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tv   Book TV After Words  CSPAN  April 17, 2010 10:00pm-11:00pm EDT

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to develop competing product i knew that was not possible mathematically nothing made sense and so i recruited a team to co-workers of mine then they financial general to the team and went after the fraud 1/2 to no avail. >> host: when did you first year of 30 madoff? i and a stand he had a semi of legitimate business then he built of rock ponzi scheme. . .
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description contained such that he would have to buy stocks that went up or stayed the same and never went down. how likely is that? in possible. the other thing i was wrong is the performance line, it was a 45-degree line up in that variation and the market as we know is up and down. the other thing, the third major thing is 96% of its was positive and that is akin to a major
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league baseball player betting negative 60 and that is cheating given what we know about baseball. >> he had a steady line going up and up up whereas you know the market goes like this and this is impossible. >> guest: yes, four hours of modeling and i proved it was clearly impossible. he had prior record and in human history and they were so superior for a long period of time and they couldn't be real. >> host: how much money do you estimate the work offering at that time? how much was the risk in this broad? >> roughly 10 billion. >> host: quite a bit of money but certainly not the $65 billion that was eventually reached. >> guest: 65 million is what people felt they had and then in november 2008 and stayed, that
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was their last monthly statement so that is what the effect was for the victims. that is what they thought they had but the didn't of course because the returns were. >> host: you talking your book, quote kohl no one would listen," how you just mentioned as well they were pressuring you to create a product like this and you could take some of the pretty maid of business, the money managers who did business because the clients like the steady returns and you eventually found this was in possible. what did you do next? when did you decide you had to go somewhere and tell someone about this? >> guest: i had to check my math and had my assistant check my math and it checked out. i said this seems too big, too unbelievable. how can someone be this big as a fraudster. i went to the best mast maths
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petition i know who is a big firm, it is a malling firm and i asked him to check and he said harry, that is fraud. and at that point i knew i had to do something so i called a local cfa the fcc. he's the former boston company, at fidelity and 25 years of industry experience and he understood immediately. he put me in touch and said you got to bring it in so i spent weeks riding of the case and we had a meeting in may of 2000 with the director of enforcement and he didn't understand a word i said. that was the first case and it wasn't a failure. >> guest: then you went to the press at least later the more general financial industry price over the years. talk about that for the minute. was the press open to when you
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were saying? >> guest: know they were not. we were putting the generals to the team. he was the managing editor, the largest single hedge fund publication in the industry. >> host: that is the trade by a hedge fund managers who do business with them. >> guest: it cost well over a thousand dollars a year for a subscription. he joined the team and did an investigation and met with madoff in april 2001 and was that print the first with an article. >> guest: >> host: you've got the articles reprinted in here for the fcc and for other complications. >> guest: we also went to forbes magazine and unbeknownst to us they went six days after we did. this is a finance publications read by millions. every weekend it comes out on saturday and that wasn't by a gentleman so those two articles
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back-to-back state for seven days. >> host: back in 2001 so this is a full seven years before the fraud was exposed. >> guest: we submitted a second case in march of 2001 and it was discarded almost immediately basically upon receipt and the few years went by we continued the investigation but we knew that we needed more proof so we went to two continents, formed into continent in europe repeatedly. i went on one trip by describing the book in june 2002 and that is how i knew it was a ponzi. when we first started the investigation it was 5050 it could have been front-running or a ponzi. we didn't have enough information to weight the evidence in favor of one cause or the other but i met 14 different funds all operating offshore saying they had a special relationship with bernie madoff and he took their money in only their money.
