The Believers
ADAM LEBOR
Orion
www.orionbooks.co.uk
Table of Contents
For Bob and Peter Green, the best of New York
A Weidenfeld & Nicolson ebook
First published in Great Britain in 2009 by Weidenfeld & Nicolson
This ebook first published in 2009 by Weidenfeld & Nicolson Adam LeBor 2009
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eISBN : 978 0 2978 5922 2
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Acknowledgements
My thanks first of all to my editors at Weidenfeld & Nicolson and my agent for their faith in and enthusiasm for The Believers . Alan Samson and Bea Hemming deftly combined steady encouragement with gentle pressure when needed. Laura Longrigg was always inspiring and her valuable advice helped polish the book. It was also a pleasure to work with Martin Soames and I learned much from his legal diligence. Tarda Davison-Aitkins careful copy-editing rendered the manuscript clean and readable.
I am blessed with numerous friends in New York, many of whom helped with The Believers , especially Ernest Beck, Joshua Freeman and Shari Spiegel who made numerous telephone calls and sent emails on my behalf as did Chris Condon in Boston. The irrepressible Peter Green was, as ever, a mine of information, leads and contacts. Bob Green cordially hosted me for several weeks, opened numerous doors across Manhattan and introduced to me to the insightful David Stone. Dan Friedman of the Forward newspaper and Ben Cohen of the American Jewish Committee were deft guides to New York Jewish communal organisations. Jack Schwartz added valuable historical and literary depth and nuance. Dan Smith helped decipher charities tax returns. Rabbi David Gelfand, of Temple Israel, brought a vital theological perspective. Steve Fishman of New York magazine and Clive Irving and Deborah Dunn of Cond Nast Traveler shared numerous useful leads.
My friend Jeff Weintraub led to me to Mark Gerson, who shared his insight into the world of high finance and who with his wife Erica was a generous Shabbat host. Ed Nicoll was an invaluable guide through the canyons of Wall Street. In Palm Beach I am especially grateful to Saul Irving, who showed me around the island, Anthony Jacobs, who generously recounted his own involvement with Bernard Madoff, and Richard Rampell for his local insight. I am grateful to all those who consented to be interviewed, whether on the record or on a background basis, and to those who helped facilitate these interviews, especially Seth Faison.
The day after Bernard Madoffs arrest on 11 December 2008 editors around the world dispatched teams of reporters to cover one of the biggest stories of the twenty-first century. This one, as they say in newsrooms, had legs. While most of this book is based on my own first-hand reporting and interviewing, I am happy to acknowledge the fine work of my many colleagues in unearthing the details of the Madoff fraud and its aftermath. The New York Times , The Times , the Wall Street Journal , the Financial Times , Bloomberg and Vanity Fair in particular have all done excellent work. One of the best things about being a journalist is the camaraderie, and many reporters were generous in sharing their knowledge and expertise, none more so than James Bandler and Nicholas Varchaver of Fortune magazine, who, together with Doris Burke, wrote one of the earliest and most incisive accounts of Bernard Madoffs rise and fall. I have also drawn on the interview transcripts of Frontline: The Madoff Affair , an excellent documentary produced by PBS in Boston. The programme can be viewed in full on the web at http://www.pbs.org/wgbh/pages/frontline/madoff/. James Bone and Christine Seib, correspondents for The Times in New York, were always welcoming and extremely helpful. Richard Beeston, the foreign editor of The Times , was supportive of a correspondent who corresponded very little while this project was under way. Many thanks to Cathy Galvin of the Sunday Times magazine for her encouragement of this and other book projects over the years. Thanks also to Zack Roth of talkingpointsmemo.com, Janet Lorin of Bloomberg, Angela Montefinise of the New York Post , Michael Weiss of tabletmag.com, Alan Furst, Thomas Escritt, Keith Dovkants, Sam Loewenberg, Bea Klokan and Nick Thorpe.
Special thanks to Justin Leighton, for his encouragement and friendship over the last twenty years, off and on the road, and for his faith in this book. Thanks most of all, of course, to my wife Kati and our children, for their love and support.
Why, sometimes Ive believed as many as six impossible things before breakfast.
The Red Queen in Through the Looking Glass, and What Alice Found There , by Lewis Carroll.
Prologue
T he simplest way to understand how Bernard Madoff persuaded thousands of investors to pour billions of dollars into his investment scam is to think of it as a cult. The cult of Madoff followed all the necessary rules. It was founded and run by a godlike figure whose decisions could never be questioned or challenged. Its devotees believed themselves to be part of an elect group, with access to a secret credo denied the rest of the world. It used coercion against unruly members and even had its own initiation ceremony. The godlike figure was Bernard Madoff, who charmed, bullied, and terrorised his subordinates, and devotees. The secret knowledge was his arcane investment strategy, couched in pseudo-scientific terms that could never be properly understood but which members believed would provide them with eternal wealth. The coercion was Madoffs demand for confidentiality, and unquestioning loyalty. Those asking too many questions were threatened with expulsion and the closure of their accounts, with being cast out of the elect, into the financial wilderness. The initiation ceremony required that would-be investors be repeatedly rejected and told the investment fund was closed. Eventually Madoff would reluctantly make space and the grateful initiates rushed to hand over their life savings.
The cult of Madoff was astonishingly successful. Bernard Madoff was a financial criminal genius who ran the largest and most enduring fraud in modern history. His elaborately engineered scam, investigators believe, lasted for decades. It reached from Wall Street and across America, to Europe and further East. Each month thousands of personal clients, many of whom were sophisticated investors in their own right, received detailed accounts of stock trades that had never taken place, and account balances that did not exist, none of which they questioned. His institutional investors included numerous well-respected banks, and finance companies. Madoff not only duped the Securities and Exchange Commission (SEC), which regulates the American financial industry, he frequently sat on finance industry committees. He helped create the USs secondary stock exchange, after the New York Stock Exchange, the NASDAQ (National Association of Securities Dealers Automated Quotations) in 1971, and served as its chairman. He also ran one of the largest and most successful share trading firms in the US - a separate operation to his investment fraud.
