Fortune has a fantastic article today called "How Bernie Did It". It's the most comprehensive look yet at this strange man and why his Ponzi scheme worked so well. And Fortune says we may learn more if one of Madoff's lieutenants cops a plea.
The guy who ran Madoff's "back office" trading floor, Frank DiPascali, is reportedly negotiating a deal. Fortune says, "in exchange for a reduced sentence, he would divulge his encyclopedic knowledge of Madoff's scheme. And unlike his boss, DiPascali is willing to name names."
Fortune goes through Madoff's entire life, from his parents' financial run-ins with the government to Madoff getting swindled himself in the 1960's.
One thing you come away with is that Madoff was... weird.
Just about every piece of furniture at his company was black or gray. He only ordered black pushpins for the cubicles. He was obsessed with cleanliness. He would often be seen dusting his office in a three-piece suit:
Everything needed to be symmetrical and in straight lines. When Madoff was in the office, all window blinds had to be aligned at the same height, all computer screens had to be arrayed at the same angle and position, and on and on. So insistent was he on perfect alignment that, more than once, he dropped his trousers in the office -- startling female employees -- to ensure that the line of his shirt buttons was precisely vertical.
Despite his apparent charm with investors, he often made his employees uncomfortable. He would glare at them for no apparent reason or make remarks:
One day a female trader remarked to a colleague that she'd had a nightmare about being raped, not realizing that the boss was listening behind her. Bernie piped in: "That's not a nightmare, that's a fantasy."
His employees wondered to each other what happened on the 17th floor, home of Madoff's hedge fund. But their curiosity didn't go very far, even when reporters started snooping around in 2001:
So what happened when two publications, one of them among the most prominent on the subject of investing in the country, raised questions about Madoff? Nothing. What seemed like clear warnings disappeared into a void of indifference. Even inside Madoff's firm, the reaction was a shrug. "We knew about the Barron's article," recalls the trader. "We went on about our business as if it was another firm that had nothing to do with us."
Madoff did a lot of things that should've raised suspicions. He archived old emails on microfiche. And...
Around 2002 he proposed eliminating e-mail throughout his firm but was persuaded not to. Lots of Wall Street firms were talking about restricting it in the wake of corporate scandals featuring incendiary messages, but Madoff ultimately did the opposite of what you'd expect. He allowed e-mail for staffers at his trading business -- the one the SEC regulated -- while abolishing it for the people working in the unregulated investment business on 17.
Speaking of the SEC:
Madoff had always been terrified of the SEC. "Every time the SEC came into the office," remembers one longtime employee, "Bernie was a basket case." Wherever Madoff was in the world, he would fly back, even for a routine examination. He peppered employees with questions about their preparedness. "What's up?" he would ask nervously. "What's up? What's up?"
These are just a few excerpts. I highly recommend reading the whole thing.