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when you hear the first time you believe it. when you hit 14 times in two weeks you know it is a ponzi scheme because you need more money to see the beast upon the ponzi scheme is an on ending, new investors to pay the old investors because you are robbing peter to pay paul. >> host: you need new money coming in because the old investors will survive and college web and say goodbye and flat i made the 12% return or he has to have new supplies coming in every month or so. when you went to europe in 2002 what was going on madoff's world where you investigate this fraud and you see the teammates something rotten here. what do the investors see as well and the fcc in your book even in marginally competent
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manager that is an adviser who manages some one else's money for the missions should have said thank you very much, mr. madoff that no banks are responsible in the other direction were these other fund managers firm in connecticut, why didn't they do this, were the incompetent or stupid, what was going on? >> guest: dewitt incompetent and complicity. one thing it did when they were he was cheating the broker-dealer clients sending 10% of the exchange volume and we collectively known as front-running and basically rigging them off. >> host: so in other words he would get an order from a customer to buy the shares of exxon and he would make his own trade for his own money based on that information before the rest of the market could see it and many of his money-management
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clients thought he was giving this for their benefit. >> guest: they thought he was a crook stealing from brokers' clients and giving the hedge funds clients the price difference and he was stealing from them so they didn't want to ask too many questions in fact they didn't want to ask any because they were afraid of the answers. the asked him are you front-running and he said yes. from the illegal activity that makes them knowledgeable and they didn't want to know. >> host: who they were constructive the current or they thought they were being constructively ignorant. in fact they were being very ignorant. >> guest: they were playing into his hands because a good cook for steel from everybody and this is not a good crop. >> host: you talk about how the european investors have these in the fcc they just assume if he were perpetrating fraud the fcc is described as front-running they get their money back and not be considered complicity but there is no way
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the fcc would let him perpetrate fraud to outright steal their money through this ponzi scheme. talk about the fcc did this make investors less willing to go out and do their own research they just figure the fcc had a seal of approval as you call it. >> guest: you should never trust anybody else and that is a problem. people trusted the rating agencies as well and the problem with that economy and they certainly trust the banks to be regulated and a trusted fnra and other self-regulatory organizations that will but the fcc everybody had this idea that they were competent and they were out there and they work. it's nothing but a lawyer is to build undersea of finance. you could lie to their face and they couldn't tell if you were lying because they didn't know the capitol market at all. what about these funds that bring in tremendous clients, to
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present and then extra 20% of the total returns on top of that they're supposed to be making this money because they are going up and doing research making sure that the ultimate investment keep their clients' money in is good. tell me how they go about doing this research the right way if i come to you and say i have a hedge fund i know you should put your clients' money in my fund as an adviser, gatekeeper of someone's money what should you to investigate to make sure i am doing what i am supposed to be giving. >> guest: it was indigestible. there were lying. there were nothing but the sheets and crooks. they said they did due diligence and they have a massive checklist so they go out there and the verify the assets were in place and they insist on full transparency so they see the trees is happening. that didn't happen because madoff never treated and they said that they were on site during operational checks
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meeting with the back office staff and we know they didn't do that either so they did nothing but lie because they didn't want to ask questions because they were afraid of the answers. they thought madoff was cheating and they didn't want to know. they were taking the feet from the clients telling them they are offering protection in the due diligence when in fact they did nothing. they deserve to be hunted down and put in prison. >> host: wealthy de? what will happen to them? are their clients suing them to recoup the money? will they get any money? are there criminal investigations? >> guest: all of the above to read most of them are being sued civilly so that should bankrupt than if they haven't thrown away off sets these cassettes of short. making the case will be more difficult because they had a lot of time to destroy evidence and certainly the authorities need to prove the criminal intent that they knew what they were doing. certainly they were all liars and cheats. they didn't do the due diligence they said they were doing and that is for one of the criminal bar. that remains to be seen. i can tell you why do a lot of
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white-collar fraud case and there's not enough space to put all of the white collar fraud stores away. so a lot of them will lead justice eda will get a meaningful future make a deterrent to the rest of the industry hopefully. >> host: some of the fund managers have said we were madoff's victims, too, and you don't agree with that. >> guest: if you hold yourself out as a fiduciary as an investment, as a trusted adviser, then you need to do this due diligence checklist you're telling the clients you do. if you're not, you are only a lawyer. but we know they are more than lawyers, they were treats and criminals as well. >> host: did some fund managers do their job? did you hear of instances where you have someone come and say i would like to put more money but madoff and check them out and say you don't want to do that? >> guest: too many instances to recount. in the united states was it was about 11% of the fund of funds.
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they didn't do their job. mabey degette, 89% of their job. in britain less than 10% said they did a better job of due diligence in their industry in the u.k. than we did. they did a rubble of, 29% of their funds felt if they came to madoff and the italian said even higher rate of failure and the brazilians certain countries have massive failures. i think in germany 16% of the funds fell victim to madoff so it is varied by country and it shows that people can hold themselves out as a fiduciary, investment do real and trusted adviser but if you are an investor you need to check and your advisers, you can't trust anybody. you have to do your own checks. >> host: to make sure we have this right, 11% of the types of funds in the u.s. fell into this trap and they put their money with madoff. they did this this service to customers and that is a very high number. >> guest: it is a high failure rate and nothing to be proud about, nothing in this case to be proud about.
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>> host: now what about big financial institutions. to talk about how some of the big banks mention goldman, you mention morgan stanley, you talk about an individual at citigroup who seemed to be on top of this and you say of the institutions if they do not have felt right proved that this was a bad deal, something is coming on, the suspected that. did they have a responsibility to see something and to what and whom and when? then you also mentioned a couple of european institutions and put madoff on the blacklist. they said they would not lend their clients' money to invest. >> guest: they had an ethical responsibility efforts were not falling short where they would have been. legally they did not have a responsibility. it proved self regulation in the capitol market doesn't work because of you see scott going on you are not been to place a call to your regulator. that disproves of a few rays of regulation could ever work.
