Original subtitles

- The money laundering case of a lifetime

just walked in the door.

- It's 60 billion, with a B.

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- My head just immediately went spinning.

- There must be thousands of victims.

- He doesn't care, the lives that he destroyed.

He's a monster.

- And it goes back decades.

All hell is going to break loose.

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Everybody affiliated with the Madoff family

was certainly on a target list.

- It looked like an absolute genius,

but meanwhile, all he was doing was kicking

back and taking their money.

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- Bernie was a criminal mastermind.

- In today's regulatory environment,

it's virtually impossible to violate rules.

- This is what he wanted to do.

He enjoyed this.

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He is the worst criminal that I've

ever encountered in my career.

- Sir. - Don't touch me.

- In the FBI, we make a lot of headlines.

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Drug busts,

mob stings,

terrorist takedowns.

- Get down! Get down!

- We understand why people want to tell stories about us.

- Mark it.

- Freeze! - FBI.

- FBI! - Action!

- But they don't know the half of it.

What really goes down,

we save that for each other

when we're talking agent-to-agent.

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This is "FBI True."

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- Pat, take me back to December 10, 2008.

- Kristy Kottis is a 24-year veteran of the FBI.

She worked gangs, crimes against children, as well

as human and drug trafficking.

- The evening of December 10th, it was probably 8:00 to 9:00.

It's really unusual to get a call

at that hour of the evening on a securities fraud matter.

- Pat Carroll managed the FBI's Complex Financial

Crimes Program.

He served with the Bureau for 24 years,

before retiring as Assistant Special Agent in Charge.

- I got a call from Bill Johnson,

who was the head of the Southern

District Securities and Commodities Fraud Task Force.

And Bill said to me, Pat, we have a big one.

We're looking at a $60 billion Ponzi scheme.

I was a little bit distracted, and I

corrected him to 60 million.

He said, Pat, look, it's 60 billion, with a B.

And I said, Bill, you got my attention.

His name was Bernard Madoff.

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- Who is Bernard Madoff?

- Bernard Madoff is a 70-year-old man.

He's been in the industry since 1960.

He started a business called BLM--

Bernard L. Madoff Investment Securities.

There's a legitimate component of the business, which

is a market making business.

Very respected man.

Did very well in this business.

He was one of several folks who brought

automation to the over-the-counter market.

In addition to that, he had this investment advisory.

It was a straight, old school Ponzi scheme.

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- Doug, give me an idea, what's the financial environment

during December '08?

- It was a global financial meltdown in effect.

- Doug Leff joined the FBI's New York Field Office

as a special agent in 1996.

He spent much of his career investigating

organized crime, money laundering,

and terrorist financing.

- During that particular point in time,

one of the greatest unfortunate credit crises in the history

of the country since the Great Depression

was taking place because of issues

with mortgages that had underlying real estate

that was overinflated.

- This is going to be one of the watershed days

in financial markets history.

- It was a manic Monday in the financial markets.

- It was the worst day on Wall Street.

- Because we're now down 43%.

- What's a Ponzi scheme, Doug?

- A Ponzi scheme is where the con artist, the fraudster,

puts out that he or she has some kind

of tremendous investment vehicle or strategy,

all the while their intent being to line their pockets

with investor money, and each time they get another series

of investors to put in, paying back the original investors

so that they can keep the scheme going,

perpetrating it without anyone catching on.

- I would like to start with the premise

that most of the practitioners in our industry

come into their firms in the morning saying they want

to comply with the rules, they want to do

what's best for their client.

- It is an enormous allegation, a $60 billion fraud.

There must be thousands of victims.

And it goes back decades.

If we don't get this cooperation,

is Bernie Madoff going to become a fugitive?

Where is that money if he takes off?

We've got a very difficult situation.

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- All of a sudden, he had a completely

unpredictable amount of people demanding their money back.

- Most investment advisors, hedge funds,

they were having what's called a run on the bank,

just like in the 1930s.

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People were coming in and asking

to cash out their positions.

That's exactly what happened to Madoff.

That's what he relayed to his sons.

And he couldn't meet the expectations

because it was a Ponzi scheme.

So, in other words, there wasn't $60 billion there.

He was literally left with $300 million.

- The two sons called.

- The sons call that night.

They're essentially turning their father in.

