tv 60 Minutes on CNBC CNBC January 1, 2014 7:00am-8:01am EST
of 2013. that's it for this edition of 60 minutes on cnbc. i'm morley safer. thank you for watching. [ticking] [ticking] >> madoff. it is a name that will live in infamy. it's a tough name to live with. >> it sure is. >> in the first interview since bernie madoff's arrest, his wife ruth... >> i trusted him. >> and son andrew... >> that's who i am. my name is madoff. and i'll live with that for the rest of my life. >> speak out about crime, guilt, suicide... >> mr. madoff, what do you have to say for yourself? >> and the day bernie admitted to committing the largest financial fraud in history. >> and he said, "i have a confession to make. i've been running a ponzi scheme." [ticking]
>> do you think you could pull off this scam today? >> given the same security measures? >> yep. >> easily. piece of cake. >> sam eshaghoff's scam was getting paid thousands of dollars to take the s.a.t. test for other students. he did it at least 16 times, scoring in the 97th percentile of the country. >> i would call him an academic gun for hire. that's what he was. >> welcome to 60 minutes on cnbc. i'm bob simon. in this edition, we examine two very different kinds of fraud. bernie madoff's wife and surviving son break their silence about wall street's most infamous criminal. and later, we visit a high school con man who figured the best way to make the grade was to cheat the s.a.t.s but first, in december 2008, bernie madoff confessed to running a $65-billion ponzi scheme, the largest financial fraud
in history. while madoff is serving 150 years in prison, his family had to deal with the consequences of his crimes. his wife ruth divested of most of her great wealth and derided by a suspicious world. their son mark dead, driven to suicide by shame and accusations of guilt. their other son andrew isolated, trying to live with the disgrace. are they innocent or willing partners? in october of 2011, ruth and andrew gave their first interview since bernie madoff's arrest. they sat down with morley safer to speak out about crime, punishment, and the shame of being a madoff. >> it's a tough name to live with. >> it sure is. >> ruth madoff. you feel the shame? >> of course i feel the shame. i can barely walk down the street without worrying about people recognizing me.
>> and andrew madoff. >> from the very beginning of this whole episode, i've had absolutely nothing to hide. and i've been eager, i would say almost desperate, to speak out publicly and tell people that i'm absolutely not involved. >> andrew and ruth madoff speak out in the book truth and consequences, a more or less tell-all arranged by andrew's fiancee, catherine hooper, an attempt to separate the family from the father's crimes. is it dismaying for you that no matter what you say people aren't gonna believe you? >> i think in many ways it is dismaying, but public opinion has to be something that doesn't matter to us. what matters to us is the truth. >> it's really hard for people to believe that you didn't know, that you must have known. >> i can't explain it. i mean, i trusted him. why would it ever occur to me
that it wasn't legal? the business was--his reputation was almost legendary. why would i ever think that there was something sinister going on? >> it was 1954 when ruth alpern met bernie madoff in queens, new york. >> i just saw him, and i was sort of swept away, i think. >> she married him at age 18. they had two sons: mark, then andrew. bernie was building up his money management business. a typical middle-class family living on long island. >> we were both solid parents and valued our family and so proud of our boys. it was a dream, really. >> exactly when bernie madoff went wrong is unclear. but as his reputation for delivering steady profits grew, the madoffs began living
the good life. a penthouse in manhattan, homes in palm beach and the south of france, and yachts in both places. >> he was a big figure in the industry. he was the chairman of nasdaq. he was constantly being honored as "man of the year" of this organization and that. and that--that had an effect on me. >> both sons went to work as traders for their father's firm in the late '80s, a time authorities believe madoff's ponzi scheme was well under way. why would your father want to taint his sons by bringing into a situation that could, well, spell disaster? >> you know, that's-- that's a great question. and that's something that i really agonize over as a son. you know, what my father did was so horrible. and it's hard for me to-- hard for me to understand that. >> bernard l. madoff securities
