But none of that happened. Madoff was gracious, if not friendly. He said he was surprised that anyone would be interested in doing a story about his company. He may even have said it was a pretty standard operation. And then he suggested, “Why don’t you come down and we can talk about it?”
“Great,” Ocrant responded. “Let me look at my schedule. When’s a good time for you?”
Madoff didn’t hesitate. If he was hiding, Ocrant thought, he was doing it in plain sight. “Why don’t you come down today?”
Ocrant was incredulous. It had been his experience that CEOs did not often agree to spontaneous meetings, that their days were usually carefully scheduled. But Madoff acted like he had nothing else to do. “Now?” Madoff couldn’t possibly mean right at that moment.
“Does this afternoon work for you?”
It happened so fast that Ocrant only had time to make a quick call to Frank. “Good luck,” Frank told him. “Ask him if he’s running $10 billion.”
Ocrant actually had met Madoff a couple of times and spoken with him to get comments while covering other market stories. In Ocrant’s experience, he had always been accessible and he always responded to questions with colorful answers. That history, his reputation, and the fact that he had immediately agreed to the interview caused Ocrant to wonder if there might be more to the numbers than he had seen.
By the time he got to Madoff’s office in the Lipstick Building, on Third Avenue between 53rd and 54th Streets in Manhattan, the trading day was over and the office was quiet. Most of the traders and Madoff’s secretary were gone. Madoff invited him into his office, offered him something to drink, and sat down at his desk. The office was surprisingly nondescript. A large window allowed Madoff to watch the activity on the trading floor. He leaned back comfortably, his body language certainly not indicating he was hiding a great secret, and invited Ocrant to ask his questions.
“He was very generous with his time,” Ocrant remembered. “It was obvious he intended to sit there until I ran out of questions. One by one I went through all the questions that people had raised about his strategy, the lack of volatility in his returns, and the fact that his trading activity didn’t show up in the listed market.
“He had an answer for everything. He said he did a lot of his trading over-the-counter, so it wouldn’t necessarily show up on the exchange. He just dismissed the idea that somehow the volume was missing. He responded directly to every one of my questions, not always with an answer that made perfect sense, but in many instances they had a degree of plausibility. When he claimed, for example, that he was using a ‘black box’ strategy—meaning some sort of proprietary computer program—developed over a long period of time, based on his knowledge of the market and his experience, it made sense; it was well known that Madoff Securities had tremendous market knowledge, and it also had a reputation for developing and using proprietory technology. So what he was saying wasn’t completely unreasonable.
“When I asked for more details about this ‘black box,’ he smiled and refused to answer. ‘I’m not going to give information that can help my competitors. Why should I do that?’ Within the hedge fund industry that is quite a plausible answer. A lot of hedge funds would respond the same way.
“It wasn’t just the signals from the ‘black box,’ he emphasized. The system he had set up relied on the input from his professional traders. He wanted them to use their gut feelings. ‘I don’t want to get on an airplane without a pilot in the seat,’ he said. ‘I only trust the autopilot so much.’
“It didn’t matter what question I asked him—there was at least an element of plausibility to every answer. Several times when I wasn’t completely satisfied with his answer I asked the same question a different way. He never complained, and he was responsive to every question. When I said that it appeared that he was managing as much as $8 billion, he admitted that he had at least $7 billion and then shrugged, meaning maybe it was a little more. And he did it without hesitation.
“He confirmed that Fairfield Sentry was a feeder fund, he confirmed that he was using a split-strike conversion strategy, and he confirmed that he often placed his assets in Treasury bills while he waited for specific market opportunities. He denied that he subsidized the down months by using profits from the market-making operation, and when I pressed him he explained, as if there was nothing else to say, ‘The strategy is the strategy and the returns are the returns.’
“It wasn’t so much his answers that impressed me, but rather it was his entire demeanor. It was almost impossible to sit there with him and believe he was a complete fraud. I remember thinking to myself, If Frank is right and he’s running a Ponzi scheme, he’s either the best actor I’ve ever seen or a total sociopath. There wasn’t even a hint of guilt or shame or remorse. He was very low-key, almost as if he found the interview amusing. His attitude was sort of ‘Who in their right mind could doubt me? I can’t believe people care about this.’
“Overall he seemed like a very personable, nice, straightforward guy.”
The only question that Ocrant had decided not to ask directly was: ‘Are you running a massive Ponzi scheme?’ He was afraid those words might end the interview. Instead he danced around it, asking him about front-running—which Madoff denied, naturally.
Years later, after Madoff had surrendered and his Ponzi scheme had collapsed,