- They wanted to report the fact that their father had

disclosed to them that the investment

advisory, the hedge fund, was actually a $60 billion

Ponzi scheme.

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- I mean, this is, like, unbelievable.

So what was Madoff's investment strategy, Pat?

- They let us know, there was never any investment

strategy at all.

Money came in, money went out, so the new investors

paid off the old investors.

- So the victims get the statement,

and it showed what happened, but in reality, he

was doing what someone could only

do if they had a time machine.

- For example, in July, Madoff might

see that stock in XYZ Corporation

had gone up 20% since January.

He would then pretend that he'd

bought XYZ stock in January,

and that he'd sold it in July,

making it appear as if he'd

made a brilliant investment.

This is much like betting on a horse race after it's over.

- So he looked like an absolute genius,

but meanwhile, all he was doing was kicking

back and taking their money.

- At the same time, Madoff projected an image

of honesty and integrity, which the investment

community believed.

- In today's regulatory environment,

it's virtually impossible to violate rules.

It's impossible for a violation to go undetected,

certainly not for a considerable period of time.

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- Doug, what kind of victims are you seeing,

and what are you feeling as you're

looking at what you're seeing?

- They ranged from very wealthy people,

who just had plenty of money and could

throw some in with Madoff.

But then the sad stories that we saw

were people who didn't necessarily know they

were investing with Madoff.

There were people's pensions, entire funds

who decided to put the money with Madoff, because they

heard how well he was doing.

- When you say like investment funds,

like pensions for like teachers,

you know, civil servants, like some of-- you know,

regular Joes.

- Those were examples, right, of people who wound up

losing everything that they thought would be waiting

for them for their retirement, and to be able to pass on

to their children.

- We've been in a state of disbelief.

- The $8 million charity she was running was wiped out.

Philanthropic organizations

have lost a staggering

$2.5 billion so far.

- He doesn't care how he ruined us.

He doesn't care the lives that he destroyed.

He doesn't care the people who killed

themselves because of this.

He's a monster.

- So now you have to stay up, I assume, all night.

You're starting to make a plan.

What's that plan look like?

- We needed Bernie to admit what he did,

and we also needed to have his brother, Peter,

who is the chief compliance officer and a lawyer

at the firm, consent to search that location.

We don't have any reason to charge Bernie,

just the statements of the son.

We have no probable cause to search that location either.

- So at this point, the sons have called.

They allege they knew nothing, so they don't

have any specific evidence.

So now it's incumbent upon the FBI to get consent,

or to interview and see what happens from that.

- The first thing we have to do is

we have to send out a team that's going

to talk to Bernard Madoff.

So the first person who came to mind was Ted Cacioppi.

Ted really took to interview and interrogation,

what we call advanced and sophisticated techniques.

So I called Ted.

One of the things that I told him that I was very clear

was if he doesn't cooperate, we can't hold him.

- Also, you probably have some concern that this news is going

to affect, potentially, the market,

because he was such a big player.

- Yeah, absolutely.

Tomorrow, all hell is going to break loose.

- So we have Ted being deployed that

morning to Madoff's penthouse on East 64th Street.

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Ted calls me, and he said, it was like Bernie

was waiting for us.

He looked like an old, distinguished businessman.

He was in his bathrobe.

He was obviously getting, you know, ready for breakfast.

It was a very beautiful penthouse

on the East Side of Manhattan.

It was him and his wife there.

First thing Teddy said to him was, Bernie,

is there any innocent explanation

for what happened here?

And he said, no, it's a Ponzi scheme.

That's not what I taught him to do.

We teach to ask very open-ended questions,

not close-ended questions that end in a yes/no answer.

And I said to him-- I said, Ted.

He goes, I know, Pat.

He said, but I just felt he was at the end of his rope,

and we had to get to this.

And he said, I looked at him, and that's what

I decided I was going to say.

- Madoff was taken into custody,

but this was only the beginning

of the investigation.

- Now that we have the top person confessing,

the case really turned to the money laundering and asset

forfeiture, because after cutting off criminal's means

of escape, the next goal that's still on their mind,

even if they're behind bars, is to see what they can do

about getting their money out of our reach and their assets

out of our recognition.

So we needed to jump on that.

- Two minutes later, I get a call

from Bernard's brother, Peter, who consented to the search

of the Madoff businesses.

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- What was that environment like?

You know, how many floors did they occupy,

and what did it look like?