employed over 100 people, but it seemed like a family business. his brother peter and several cousins worked there. mark and andrew worked on the 19th floor of new york's lipstick building, where they legitimately traded securities for the firm and for outside clients. the investment advisory business--the ponzi scheme-- was housed two floors below, where their father never made any trades at all. he was simply creating phony paper statements that showed steady profits for his clients, his victims. access to the 17th floor was highly restricted. you must have been curious about why the 17th floor was such a secret place. when you or mark asked him about his end of the business, what did he say? >> it was always very similar responses. "you guys have your business to worry about,
and let me worry about my business," and the conversation would end there. >> but people say, "look, there's no way these kids could not have at the very least suspected something was going on." >> well, keep in mind these were completely separate businesses. we were executing hundreds of thousands of transactions a day, and that kept all of us incredibly busy. and it just didn't occur to me that he could be involved in any kind of criminal activity. >> andrew says his father would often walk his clients through the 19th floor to show actual trades being made. you feel that the legitimacy of the trading business offered protection to what your father was doing. >> absolutely. absolutely. >> that he was using you and your brother? >> absolutely. it was one of the hardest things to come to grips with, in trying to get my head around this, was that feeling that i had been used
almost as a human shield by him. he--it's--it's unforgivable. no father should do that to their sons. [ticking] >> coming up, wall street's biggest crook comes clean. >> he called from the office and said, "i'm coming home with the boys. i have something to talk about." >> mr. madoff, what do you have to say for yourself? >> more madoff when 60 minutes on cnbc returns. [ticking] ♪
[ male announcer ] this is the story of the little room over the pizza place at 315 chestnut street. the modest first floor bedroom in tallinn, estonia and the dusty basement at 1406 35th street. it is the story of the old dining room table at 25th and hoffman avenue. the southbound bus barreling down i-95. ...and the second floor above the strip mall at roble and el camino. ♪ this magic moment it is the story of where every great idea begins.
♪ so different and so new where those with endless vision and an equal amount of audaciousness believed they had the power to do more. time and time again. ♪ and then, it happened at dell, we're honored to be part of some of the world's great stories. stories that began much the same way ours did. in a little dorm room -- # 2713. ♪ this magic moment ♪
>> the basic concept of wall street... >> andrew madoff says he thought his father was a financial genius. there were suspicions about bernie madoff's remarkably consistent returns, but the s.e.c. repeatedly cleared him of any wrongdoing. what troubled andrew was his father's refusal to discuss any plans for a succession. >> his plan was that he had no plan.
and he would say that when he dies, his end of the business dies. and again, it was always the same response, "that's the way it is, and it's not gonna change." >> in the fall of 2008, the world economy began to implode and markets were in free fall. big investors wanted out. redemption after redemption strained madoff's scheme to its limits. on december 10, 2008, with only a few hundred million left of the billions invested with him, madoff realized the game was over. he told his wife to transfer $10 million from her brokerage account at the firm into a personal checking account. did you not wonder what on earth is happening here? $10 million is a lot of money. >> it wasn't atypical for him to put money in an account and take it out. i didn't think anything of it, actually. >> that same morning, bernie madoff called