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>> host: by using the get into that? you think they had experiences like you had where you went to the fcc, they didn't understand you, the few people if they did understand you even slightly they thought you were a better competitor were you were a crackpot, do you think these firms had that experience and said look i don't get thanked for going out there and starting some one else when going to turn a blind eye to this. >> guest: i would say it is more the case if you live in a glass house you're not going to throw stones. they had plenty to hide so they didn't want to do self reporting because they were worried about their competitors across the street making phone calls and reporting them for their transgressions. >> guest: it was a code of silence and wall street. >> host: even a big financial institution have worries someone else. these guys are helping putting money offshore. they didn't want scrutiny over
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the funds. >> guest: the hedge funds wanted to remain on regulated in the dark corners of sunlight and the transparency so that is an industry because of its failings not seeking regulation sort of fell off the cliff and now they have to regain the investor trust again and that is going to be difficult. >> host: to step back for a moment and consolidate some of these lessons over the past 25 years as you know at least up until 2007, 2008 financial industry grew and grew as a percentage of the nation's output it quadrupled from the early 80's until the late 2000's of financial institutes, professional skating great deal of money compared to the fcc economy and the reason for this has always been these guys had great value to society that we need ever more complex financial intermediation, more complicated jobs for the middlemen because the world has gotten so much
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more complex. it seems to me from reading the book and talking to you that this intermediation that is these firms and the advisers to the firms, the advisers to the clients, they prevented the market from working. did these funds, are they part of the free-market that think markets didn't work here or is more of a situation of collusion where we need to get rid of some of the middlemen so that people can know they've got to be responsible for their own money. >> guest: there are too many middlemen and they take a giant amount of fees and it is a complex we don't need. investors should in dustin structure products. i say 99% of them are bad and that is a good 1%. if you don't understand you can't model with yourself if you are a fiduciary. if you are a pension fund, if you can't model and instrument you have no business investing in it.
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this complexity has done nothing to hide fees from wall street and what i call it your face of financing. they are bringing upon investors. >> host: and you would include madoff suppose it split strike model, this was using the veneer of structured finance to trick people. would you also include things like credit-default swaps, mortgage securities are these also a veneer so people -- this is not just a ponzi scheme it directs people's attention away from fundamentals at some point you're lending people money to can't repay it and all these complicated products just obscure that. >> guest: i don't like credit stifel swaps because you could have a bond and have 20 times that in credit defaults what is betting that the bond and bondholder basically are going to go down. and the company will not repay its debt so that magnifies the risk and derivatives used the wrong way leads to the wrong source of behavior.
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and we need a simple complicity so counterparties don't discount a party credit risks that is why you have to much complexity and it became too big and it was on regulated, they didn't know they're looking at in the banking regulators none of them did their job and this can to failure and who had to bail them out, we did, our children and grant hill children did. >> host: what would you say to wealthy investors. should they go to these firms? should go to anyone, should get open and accounts at discount brokerage firms and by a few stocks on their own guess it depends, every situation is different. everyone has their own financial some of addition. if they're going to use the intermediary you need to do the due diligence on them and make sure the ordering the checks they say they are doing, you cannot rely just solely upon others. you have to trust and verify
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>> host: what point you have to verify the ferre fires at what point does it become too complex where you've got your own due diligence team to do diligence on your fund who is than doing due diligence on madoff supposedly how you at some point know there's something wrong here? is it too many layers? for example is the fund to complicated and it sells? why not just invest directly in the fund? >> guest: i agree. we had the balance is that should have failed. look at them one by one we had a regulator maseth failure they were incompetent. the failure accounting firms that were supposed to be doing audits on the fund. making sure the assets were really there. will they weren't. you had a third party planet and as traders keeping the four of the trade they're fleeing the performance. e-verified was accurate. how did that work out? they never treated so the field, too then you have the fund of the funds failing that was a
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massive layer after layer of failure and the whole system broke down there was no checks and balances at the end. >> host: hauer the fund is doing now? has this business been destroyed or are people very suspicious of putting money here? >> guest: dealers suspicious, they have a right to be suspicious. there are questions i put in the people should ask. what percentage of revenues go to due diligence? let me see you due diligence checklist. okay from b.c. and xm portfolio and say okay now show me the worksheets of the questionnaires you went to the due diligence. if they can't produce the documents, the worksheets, guess what, they didn't do their due diligence and you should run away and tell your friends they are shady operators. >> host: how do you at some point get investors to understand that in the and if something is to get to be true it probably is a lot of people
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were just suspend their disbelief saying he gets me 12% a year medial but less than that but don't have to worry about how do you just get people in the middle of the bubble to understand. you talk about one investor who came to you concerned about his wife and father-in-law putting their trust in bernie but unfortunately very few people did that. is this just human psychologies this will never happen when these are going well or are there ways you can change the psychology. against the first of it is too good to be true if you put your eggs in one basket and see the ponzi scheme or you are in the middle of a double city of the people to resist that temptation. the reasons that siphon temptation and diversify to us that they are maybe staying the same or going down because you want a portfolio that is sent expiring. that's one thing that you can do. >> host: don't put all your eggs in one basket no matter how great it seems.
