to be read and it was a front ! You walked in and it appeared elegant ? All black=unknown (black holes) Strength and power,formality,death,evil and mystery but it was all black. Colors have an effect on mood and what do you think ? Is he in pink now and how is that working out for him ? Take a Dr. Of psychology with you before you invest you're money and tune in to weird vibs. They lost millions over this hoodlum.

    March 24, 2009 at 2:11 am |
  6. KIm

    Everything was black and he was constantly cleaning ? Black gives the feeling of perspective and depth,but a black back ground diminishes readability. Even the picture frames were black and if an employee bought a silver picture frame it was changed to black. Compulsions ? Was he dissociative ? OCD ? They said his office was not as organized and somewhat of a mess. No one picked up on any weird vibs on "Mad.".Off to jail ?

    March 24, 2009 at 1:52 am |
  7. John Boynton

    Of course he had accomplices inside the company. Can you imagine a 70-year old man sitting at a PC generating false statements for thousands of investors each month? I can't. And my gut says his family was integrally involved, and Bernie's going to take the fall. I predict we will learn that he is terminally ill and thus, this was the right time to take that fall.

    March 24, 2009 at 12:39 am |
  8. julie

    Anderson we have more cunning ceos then AIG why not tried Delta air lines not only that we all are loosing our jobs at every station that there is a Northwest station since The ex ceo of Northwest is at delta not only he is breaking his promise that we will not loose our job I feel everyday we are becoming more Northwest we are working for these big cooperation with no protections.Why not follow that sotry for a change at the end of the month Delta is kicking honest hard working employee and lower our hours with 24hrs only The government need to stop big merger like Northwest Delta please help us by puting the story out there

    March 23, 2009 at 11:23 pm |
  9. mw - Australia

    Well at least "one of the fraudster’s employees" gets some payment for speaking to The Daily Beast as they are unlikely to get another job now.

    Its bad enough that Bernie has gone down taking his customer's money, but now the employees and their families have to suffer this stigma as well.
    How are these people going to find jobs and support their families now?

    March 23, 2009 at 9:56 pm |
  10. Val

    I can just imagine how many writers are scrambling to write the ending to this wickedness. I've already assigned a title to my version of the book. As for the employees that knew, but kept quiet...the "fat lady" is warming up, hell is at 33 degrees, and the rooster has crowed twice.

    March 23, 2009 at 9:52 pm |
  11. Dean

    Oh what a tangled web we weave...

    March 23, 2009 at 9:42 pm |
  12. Jeanette

    There's a lot that is still unknown. No telling how many people will come down with all this.....I feel so bad for the people that they ruined. Very interesting that there was other connections with the SEC and JPM. Something rotten in Denmark.

    March 23, 2009 at 9:11 pm |
  13. Ann

    Is Obama right that gov can't go after the bank execs cause they didn't break any laws?

    What about making shady risky investments that investors couldn't afford to risk their savings on? Is Madoff the only one going to jail?

    March 23, 2009 at 8:13 pm |
  14. Renee Staples

    One more reason why we need a watchdog organization in the securities business. Securities firms need to know that they will have to answer for every penny they take.

    March 23, 2009 at 7:58 pm |
  15. Isabel

    Much rotten is still to come.
    Now imagine what the employees know and not yet come to the public.

    March 23, 2009 at 7:56 pm |
  16. Annie Kate

    I find it hard to believe that this went on for as long as it did with only Bernie knowing about it. It just seems inconceivable especially since the "front" businesses were not doing well. If a computer programmer noticed all this what did the financial types who were the ones handling any trading, etc. think was going on? Surely they had enough knowledge to know it wasn't on the up and up.

    March 23, 2009 at 7:41 pm |
  17. Jim M

    More and more this sounds like the making of a new sopa opera – and they could call it Lipstick, for the name of the building where Bernie Madoff had his offices.

    Interesting that Madoff's niece Shana Madoff Swanson, who is an attorney and worked for Bernie is married to Eric Swanson, former Assistant Director of the SEC's Office of Compliance Inspections and Examinations (1996-2006).

    Add to that, Frank DiPascali, the CEO of the Madoff enterprise, is married to an employee of JP Morgan in the mortgage security division. JPM is one of two financial institutions which held Bernie's real money.

    March 23, 2009 at 7:37 pm |