a family meeting in his office. >> and he started to try and speak to us, and he couldn't. he sort of fell apart, started to cry a little bit. and it was shocking to see that. i mean, this was not a man who was emotional in that way at all. he said that maybe it would be easier if we talked elsewhere, and he suggested maybe we should go up to his apartment. >> he called from the office and said, "i'm coming home with the boys. i have something to talk about." came in, we went into a room, four of us, and he said, "i have a confession to make. i've been running a ponzi scheme." he said, "$50 billion." >> he said, "everything i've been doing is all a big lie." he said--he said,
"the business is a ponzi scheme, and the firm is completely insolvent. and i'm broke." and then he just started sobbing. and i was... i was shocked. i--it was--i felt like my head exploded. i mean, i don't think if he had told me he was an alien i could've been more surprised. he said that the firm had liabilities of $50 billion. it never occurred to me that his business had anything like that kind of-- anything like that under management. it was--it was shocking. >> your mother, what was her reaction? >> she looked-- she looked shocked. she asked, "what's a ponzi scheme?" was her first question. she didn't even understand that. i think it was me who answered and said that it means that it's all fake. that dad's--you know, is-- he's not been doing what he says
he's been doing. and he followed that up and said, "yes, i've been lying to all of you all of these years. i've been lying to everybody. i've been lying to myself," he said. >> and your brother? >> my brother was trembling with rage. he was absolutely furious. mark was the first one to stand up and said, you know, "i'm out of here." and he stormed out of the room. and i immediately followed him and walked out. >> you know, there's a lot of people out there who are saying, or will be saying as they watch this, "this is all a charade. this was something that the madoffs set up to get themselves off the hook." >> i wish it were. i wish it were. i wish none of this was real. you know, i knew absolutely nothing about this before my father shared the information with me. and it was the most shocking and terrible moment of my life. >> i was as stunned as they. i was kind of paralyzed.
bernie got up and said, "i'm going back to the office." >> was he emotional in any way? >> i don't remember that either. he must have been. >> apologetic in any way? >> [sighs] probably, yes. i--it's sort of a blank now. i'm not hedging here. i don't--i just simply don't remember every detail. i was in such a state. >> and later that day, that evening, you both turned up at the office christmas party. >> i know. he phoned me from the office and said, "we have to go to the office christmas party." so i got myself togeer and went over there. we stayed a half an hour. and we just went home. and the next morning, the fbi was there to arrest him at about 7:00 a.m. >> andrew and mark madoff had turned their father in. shortly after the arrest, ruth madoff called andrew, pleading with him to cosign his father's $10-million bail bond.
>> and i said, you know, "forget it. there's no way. i mean, how could you even ask that question? no, i'm not signing that bail bond. that's crazy." >> i just wanted him to come home. i was so afraid. >> afraid of... >> i mean, the whole idea of going to prison is sort of unthinkable to me. i don't think i ever knew anybody that went to prison. >> mr. madoff, what do you have to say for yourself? >> bail was eventually guaranteed by ruth and madoff's brother peter, and bernie was released. all of his assets were frozen, but in a stunning breach of the court order barring the transfer of property, a large and extremely valuable envelope arrived at andrew madoff's apartment. >> i tore open the envelope and--and--and dumped it out. and it was absolutely heartbreaking. these were pieces of jewelry
that i recognized. things that i had seen my mother wearing over the-- over the years. and i couldn't understand how she could do this. i mean, what were they thinking? and it wasn't until three years later that i had a chance to ask her, "what were you thinking when you sent me that jewelry? i don't understand." and she told me that she and my father planned to kill themselves. and they put together that package beforehand and sent it out. >> did they try to kill themselves? >> yes, they did. >> i don't know who-- whose idea it was. but we decided to kill ourselves because it was-- it was so horrendous what was happening. we had terrible phone calls, hate mail, just beyond anything. and i said, "i can't.