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>> guest: it was 30 to 50 diversified across the entire country. it was a piece of american to investing in. you have an option that would downsize the rest of the market went down. when you didn't diversify away from was manager fraud risk that you never please all of your money with just one manager and one strategy and the proper allocation of hedge funds as i've been taught is between zero, 25%. the ultra wealthy, 25%. for the average person on the street saving for retirement, probably zero and some people are in between. but it is 100% and in a strategy you didn't understand, that makes no sense and if you don't understand the strategy you don't understand the returns coming from don't invest in at. >> host: did the markets work in the end? this is a story of as you said several times in the book didn't put their money in madoff in some cases and they are rewarded, people who put their
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money in madoff were punished. was this an extension of markets working belatedly and can society afford to wait that long for the markets to work if that is the case? what is the cut off? you can say if the piece had run and then a couple of months later everyone pulled their money out of this and that is the example of the market working and running eight years or six years nothing happening and then suddenly the global financial crisis and finally people pulling their money out seems more tenuous to say markets actually work to the market's failure or help succeed in serving of madoff? >> guest: i think you can see the government is run by corporations because the corporations got bailed out and we build them out. and the victims are getting callbacks the last six years of earnings they were not winners so you can see the system favors too big to fail and that is a very negative message to send to
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any industry that they are too big to fail because they get arrogant and the increasing risks in the future and the problems in the future will be bigger and maybe we are not able to save them the next time and go to national bankruptcy so it is a danger to all of us. >> host: let me ask one more question before we take our break. is it fair for lenders to aig including goldman sachs, very sophisticated creditors to get this bailout as you describe the were paid 100 cents on the dollar but yet madoff's victims receive nothing. how is that fair and what was your solution would you suggest nobody get these bailouts at all? >> guest: no bail out, 100% accountability. let the firms go down. we can nationalize and wipe out the shareholders and bondholders because they didn't do their deutsch diligence either so why should i feel sorry for any of the wall street firms, shareholders or bondholders? i should not or should i be responsible for their behavior. why should the madoff victim be treated as a lower-cost the
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class? >> host: right. and when we come back we will ask about the fcc failures and we can talk about some of your suggestions for how to fix this. >> guest: thank you. >> host: thank you. >> "after words" and several other c-span programs are available for download as podcast. more with "harry markopolos and nicole gelinas in a moment. "after words" with harry markopolos and nicole gelinas continues on c-span2's book tv. >> host: are backed with speed kentucky that his new book "no one would listen." harry, you may know that alan greenspan the former federal reserve chairman who was an
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office from 1987, 2006 during the time much of this was building up certainly not just madoff but the entire succession of two financial walls one based on it and eventually the financial system and the economy to its knees and just last week alan greenspan came out with a part of the crisis called the crisis and he said in the paper in the aftermath of an actual crisis we will find highly competent examiners failings who have spotted a madoff and he goes on to say that that is why we still have little choice but to rely upon counterparties surveillance as the first line of crisis defense, meaning the free-market. helpless dissect this. were the examiners at the fcc competent? was this simply the case of having too much work to do not being able to sort out of reef roster that? and should the free market be the first line of defense? if so how can the fcc help them
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and if not what should be the first line of defense? >> guest: if you're to be the first line of defense we've proven that didn't work given the crisis we've entered. all of the checks and balances fail. i would challenge the assumption the fcc investigators were confident because in fact they were not. incompetent, they were not trained, they were poorly trained and they didn't understand finance or math, so they should not have their job and neither should the banking regulators. not one of them did their job. if you mention auction rate secured, dirty madoff, lehman brothers, bear stearns from aig and a host of other problems all of those big jul and problems with the regulators do can change all of the rules in the world but if you don't change the people manning those agencies and put confident people in their nothing will change because those people couldn't enforce the old rules we had and they want to give more complex rules and broader
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responsibilities. how are they going to achieve that? they are not. >> host: we better figure this out before the responsibility of looking out for the entire financial system and of the law and that is exactly what senator dodd wants to do creating a systemic risk regulator. and they can't find madoff after you go out and warn them including in a memo with the title, what was the title? >> guest: the largest hedge fund is a fraud. maybe i was too subtle? >> host: mabey and you said that you specifically modeled after the bin laden memo from the summer of 2001, and it still you've got nothing from the sec. what did me to be competent? if you go into the sec and ask for a meeting and say you think you have a fraud, you've got documents, what with the examiner to? >> guest: an examiner what question you, question or dig up, look at the data, question your modeling techniques, be very familiar with the modeling techniques. he ought to see independent
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third-party data, look at the fraud theory. the question you extensively about who else knows about this. and by the weekend i have the contact information because of what to call the witnesses and they would call those people and find out if it was a fraud or not and immediately start an investigation and they would know what to look for because you'd be giving them a road map and that is what they should be doing that that is not what they did. >> host: you talk about fixing the spc to make it functional organization or putting it out of america's missouri. do we need new laws and rules or do we need to change the way we execute these rules for a sample you talk about getting rid of the lawyers, making sure that these people have experienced the are paid better, should it be more like the foreign service where after you have done some time on wall street you kind of get back and do try to use your knowledge to figure out what is