- There was the legitimate business on 19,

and it was pristine.

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It was exactly what you would expect from the chairman

of the NASD, who ran this very successful

market making business.

All the same color.

The desks were neat.

Everything was tidy.

It was obvious that it was cleaned on a regular basis.

His sons worked at the legitimate business,

but when the team got to the investment advisory,

this looks like a boiler room.

Now, a boiler room is a place that usually, it's mobbed up.

These are dirty, grimy places, cigarettes

in ashtrays all over the place, coffee everywhere.

There's no cleaning people that come in there because there's

evidence everywhere.

There's boxes everywhere.

There's antiquated computer systems from,

like, the '80s and '90s.

I mean, I hadn't seen computer printouts like this since

I was a broker in the '80s.

The computer system was the AS/400,

which was state-of-the-art, I think, in 1988.

Using an antiquated computer system, which could not

be connected to the internet, helped

Madoff conceal his fraud.

- It was like a crime time capsule.

- It literally was.

It was fascinating.

- When you walked into the 17th floor office,

it literally was like the office that time forgot.

I mean, one thing we shared among us

was that usually we always thought the government was

the only one who knew how to create such

an unpleasant-looking work environment for their people,

but this place was just horrendous.

We walked around there.

There are printers.

The dot matrix kind was what was in use there,

where you have to rip off the perforation

as the page prints out.

And that's all they had on this floor.

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- We're in the investment advisory.

There's hundreds of banker's boxes here.

In addition to that, there was 6,000 boxes in a facility

in Long Island City.

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- When they opened the doors, and it's just

as far as you can see, boxes.

- Yeah.

This is a box that can hold a great deal of paperwork

and evidence in this case.

- We knew going forward, there were literally millions

of pages that we'd have to have eyes put on them in order

to follow where-- like, follow the money, as we say,

which was our primary mission.

- And so, you know now.

You have the responsibility, along with Pat's squad,

to go through millions of pages of evidence.

Where do you begin, and how do you organize that?

- So we did the walk through of the office.

Doug was with us.

And you know, the spirit of the folks there were,

like, can't move this stuff.

- But everyone uniformly agreed on the best place

to look at them was where they were.

- Oh, so wait a minute, that's very unusual.

Instead of taking all the documents back to the batcave,

we are going to stay there.

- It's the first time that a case-specific resident agency

was set up in a field office.

We're going to have our phone system.

We're going to have our security system.

It was quite a production, but it took a couple of weeks

to get that up and running.

- Even though Madoff said, you know, I was doing a Ponzi

scheme, he didn't cooperate.

He didn't help you guys with your investigation.

- He said he did it by himself, a $60 billion Ponzi scheme

with millions of documents.

He helped in no way, shape, or form.

That made it difficult.

It also made the asset recovery difficult.

- Shortly after he confessed and supposedly was cooperating,

we found out a package-- giant package--

with a large amount of jewelry in it came in the mail.

It was clearly sent by Madoff, or someone at his behest,

to try to have that jewelry hidden so that his family could

enjoy it.

Unfortunately, the lawyers' wisdom had the best of it,

and they came and told us about it

so that we could take that and make that part

of the asset forfeiture.

- And as I look at different players in this,

I'm thinking about, you know, the sons called initially

and said, hey, our father told us that he was running a Ponzi

scheme, and they came forward.

But they were also getting very well compensated while they

worked at the company.

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- Well, the record is clear about that.

That's true.

It's always important to say they were never charged by us.

So everybody in America has a presumed innocent

until convicted of a crime by plea or a jury,

so they're presumed innocent.

To state generally, though, the people don't realize this

often, for money laundering to be guilty,

you don't have to know specifically

what that money came from.

You just have to know that it must have come

from some felony activity.

So stemming from Bernard Madoff or loans

to family members, seven-figure loans with no terms,

no indication you ever have to pay it back.

So anyone on a jury would have to ask themselves

that particular question, did this person

know that must have come from a felony type of activity?

- How do you deal with that?

- Everybody affiliated with the Madoff family

was certainly on a target list.

But to Doug's point, the sons and the wife

were never charged.

- Got it. - It's a tough one for us.

- OK, Doug, tell me about asset forfeiture.

- Sure, asset forfeiture is where we basically follow

the path of greed of the perpetrator.