i just can't go on anymore." that's when i packed up some things to send to my sons and my grandchildren. i had some lovely antique things and things that i thought they might want. i mailed them. it was christmas eve. that added to the whole depression. we took pills and woke up the next day. [chuckles] >> what did you take? >> i think ambien. >> how many? >> i don't even remember. i had--i took what we had. he took more. >> did you leave notes? >> no. it was very impulsive. and i'm glad we woke up. >> but you must have talked. this is a rather large decision to make. >> it wasn't hard at the time. it was impulsive, and i just wanted out. [ticking] >> when we come back,
life in the madoff apartment and the death of a son. [ticking] honestly, as much as i love this job, i plan to do a lot more. i needed a new laptop for my pre-med classes, something that runs office and has a keyboard. but i wanted a tablet for me, for stuff like twitter and xbox, so my downtime can be more like uptime. that's why i got a windows 2 in 1 which does both -- works as a laptop and a tablet. so i can manage my crazy life, and also have a life. [ beep ] gotta go. ♪ [ male announcer ] this december, experience the gift of unsurpassed craftsmanship
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[ male announcer ] the parking lot helps by letting us know who's coming. the carts keep everyone on the right track. the power tools introduce themselves. all the bits and bulbs keep themselves stocked. and the doors even handle the checkout so we can work on that thing that's stuck in the thing. [ female announcer ] today, cisco is connecting the internet of everything. so everyone goes home happy. [ticking] >> the sheer scale of bernie madoff's ponzi scheme shocked the world. thousands of individuals, charities, and funds, that on paper were worth a total of $65 billion, were wiped out. what's more, some of his closest friends and family who had trusted him with their life savings faced ruin. >> 30 seconds, dave. [horn honks] >> with madoff under house arrest, the world staked out his penthouse on 64th street, obsessed by what might be happening behind the drawn shades.
>> there were lawyers coming for meetings at the apartment. we watched a lot of television, and i cooked. >> was there remorse? was there guilt? >> yes, there was remorse. >> or was it sort of self-pity? >> i think, in a way, he was relieved at the beginning that he was finished. >> but you must have asked yourself a thousand times, "why?" you could have been a perfectly comfortable, even wealthy family. >> without question. >> without this. >> i don't understand it. i don't-- it's hard for me to say this, but i don't think the money was the part of it. i think he got stuck. that's what he said. and he didn't have the courage to face--face things when they might have been able to be faced on a much smaller scale. >> madoff repeatedly told authorities that he had
acted alone. >> did your wife have anything to do with this, sir? >> get out of here. >> that his family knew nothing. but who would believe bernie madoff? >> do you have anything to say to the investors? >> no, i don't. >> ruth madoff seemed to get the worst of it. it was said she had an office at the firm, that she had been the bookkeeper. >> i was the bookkeeper. i was the receptionist. i worked for bernie in 1961 when i graduated from college. and i left in 1963 when mark was born, and then andy, and i was a stay-at-home mom all those years. and later on, when the boys started to work there, we lived within walking distance. and i had an office there where i took care of decorating things and house things and boat bills and managing those things. but i was never the bookkeeper after 1963.
>> probably a majority of people can't believe that you can live with someone for 50 years and not know. >> it's hard for me to believe too. >> had you known, would you have turned him in? >> i'm glad i didn't. that would have been tough, but i would have left. whether i'd turn him in or not, i don't know. i like to think i would have, but i--i--i couldn't say. >> she was vilified and shunned, harassed on the subway. the press hounded her with headline after headline. her fiercest critics were her own sons. from the time of your father's confession, i gather you had a certain degree of estrangement from your mother. how come? >> well, she and i barely spoke for two years. i struggled tremendously trying
to understand her decision to stay by my father's side. i felt so angry with him. so i didn't understand her choice, and i struggled with it, as did mark. >> i never thought of leaving. i don't know why i didn't. i just knew this man for so long, whom i loved for so many years i didn't know what else to do but stay there. >> three months after his confession, madoff pled guilty. he was later sentenced to 150 years. ruth madoff agreed to forfeit $80 million and all her worldly goods. all the homes, boats, cars, furniture, even madoff's slippers were auctioned or sold. you were allowed to keep $2.5 million. to a lot of people, that's a lot of money. >> it is. it's certainly enough for me.
i've used a lot for legal fees. >> there is a public perception, and i'm sure you've heard it, that there's got to be a stash somewhere, you know? >> i've heard it. i've heard it. >> that bernie madoff hid it somewhere, and that you know-- >> i wish they'd find it and give it all back. my understanding of a ponzi scheme is that when it's over, there's nothing left. and i certainly don't know of a stash anywhere. [ticking] >> coming up, tragedy strikes the madoff family. >> how did you react when you-- when you heard that? >> [sighs] it was awful. i wish i could say i was shocked, but i wasn't. >> we'll have more madoff when 60 minutes on cnbc returns. [ticking] [ male announcer ] the wright brothers started in a garage.