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a long or would that is to be another case of people from within the industry protecting their own capture? how do you in the and how do you fix the problem of there is always going to be more money on wall street than there is government? >> guest: you need new rules, you need to bring over-the-counter derivatives. you need to regulate hedge funds because they will get new rules and new power and put big firms down, killed the big firms said they are not too big to fail. unless you have a new regulatory scheme right now you have seven different regulators consider a different computer systems, these powerful financial arms, a broker-dealer arm, asset management arm and a hedge fund trading arm and then other arms you need to be built to connect the dots. having seven different regulators with computer systems will not connect the dots. prior to 9/11 we had 16
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different intelligence agencies who didn't share information with one another. now they do. we are hopefully able to connect the dots and you need to combine the regulation in one super regulator because one computer systems you can go in a confident regulators which i mean coming from the industry's if you take someone who has a trading background the kids on the trading block and blocks rot from across the road. if you to get money manager like myself and put in a management operation mutual-fund we are able to stop fraud immediately if the answers are not making sense we know to call them because we have a fraud on our hands. and if you have a public accounting background and get on those reports for big companies that you can spot public accounting fraud immediately. and that is what they need to do is provide service to the model and bring people with no hair, gray hair or dyed hair into the government service and compensate them. if they say five, 10%, 5% or 10% of the revenue that you bring in every year well the sec does to
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macrophyte the bad guys $3 for every 1 dollar of the steel and pay them five to 10% bonus based upon the cases. >> host: said you could have seven figure rewards for the staffers in some cases maybe even higher. against the you could have eight figure for government staffers and would be in favor of the stock fraud and prevent taxpayers from the leg of the banks and insurance companies from a trolley in. the bad guys are paying the fines its model of the taxpayers' pockets it's the bad guys pockets and that is what we need to do is sit foxes after fox's because right now you're sitting chickens against foxes and the government's chicken is not catching and fox's. >> host: should some of the investigations begun publicly? i can see there would be a problem if there was a suspected fraud that turned out not to be a fraud but you have a public information out there hurting someone's reputation it yet you see the company's publicly traded like lehman brothers and bear stearns you have short
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sellers like david boren who wrote the foreword to your book saying publicly something is wrong here. you had a public debate about this and market signals where the stock was going down. you have a great chance that markets could work with a fund like madoff's this was private as you said he even told his customers don't tell people you got your money with me or i will take you out of the fund which in retrospect wouldn't have been a very bad punishment. should the sec have a public blog the invite people like yourself to say i think i found something here. people should prove me right or wrong, something like we have in the political future market for politicians, something like that for these funds. which one is going down. would that help? >> guest: the sec has adopted the proposal. they are starting with the whistle-blower and they will be paying rewards for people to come in with inflation because when you take and you take risks and may be running a ticket but
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if you can come with a smoking gun e-mail and the transaction documents under fraudulent or come with a book the government does nothing about that is worth paying for because it saves the government tons of money and resources they would have never figured out on their own and it stops the fraud when it's small before they get so big it threatens the entire economy and put tens of millions of americans out of work. >> host: something as simple as forcing the funds to the trade through many different financial institutions and have the trade confirmations and directly to the customers. would that have helped a great deal you have a rule that says madoff has to do the street through five different firms whether it is a big firm, a small firm and then the customers are getting to the conference and may be throwing away but at least there is something if you are not getting anything as you know madoff had a huge advantage because he cleared his own trade so there was no outside group singing
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wait a minute this guy says he's got $65 billion but he doesn't have any money >> guest: i don't think that customers will know what to do but it places responsibility of the individual investor but they should have been getting the trade confirmations and have access to the full transparency trade after they had happened and they shouldn't allow self accustoming. madoff kept score and kept the money so of course he would give himself high marks when he was stealing money. >> host: right. you mentioned the late [inaudible] in charge of the access international export to us on madison avenue. he ran one of these funds unfortunately into madoff on behalf of the european customers and both you and your colleague in the book describes these conversations where you said to him madoff is a fraud and he
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said that cannot be true. i'm paraphrasing but that cannot be true and if it is true i am ruined. that made me kind of think about what the head of citigroup, dan had at citigroup charles print said in 2007 where people said to him at a public meeting these markets are in saying why are you continuing to put money in the subprime mortgages and everything else for very little compensation and then he says the music is still playing and while the music is playing you have to get up and dance. it seems very similar. what kind of regulations can help people who are just caught up in this bull mentality they kind of note what is going on but they don't want to admit it and at some point they can't admit it because they will lose their customers and markets. if he had said to his customers this is a bad deal the would have taken their money to someone else would have put eight with mr. madoff. the same with citigroup three if they stopped everyone would have put their investments somewhere
