“Okay. Now what if I told you that this is a fund managing as much as eight billion dollars.”
Weisman didn’t hesitate. “It’s impossible,” he said flatly. “In that case, I’d have to think it might be a Ponzi scheme.”
Ocrant took a long, deep breath. His journalism professor had nailed it: It always comes back to the money.
We were an extremely loosely knit team. Ocrant never officially signed on; we just began including him in our communications. Neither Neil nor I had ever met Mike Ocrant; in fact, we wouldn’t meet face-to-face for many years, and we spoke only a few times. But we were connected through the Internet and the telephone. We shared documents, information, and rumors; we taught Mike the basics of the business, and at some point, we finally understood that the four of us had fallen down the rabbit hole together. The four of us had evidence that certainly would change the financial world. It would create havoc in the markets worldwide—and nobody cared. Maybe even more than a commitment to do the right thing, we became bound together by our frustration.
I continued speaking regularly with Ed Manion. Nothing’s happening, he told me. “I’m not getting any feedback at all.” Having failed to interest the government, I figured my best shot was to publicly expose Madoff’s operation. Once the existence of this fraud was known, even if he didn’t go to jail he’d be out of business. I figured that if people found out this whole thing was a scam, the investors would take their money out and nobody in their right mind would put in new money.
I knew Ocrant was working on an article, but I had no idea how far along it was or when and if it might be published. That if was actually a major consideration. Bernie Madoff was a very powerful man. I didn’t have the slightest idea how long his reach was, and I wondered if a subscription-dependent trade magazine would risk its relationship with Madoff and everyone he knew in the industry by printing an expose. So in early March I sent a copy of my May 2000 SEC submission to a senior reporter at Forbes, a man I’d been casually introduced to by a friend who was my former finance professor at Boston College. I explained that I was enclosing evidence of what I believed to be the largest Ponzi scheme in history. I like to believe that if someone put a potentially Pulitzer Prize-winning story in my hands and said, take it, I’d be smart enough to at least investigate. But boy, the lack of serious interest was astonishing. I think the editors at Forbes, like so many others we were to encounter, were victims of their own hubris. These were people who took pride in knowing that they were the experts on the financial industry. They knew that the largest hedge funds were running $2 billion, give or take a few hundred million. So when this editor received a several-page letter from some guy in Boston he’d never heard of claiming that he had discovered a hedge fund six to 10 times larger than anything the experts knew about and it’s a complete fraud, it was pretty doubtful that he was going to take it very seriously. In fact, I suspect that the only way he would have taken it less seriously was if it had been written in crayon. He was just too smart to recognize the truth.
This is an important point. Madoff’s operation was too big to be believed. Once I stated how many billions he purportedly was managing, people stopped listening. In a world in which a $2 billion hedge fund was considered huge, the fact that I was claiming Madoff was running between $12 and $20 billion made me about as believable as those people claiming NASA had staged the moon landing in a warehouse. Journalists, SEC staff, and others just didn’t have enough professional skepticism to at least conduct an initial investigation to see if any of my claims just might be valid.
As it turned out, it didn’t make any difference. When Mike Ocrant finally accepted the fact that Madoff was doing something illegal—whatever he was doing—and that he had enough evidence to support his story, he picked up the phone and called Bernie Madoff. That’s just good journalism; any fair investigative reporter gives the subject of a story a chance to answer all the questions before writing the story. And when the subject refuses to be interviewed, as often happens, it adds just a bit of spice to the story.
But to everyone’s tremendous surprise, Bernie Madoff didn’t refuse. In fact, he welcomed the opportunity. Ocrant placed a cold call to his secretary, introducing himself as a reporter for MARHedge and explaining that he was working on a story about Madoff’s money management company and had some serious questions he wanted to ask him. Rather than the secretary making the expected excuses, as had happened when he investigated the New Jersey currency scam, she was calm, polite, and professional. “Can we call you back, please?”
Ocrant figured that was the easiest way to avoid him, that the call would never be returned; but within minutes his phone rang. Madoff was returning his call. Ocrant believes in being direct with his sources. “I understand that you manage quite a bit of money as part of a separate operation within your securities firm,” he said. “I’ve been talking to a lot of people in the hedge fund industry and they’ve raised some serious questions about this fund, and I’d like to ask you several questions about it.”
People who have something to hide find ways not to talk about it. That’s a big clue to an investigative reporter. Honest people most often will talk until the tape recorder batteries wear out. Mike expected to hear Madoff explain why he