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>> in october 2011, the people who knew bernie madoff best, his wife ruth and his son andrew, lived with vilification, shame, and pursuit from bankruptcy trustee irving picard and his lead counsel david sheehan. they were demanding that the madoffs cough up virtually every penny they have, claiming they, quote, "knew or should have known" about bernie's crimes. >> would you agree with mr. sheehan, the lawyer for the trustee, when sheehan says you should be ashamed, that you should give every penny back? >> well, obviously, i disagree with many of the assertions in the lawsuit
that the trustee has filed against me. and i'm hopeful that, in time, we'll be able to reach a settlement, and i'll be able to put this behind me. >> picard says the sons' trading operation received millions from bernie's ponzi scheme. he is suing andrew madoff alone for $60 million, virtually every penny he earned, borrowed, or was given to him by his father over a ten-year period. let me ask a really intrusive question. how much are you worth as we speak? >> well, i was fortunate over the years, running the business that mark and i ran. it generated many millions of dollars in profits and enabled my brother and i both to live a comfortable lifestyle. >> you haven't answered the question. >> i made, in good years, several million dollars. you know, my life, at this point, is an open book.
the details of my financial past have been laid bare completely in the lawsuit against me. i haven't enjoyed it. but that's the reality that i live in. >> have you talked to your dad? >> i have no comment. i'm sorry. i can't help you. >> but for andrew's brother, mark, the weight of the lawsuits, attacks from the media, and the shame became unbearable. >> he was absolutely obsessed with the news coverage. he would wake up every morning, immediately comb through the regular newspapers, and that would be followed up by reading blog posts and comments. and i would say, "look, you got to shut off your computer. you got to stop subjecting yourself to this, because this is not helpful for you, and it's not helpful for me. and if you keep doing this, it's just gonna lead to misery." >> and it did. on december 11, 2010, the second anniversary of his father's arrest, mark madoff hung himself
while his two-year-old son slept in the next room. he said in his last email, "no one wants to hear the truth." >> it was awful. i wish i could say i was shocked, but i wasn't. he had tried to kill himself a little more than a year before. and that was absolutely devastating. and... i had tried to talk to him, to understand what he was going through. it was very painful for me and very difficult for me, but i was making it through. and to see him struggling and not making it was-- was terrible. we were--we were very close. he was my best friend. and i wanted to help him. >> the night before
he killed himself, there was an awful article in the wall street journal. i mean, i sort of--i understood. i was going through those agonies of shame, and it was terrible. to feel that we were always so proud of who we were and bernie's success in the industry. it was--it was so difficult. >> she blames herself for mark's suicide. he'd wanted her to cut off all contact with her husband. >> i just wish, until my dying day, that i had done what he wanted. i don't know if it would have made a difference or not, but if i could change things, at least if i had tried, i would have felt a little better. i don't know if it would have mattered. it's the most awful thing that can happen to anybody, suicide of a child.
>> after her son's death, ruth madoff told her husband she was finished with him-- no visits, no phone calls. that decision led to a reconciliation of sorts with andrew. >> that's partly why i'm sitting right here. he and catherine wanted to write this book. they thought it would be good if i was a part of it. and i agreed because i wanted to reconcile. >> neither ruth nor andrew will benefit from sales of the book. catherine hooper will. you lived just over there. you miss the apartment? >> not really. >> she lives a simpler life now in a three-room apartment in south florida, but she remains ruth madoff, lawful wife of the greatest financial criminal in history. why haven't you filed for a divorce from this man? >> i don't know. it doesn't matter to me.
