Jim Campbell: Author of Madoff Talks

We were honored to host Jim Campbell, author of Madoff Talks, as our February 2023 White Collar Support Group Tuesday Night Speaker Series presenter. Bernie Madoff wrote him more than 400 pages of letters and emails from prison, and Jim spent the hour on what those pages proved and what they quietly did not. You can watch the full recording above.

What Jim brought us is an autopsy of everyone who was paid to look and did not. He got in sideways. First an off the record phone call with Andrew Madoff, which Jim opened by asking about the three million dollars his father wired him five months before the collapse, then a lunch with Ruth Madoff in an empty Greenwich restaurant on a cold December day, sunglasses on the whole time, ending with her stopping at the door to ask whether he was wearing a wire. If your own case involved professionals who swore the numbers were fine and then went quiet when the government arrived, this hour will land close to home.

The four groups who could have stopped Madoff

A sixty five billion dollar fraud does not run for forty years on one man’s nerve. Jim sorts the people who made it possible into four buckets, and the sorting is the interesting part. At the top are the big four investors, who pulled billions out, bailed Bernie out of his cash crises, and used that leverage to demand better returns than anyone else got. Jim calls it a reverse Robin Hood, because some of the money funding those returns came from people who had been putting in small amounts for forty years.

Then the feeder funds, whose entire job is due diligence. Bernie forbade it, and handed the whole management fee back to them.

So basically, they gave up their one job to take bribes from Bernie and ask no questions.

The third and fourth buckets are the ones that will make you put your head in your hands. The SEC opened five separate investigations and never once found the seventeenth floor. Jim tells three stories about how easy detection should have been, including the Friday night Bernie handed SEC examiners the account number and the single phone call that would have ended him. Harry Markopolos, working from public numbers alone, needed under two hours.

What SIPC covered, and why victims faced clawbacks

This is the stretch our members react to hardest, because it has almost nothing to do with Bernie. SIPC is Wall Street’s version of the FDIC. Congress’s own watchdog had warned it sixteen years earlier that it had neither the structure nor the capital for a large failure, and the annual premium in those years was one hundred fifty dollars, the same for Merrill Lynch as for a one man shop. The fund was close to empty by the time anyone needed it. What SIPC then decided about Ponzi statements, and how it went about making customers whole, is worth hearing in Jim’s own words. It ended in clawbacks against people who had taken out their own money years earlier and long since spent it.

So essentially the victims were victimized again.

Anyone who has sat through a restitution calculation recognizes that arithmetic, and the Women’s White Collar Defense Association panel on restitution and forfeiture covers the same ground from the defense side. Reconstructing where money actually went is its own discipline, and our session on forensic accountants in white collar defense is the natural companion to this one, as is the argument for getting that expert in long before the government’s loss number is the only one in the room.

Jim also names two conspiracies nobody was charged with: a domestic tax evasion scheme that manufactured fake losses for the biggest investors, and offshore money laundering that ran oligarch and cartel money into the fund. Karen Kelly, formerly of the DOJ Tax Division, has walked our group through how the first of those normally gets charged. Jim’s account of why neither was charged here is one of the sharpest stretches of the hour, and reading a case by what the government chose not to do is the same discipline Alex Little brings to the first days of an investigation.

How the Ponzi scheme actually began, and what Bernie claimed

Bernie told Jim the fraud started the way people assume these things do, with a loss he tried to trade his way out of. Jim checked it, and it does not hold up. On the nineteenth floor Bernie was building a real market making business with top graduates and the best technology on the street, executing for discount brokers like Charles Schwab. Two floors down, on IBM AS/400 servers already obsolete in the 1980s, high school hires were operating the Ponzi scheme. Both were built at the same time, by the same man.

That is why the hour is worth more than a documentary recap. Jim was handed a subject’s own account of himself and treated it as a claim to test rather than a scoop to print. Most of us know how much comfort there is in a version of events that makes the beginning smaller than it was. Tom Hardin, who came to us as Tipper X, spoke about the same problem from the inside.

About Jim Campbell

Jim Campbell is the author of Madoff Talks, published by McGraw Hill in 2021 and the basis for the Netflix series Madoff: The Monster of Wall Street, directed by Joe Berlinger, whose other subjects include Jeffrey Epstein. Roughly a hundred million people watched it in its first month. Jim hosted the morning show at a Greenwich, Connecticut radio station for years, and learned at a stoplight on the drive home that Madoff had died in Bureau of Prisons custody, two weeks before the book published. He has interviewed our founder Jeff Grant more than once, including the day Jeff got his law license back.