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else. can we stop that from happening or is that just another thing where that's why? >> guest: i think it's life. you can't stop it. you will always have those character traits. more money has been lost reaching for the yield or investing in and by increasing investment schemes ever a point the gun people will do it to themselves and i think in the industry bad money does drive out good money. for example i have a book advance for writing this book. we had a choice of where to put the money. we chose citigroup because it was the most insolvent bank in the nation owned by all of us taxpayers, 34% by the united states government so we felt they were not at risk of going down. the worst bank in the united states and we put our money there. we also considered bank of america which wasn't quite as insolvent as citigroup so we didn't put our money there where
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if things were functioning normally be should have put our money in a local community and that was solvent. >> host: right and i always feel grounded by invest my money into short-term cds of the failing banks. after the crisis started banks that offered the highest interest rates under the cds with the countrywide banks coming under but you knew that your money was safe because it was invested and guaranteed by the fdic and so this is a distorted market on many levels. boris madoff is a cpac or psychopath? we haven't really gotten into the personal element here. he's a person in analyzing this nearly a decade what on earth do you think made him do this? have you ever spoken to him or communicated with him and it has always been assumed his family
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knew about this and that his wife knew if it was possible for him to trick the fcc for so long would it have been possible for him to track his own wife? >> guest: he was the subject of the investigation of the fund we have located across the globe and a current velt and now we know there's 339% of those that leave. they're superbly more that we don't know about. we were tracking them across the two continents to gingrich risks to do that but of course it was an undercover for us. we couldn't reveal that we were tracking the because he was stealing from some of the wrong people, the most powerful people in the world and people have a lot to protect it was very dangerous. we never really got inside of his mind. he certainly seemed to be sociopath nothing but we know now that time it wasn't really evident. we just knew he was a master con man. what i did see that was unusual was in europe i saw the offshore funds that he was taking money from and those offshore funds
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attract people, the shady people in the plant, mobsters, cartels, if you are stealing from organized crime you were either criminally insane or and or yourself. we don't have enough evidence yet. this is still to be seen at it will be an extra inning it on his mind. was it family involved in the business? gispert his son's ran the brokerage arm which certainly losing money in the over-the-counter market study deacons and in 2007 to those on and on the profit-margin went down 92% so i would ask was there a force there was submitted to the regulators the regulatory capital were they collected suspect not. the firm was filing false statements. the firm's compliance officer was dirty madoff's brother. his niece was a compliance officer. this was never incompliant. >> host: other ways investors should look. >> guest: you had no segregation of duties. everyone was a family member.
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but we don't have enough information yet. was it criminal? can i prove criminal intent? that is a tough barbee of a reasonable doubt of proof. certainly the family will be sued and they will be bankrupted. as far as the criminal case remains to be seen that there is one. >> host: has he ever tried to get in touch with you? >> guest: no. i have no interest in meeting with him. he does nothing but life for his career as a lie but i want to sit there and listen to his life, and he doesn't owe me any answers, he owes answers to his victims and owes them a higher duty. he owes me nothing. >> host: i should mention this is a life or death situation. unfortunately this man in the committing subside after this was uncovered in the early 2009. was it, or was it made 2008? >> guest: he committed to the side december 23rd 2 blocks from here. >> host: just a couple of weeks when this was uncovered. >> guest: and the most gruesome imaginable. he wanted to let his clients with a heartfelt apology he was
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a man of honor, nobleman and that was a tragic way that he chose to end his and a very positive manner and i think it's a gruesome. i certainly don't condone it but i respect his decision. i respect his decision than the other operators around the globe and are lobbying glow in the weeds trying to avoid the civil suits that will bankrupt them and criminal prosecutions that will put them in prison. >> host: and what has some of the victim's said to you? do they blame themselves? and do they blame? >> guest: i think the blame themselves and i wish they wouldn't. they wouldn't have known. it was such a master corn and it is a lesson for all of us. you have to diversify. you can't trust. you have to diversify. what they did is it was hard to get there. he was so exclusive he would turn people down on purpose to build that allure of exclusivity. it felt like dating. you always on the date with a girl that turns you down. you want to date her the most
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because she turns you down and that is the way madoff was. they look and see the smart people in there and that is smarter than me and they are there and certainly they must object. everybody assumes someone has checked so they went in willingly thinking they didn't need to check so if you're an investor you cannot abandon your responsibilities to others. you have to take responsibility and figure things out and ask questions on your own. you can't just trust people willy-nilly. these people were not from financed victims, they would to understood the strategy. they don't even know what the word due diligence and and unfortunately they became victims. the portfolios these days seem diversified and seem to be a reputable by running it. he was one of the co-founders of nas-daq and certainly the former chairman of a regulatory body. his family had an impeccable pedigree but the white collar foster's always have the best recipes and live in the finest houses and designate and seem like nice people until you find
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out they're nothing but human predators is what it was. >> host: right. should we have some kind of regulatory penalty for anything that is complex higher capital requirements complicated mortgage securities? you talk about treating these credit defaults swaps and derivatives of exchanges? should this be true on a personal level where right now if you want to buy stock the regulation says you've got to put 50% down in cash to protect you and the rest of the financial system from yourself. is their something that you could do to gently steer people away from the most complex investments and investment firms without telling them they can't do, something like an extra seat or something on the funds i'm just thinking out loud here but is there any way we could do that through gentle regulatory