he's gonna die in prison. i certainly don't want to find another man these days. >> he'll probably see this interview. are you concerned about-- >> i was thinking about that. no, i'm not concerned. he should hear it. >> believe her or not, the thousands of victims may have little sympathy for andrew and ruth, but it can't be denied that they, too, are victims of bernie madoff. that's mark and andrew? >> mm-hmm. [tearfully] in happier times. >> they lost a son and brother and will forever carry the shame of the madoff name. >> what he did to me, to my brother, and to my family is unforgivable. what he did to thousands of other people, destroyed their lives, i'll never understand it. and i'll never forgive him for it. and i'll never speak to him again. >> in june 2012, bernie madoff's younger brother
peter pled guilty to charges of conspiracy and falsifying books and records of an investment advisor. as part of his plea bargain, peter madoff agreed to a maximum sentence of 10 years imprisonment and the criminal forfeiture of all his real and personal property. at the time of peter madoff's plea deal, neither andrew madoff nor his mother ruth had been charged with any crimes. [ticking] coming up, cheating on the s.a.t. >> a lot of times i would actually--i would actually even induce a bidding war between two potential clients, have them, like, fight against each other for who was gonna pay me more. >> the perfect score, when 60 minutes on cnbc returns. [ticking] ♪
[ male announcer ] this is the story of the little room over the pizza place at 315 chestnut street. the modest first floor bedroom in tallinn, estonia and the dusty basement at 1406 35th street. it is the story of the old dining room table at 25th and hoffman avenue. the southbound bus barreling down i-95. ...and the second floor above the strip mall at roble and el camino. ♪ this magic moment it is the story of where every great idea begins. ♪ so different and so new where those with endless vision and an equal amount of audaciousness
believed they had the power to do more. time and time again. ♪ and then, it happened at dell, we're honored to be part of some of the world's great stories. stories that began much the same way ours did. in a little dorm room -- # 2713. ♪ this magic moment ♪ there's nothing like being your own boss! and my customers are really liking your flat rate shipping. fedex one rate. really makes my life easier. maybe a promotion is in order. good news. i got a new title. and a raise? management couldn't make that happen. [ male announcer ] introducing fedex one rate. simple, flat rate shipping with the reliability of fedex.
>> in september 2011, college student sam eshaghoff was arrested and charged with fraud and criminal impersonation. his crime was taking the s.a.t. and a.c.t.s for other people. he was so good at it, other students paid him thousands of dollars to take the exams for them, which he did at least 16 times. the case raised questions about the integrity and security surrounding one of the most important tests millions of high schools students ever take. in january 2012,
sam eshaghoff told alison stewart how and why he did it. >> i thought there was an easy way to make money. and just like any other easy way to make money, it's always too good to be true. >> who told you you were in trouble? >> my parents got a phone call saying that there was a warrant for my arrest, which was scary and shameful. i was--i felt like my world was gonna come crashing down. >> until he was arrested, sam eshaghoff seemed like the perfect kid. at new york's great neck north high school, he was a top student, vice president of the business club, and a varsity athlete, but what may have been his greatest talent was the one that got him in trouble: his ability to ace standardized tests, which was how he began a double life as a con man. >> i would call him an academic gun for hire.
that's what he was. >> people just needed him to get a job done, and he got it done. >> and he was the man. >> nassau county district attorney kathleen rice filed criminal charges against eshaghoff and the students who hired him. >> this was a huge fraud from my perspective. this was lots of money exchanging hands, there were high stakes involved, and there was forgery, there was criminal impersonation. that's a fraud. it's a fraud on many different levels, but most importantly, against the kids who play by the rules. >> during the course of the investigation, what did you discover about the process of taking the s.a.t. and the security associated with taking an s.a.t. test? >> how incredibly easy it is to cheat the system. there is absolutely no security in place whatsoever to prevent criminal impersonation like we see here from happening. >> so if i went up to any one of those kids and i say, "do you know what this guy did?" they'd all know?
>> every single person would know who i am and what i do. >> eshaghoff says paid test takers were an open secret among students at great neck north. he became the best known, but he says he was not the first. >> i had heard of it happening successfully in my own high school. >> so tell me about taking the mental leap from, "well, i heard other kids are doing it" to "i think i'm gonna do this." >> well, it all started with some kid approaching me. and he's like, "yo, you're good on your s.a.t.s, and i'm not. and you know this is possible, so how much is it gonna take?" >> here's how he did it: it was as simple as making a high school i.d., one of six forms of identification accepted at s.a.t. testing centers. >> a school i.d. is what-- like what is that? it's like--it's some colors with literally a name and a picture on it. so what i would do is, i took the template from my high school i.d., pasted my picture on top of it, and whatever person's name
whose test i was taking, i would have their name and it was really as easy as that. >> no social security number? no driver's license? no passport? >> name and date of birth. >> on a little piece of plastic? >> on a little piece of plastic that got laminated once. >> fake i.d. in hand, and with a bad case of nerves, eshaghoff began his lucrative career. >> as soon as i took that first test, and i went in and i killed it, like my first time ever taking the test for somebody else, i got a perfect score on the math section. it was like, "whoa, that was easy and that was great. and i'm good at this." >> it was clockwork from there. over the course of nearly three years, he took the s.a.t. over and over again, consistently scoring in the 97th percentile or higher for the students he called his clients. >> i mean, my track record speaks for itself. like, if you know somebody's so stellar at doing something so flawlessly,
without one exception, it goes without saying that's a reliable service. >> were you invested at all in the score you would get? >> oh, yeah, absolutely. just like any other businessperson, like, you want to have a good track record, right? and essentially, like, my whole clientele were based on word of mouth and, like, a referral system. >> if that sounds outrageous, it's because his high scores and his client's money trumped right and wrong. at the height of his business, eshaghoff was able to charge as much as $2,500 per test. one very satisfied customer gave him a $1,100 tip. >> a lot of times i would actually--i would actually even induce a bidding war between two potential clients, have them, like, fight against each other for who was gonna pay me more. >> he didn't stop after he left for college. he just added the cost of flying back home to his fee. the big question for me
comes back to: where are kids getting this money to give you? 'cause we're talking about thousands of dollars, and then if you add airfare... >> yeah. >> do you know where they were getting the money? >> i mean, i can't imagine that, like, a high school kid would be able to get this kind of money on his own, like, from working or something. i don't know. i don't know. maybe it came from their parents. i mean, i wasn't really gonna ask them, "okay, so where are you getting the money from?" but come on, let's put two and two together. >> i've read this, but i want to hear it from you. you took the s.a.t. for girls? >> correct. >> how do you take the s.a.t. for girls? >> like if the girl has a foreign name that could be perceived as unisex, like a girl could be named alex. but if she needs me to go and take her s.a.t.s under the name "alex whatever," it's easy as that. [ticking] >> coming up, the guardian of the s.a.t.