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constrained to say to someone think twice before you do this? >> guest: you can't regulate intelligence and assistance making. i'm afraid you can't. you can certainly the institutions themselves treating complex hard to understand investment structure increase the regulatory requirements for them so they can do less of them and you certainly should mandate the total elimination of off balance sheets, structures and if something is off-balance and it's not reported to investors and regulators i would put in a mandatory three-year sentence to the ceo, cfo and general counsel, 30 years in prison hard time notice and or botts. you need to in the balance sheets structure once and for all. >> host: these things have to be on someone's balance sheet if it is a stricter of investments to equals sponsor bye citigroup it should be on the balance sheets. >> guest: no more logging and cheating and aiding and abetting the financial firms putting stuff off balance because that
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can back to bite us big time in its way to cost my children and my grandchildren. they all deserve that. they are not even born yet. i don't have grandchildren. we will be paying for this because people are hiding stuff off balance sheet. >> host: i am sure many of madoff's victims who were successful in business although usually not in finance as you mentioned they consider themselves to be x exceeded people. should we have this between the investors and where the sec says for example if you have a net worth of more than a million dollars, maybe 2 million you are making more than $200,000 a year you on your own, there is really no consumer protection or investment protection for you. you can invest in all kinds of on regulated stock and everyone else has at least some rudimentary protection. they need reform as well. should we even have the
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separation? >> guest: no. just because they are wealthy doesn't mean they know the capitol market that will. they deserve a level of protection. they are citizens of this nation to be below the duty of protection. the would be like the armed forces chollet protect people that make less than 20,000 a year. they predict all of us of the armed forces. it is a with regulators should be deferred and cheating things sitting or on your own it's okay for you to get wiped out we don't care. someone should care. there are people and the families and pickaxes, they donate to charity and serving your organizations. why don't we want to protect those people? the victims have gotten nothing but a bad deal for the government. no protection, no sympathy and now they are taking callbacks. the people that got protection with a big corporate entities. how fair is that? >> guest: >> host: more sophisticated. >> guest: and they got bailed out. so the corporations or was this kid they get bailed out, people that are making over 200,000 a year and may have over 2 billion
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in assets get no protection and anybody who is middle class gets plenty of protection. will it turned up the middle class gets protected better than the rich people in this country did. who didn't get protected? the corporations and as the country represent? it seems to represent corporations. >> host: take us to the larger level of what you talked about the on the fairness of the financial industry bailouts, the perception of the regular people that there is free markets meaningful year for me but not for the if you're big enough and complicated enough. how can we put in place the right regulations so that we don't have these bailouts next time are not so you can have financial companies go under without bankrupting the rest of the financial system. what is bernie madoff in this whole debacle teaching for five years from now, ten years from now? >> guest: i think it teaches of your individual this country does not represent you, it
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represents corporations. i know the american people are angry as hell because i go out and give speeches and i meet them and the anchor is palpable. >> host: what are they angry about? >> guest: the bailout they don't understand why we build of the auto companies. they don't understand why aig was allowed to exist, fannie mae and freddie mac. they don't understand the about and why we rescued the banks and they don't understand why the banks are paying big bonuses. why don't they pay back the bonus is the earned the last ten years. they were not real earnings. >> guest: >> host: they have to give back the money that they made by about the big financial institutions as well? >> guest: how fair is that? the ceos get to keep the money they didn't earn and the victims have to give theirs back how fair is that? it isn't fair. it shows the inequality and who does the government represent? it certainly doesn't represent the taxpayers. >> host: you lay out a very good suggestions what is your
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realistic assessment from what you have seen in the congress and the past year and have now coming year, year and a half since your exposure came to light the of regulatory bill that is before, chris right now and this idea the systemic risk regulator, consumer financial protection agency do you think they will get this right? >> guest: no one has been held accountable in washington, not one regulator, not one staffer has been fired, the need to be publicly funded. they shouldn't have their jobs. there's nothing in the current regulatory scheme that needs to save the nea to build a new. one computer system, new people that are is a list and compensated to find fraud and prevent fraud and protect us taxpayers and right now no accountability. zero. >> host: you are sinking even the people that you mentioned and a couple of other ones you are reporting to yourself and the inspector general business to these findings many times
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over, they are still working at the sec? >> guest: many of them are left and some of them have been promoted. the penalty for us going up massively like the madoff case if you make more money that is wrong. or you go to the private sector and to the partnership at a big law firm that doesn't seem like punishment to me. i want accountability and government there is none. you have an ty cherry agencies that have failed them nation not one person has been fired. how shocking. should americans be of reach? you that they should be. >> host: if everything somehow magically is fixed exactly the way you suggest unlikely but for the sake of argument would you tell people to relax then or should they still act as if you have dysfunctional regulation that they in the end are the left line of defense against the money? >> guest: each investor has to take personal responsibility in their own because you cannot count on somebody else to have your best interest at heart.