[ticking] >> high school students with an acceptable form of identification can take the s.a.t. at any of the 6,000 testing centers nationwide. as sam eshaghoff told alison stewart in january 2012, he exploited the rules that make the s.a.t. accessible to everyone in order to make money, taking the test for other students. >> describe the security for me when you as a student show up to take your s.a.t. >> when i go to take the s.a.t., it's as easy as going in, keeping your head down, giving that proctor the flash of the i.d., which is all they need. they just need to match the name on the i.d. to the name on their roster. and then it's find your seat, don't make noise, don't cause trouble, do what you got to do,
and get out. >> is it easy to cheat on the s.a.t.? >> no, i don't believe it is. >> kurt landgraf is president of the educational testing service, which administers the test for the college board and is responsible for s.a.t. test security. >> this is not a common occurrence. >> how many impersonations did e.t.s. discover last year? >> about 150. >> but in reality, that's the 150 you know about. that doesn't mean there were only 150 impersonations. >> absolutely. >> landgraf says, according to their data, of the three million students who take the s.a.t. every year, more than 99% do so honestly. his organization spends $11 million on s.a.t. test security annually. do you know how many times sam eshaghoff took the s.a.t.? >> actually, i don't. >> 16 times. does that surprise you? >> no. >> does it concern you about the integrity of your test? if one teenage kid can do that
16 times, and that's all that we know about from him alone? >> yeah, so the integrity of the test, the validity of the test score, is the primary concern of e.t.s. and the college board. since i believe that almost all the students take the test honestly, with integrity, and the score is valid, it's very important that we not overreact to this case or any future cases and do things that would be onerous and detrimental to the actual long-term security or access for the administration. >> sam eshaghoff is a smart kid. but you don't have to be a brainiac to cheat the system the way it exists at this present time. there's absolutely no security procedure in place. any review is done after the fact. which prevents any level of accountability once cheaters are caught. and that system has to change.
we now know that the security vulnerabilities we exposed in september are a systemic problem. >> since eshaghoff's arrest, the investigation has grown. more than 50 students have been implicated in what district attorney rice calls "well-run cheating operations" in four different new york counties. rice says she discovered a sophisticated system of brokers who would match buyers and sellers based on their ability to pay and their ability to score. >> we know that there are students who met with someone who acted as a middleman who said, "tell me what you want. tell me what you need. how much money do you have? okay, i'll set up the test taker. and they'll take the test for you." i mean, this is big business. and it didn't just start in 2011. this has been going on, this criminal impersonation, has been going on for years, i mean, decades, all across this country. >> sam eshaghoff was caught after several of his clients, students with suspiciously high scores, were questioned
and confessed. eshaghoff's legal team accepted a plea deal which includes community service tutoring low-income students on how to take the s.a.t. was there ever a point when you were taking these tests that you had a conversation with yourself that went like this: "sam, i know i'm doing the wrong thing. i'm lying here. this is not right. i got to stop this." did you ever have that conversation with yourself? >> yeah, i did. it was tough. i knew i was doing the wrong thing. i fully acknowledged that this is the wrong move and i got to stop this. but i was-- i guess i was low on cash, and i just told myself, "one last time. one last time. one last time." >> you feel bad about what you did? >> [sighs] if i could start over, i never would have done it. >> and if you're wondering what happened to the kids he helped get into school, their colleges will never be
notified about what they did, because it is e.t.s. policy not to tell schools about cases of suspected or confirmed cheating. >> we know there are kids in college right now who got where they are because of tests that someone else took, and there's nothing that we can do about it. if that doesn't tell you that the system has to change, i don't know what does. >> by october 2012, district attorney kathleen rice had brought charges against 20 people accused of being involved in an s.a.t. cheating ring in nassau county, new york. in response to the cheating by sam eshaghoff and others, the two companies that administer the s.a.t. and a.c.t. issued new security measures. among the reforms, students will now be required to submit a photo of themselves with their test application that will be printed on their admission ticket and checked against a photo i.d. at the test center. as for sam eshaghoff, he returned to school
and resumed his college career. well, that's our edition of 60 minutes on cnbc. i'm bob simon. thank you for joining us. [ticking] [ticking] >> do you believe that there are people at countrywide who belong behind bars? >> yes. >> do you want to give me their names? >> no. >> would you give their names to a grand jury if you were asked? >> yes. >> we spent nine months investigating our story and asked the justice department about the state of their own investigations. the perception-- i mean, it doesn't seem like you're trying. >> well-- >> it doesn't seem like you're making an effort, that the justice department does not have the will to take on these big wall street banks. [ticking] >> anton valukas was the man in charge of investigating the collapse of lehman brothers, the ur