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>> host: anybody. >> guest: nobody is going to care about you like you do. >> host: whether it is the government, the bank or you're well-paid adviser. >> guest: we saw every check and balance bill in every financial crisis the last year so why we do have confidence in anybody else? you have to place the confidence in yourself and educate yourself and do your own checks. >> host: right. well, thank you very much, harry, this is an invigorating discussion and again, the booko" a true financial thriller. and harry does mention in his co investigators how you recommend the book is a herring frigate but it does tell you unfortunately the real life tragic stories. a big reason why this financial crisis came about. thank you.
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we are of the organization of american historians meeting in washington, d.c.. eurith university of kansas press who the last couple of years has been putting out an election series of books to read this about the election of 1896. we are with acquisitions editor in chief michael briggs. you want to tell about the election ceres you have? >> it's part of the presidential election series. but we do is take a look at pivotal presidential elections. some of the more famous ones like 1980, where ronald reagan assured in the conservative era in politics and some of the lesser-known ones. like ford said the selection of 1898 where there is a lot of realignment and set a precedent for how the parties sort of reconfigured thought electorate in their favor. >> where did this idea come from? i guess i will ask michael that question. you do what other legal series and you have been seeing a lot of these books come through the
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office discuss how this can to get there and the two of them are working out for you. >> the legal series got its start in the early 1990's with a conversation i had at an academic conference with peter charles wofford, the co-editor of the series, and we both had wanted to develop the series focused on major legal cases in american history and it worked out a plan for it and have come forward from that since then. we now have nearly 50 titles in print. we have another two dozen of the way and it is a very open-ended series as new cases are coughing up all the time that our major and significant and we intend to deal with those also. >> now, while authors approach to working into the series in regards to the election series and legal series or are you seeking out that? >> welcome he can answer this also but both. one of the main reasons we come to meetings like this is to try to have face-to-face
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conversations with potential authors and some of them approached us. many of them are potentially targeted by ourselves and our planning for the meetings we go to and then out of those conversations often will we get books. >> regular viewers of booktv is made recognize your titles, univ. of kansas prescott of several titles every year and booktv covers a lot of them. one of which were holding in your hand which as recently covered guantanamo usa. this is a history of the american base in guantanamo prior to the way that we know it currently in regards to the holding area for terrorist suspects, but rather a military base. can one of you talk about that for a moment? >> it was part of a developing empirical and pulls an american national life. the base itself was designed to be part of the projection of american identity and power in the early part of the previous
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century and was a bit of a precursor to what now is dozens and dozens of bases around the country that have been american identity or are controlled by united states. and that was designed partly in the interest of national security and that is an ongoing concern today. >> at the authors steven schwab, can you tell me a little bit about him? >> sure. steve is actually for about 30 or more of years was an analyst in latin america for the cia and so he knows an awful lot about the region including the caribbean and cuba and we had a conversation in another conference many years ago about his work he decided to pursue dissertation after his -- after he retired from the agency and chose this as his subject and he approached me one day at another
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conference and i was very interested in thought especially in light of a post-9/11 there is an awful lot of interest in guantanamo of course but not known about the history of the place so i thought this would be a good opportunity for a good book. >> the two conferences are not really about you shopping of your new books that having new authors approach to perhaps. >> is a little of both. we want to show off four new books. this is a chance to reach out to the core audience for a lot of these books. but also it is a good way to meet new scholars and get introduced to the new projects. a little of both. >> ranjit, you were the publicity manager at university of kansas prez and now and acquisitions editor. you want to tell me about what that entailed? >> short. i had been on the marketing side and that was dealing with the books once they were produced. at this stage i'm working with authors very early on in the process to shake the books and

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