Find everything they did to enrich themselves

and other people, who they wanted to enrich,

and use the laws, federal laws, to get that property

back so that it can be sold.

So as we follow the trail, he had houses in Long Island,

in Florida.

In France, he had boats.

He had, I think, partial ownership

interest in an airplane, plus the money itself flowing.

- Madoff's Manhattan apartment is

on the market for $9.9 million, his Florida

home for $7.9 million.

And last month, his house in the Hamptons

sold for nearly $9.5 million.

- Countries, the ones that would come to your mind

about where you want to put money,

because you're assured by the banks they will never tell

anyone, some of those countries, the law enforcement

did call us.

And that was because our agents in those countries

had conversations with the police there.

And the victims in cases like this

can recover, usually, just some or ideally,

all of their losses.

The United States Marshals Service

has responsibility for the federal asset

forfeiture programs.

Now, the efforts have continued up to now, which is incredible.

In any case, even way smaller cases, they're up to just about

$0.89 on the dollar recovered from this fraud.

So waves of reimbursements have continued

to go to victims as recently as during the past year,

and are still continuing.

- Did you get any money back at all?

- Yeah, well, so far, we have gotten the-- there

was something called SIPIC, so we got that money back.

- You got to experience hearing these victims,

and you even interviewed some of them firsthand.

Take me to the hearing where the victim impact

statements were being made.

- Yeah.

It was a riveting and powerful day.

It was at his sentencing in June of 2009,

before Judge Denny Chin, but the judge allowed

for victim impact statements.

I was sitting right behind Madoff,

and it was absolute silence.

It was like a funeral.

There was no gasps.

There was no sound.

It was very difficult.

- Retired, I'm 65 years old, and I am now on food stamps.

I've applied for food stamps.

And if I'm unable to pay my rent soon,

I'll be living in my car.

- We lost over $4 million.

- Friedman and his wife were already retired,

left with nothing but Social Security.

- I'm an old violent crime guy.

I've dealt with a lot of tragedy

as it relates to physical violence, homicide,

things of that nature.

This was the closest thing that I saw to that.

These were folks in there, in some cases,

very late 60s to mid-70s, who had thought that their lives

were fine from a financial standpoint,

that they were going to live out their lives in a good way,

and that they were going to be financially safe,

and they lost everything.

- I was in the process of retiring.

In fact, it would have been around now,

I was going to retire.

There's no retirement for me.

- This Wall Street executive, who

once had the world on a string,

but lost billions to Madoff,

jumped to his death in an apparent suicide.

- A lot of these people represented to us, they

were living hand to mouth.

That they were on people's couches.

They had moved in with family members.

- Yeah. - It was really devastating.

- Chairman took a job at a local grocery store after

losing his entire life savings,

more than $700,000,

to disgraced Wall Street financier Bernie Madoff.

Police discovered Rene-Thierry Magon

de La Villehuchet dead

in his Manhattan office early Tuesday.

The 65-year-old French executive

lost more than $1 billion of his clients' money

to Bernard Madoff.

Police say he committed suicide.

They say both wrists were slashed.

- Pat, did Madoff have anything to say after all this?

- He did issue a statement at the end of the victim

impact statement.

It was two sentences, basically, I'm sorry.

And it was clear, to me, as somebody

who's interviewed thousands of bad actors,

he didn't care at all.

- Your investors.

- Sir. - Don't touch me.

- He had no desire to be there.

He could care less about what the people were saying.

And he just wanted this over.

- Did your wife have anything to do with this, sir?

- And, you know, when you look at a serial killer, right, it

wasn't a physical or sexual assault,

but it was financial destruction.

This is what he wanted to do.

He enjoyed this.

- How satisfying was it, though, to see him get

put in handcuffs and walked out of the room?

- It was very satisfying.

The victim impact, really, there

was a cascading effect that way,

that we got to help these people.

- When he was led away, was there any comments or anything

from the crowd, the gallery?

- No. It was a very somber moment.

It was clear that he had just left

complete devastation behind.

He left in disgrace.

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- Doug, how does this case rank in your career?

- There was no case that compared to this.

In the level of time that a crime went on,

the amount-- dollar amount, the locations of all the assets,

and the team effort between ourselves,

our squads, and the other agencies,

it was just incomparable.

- Bernard Madoff is probably, the worst criminal that I've

ever encountered

in my career.

He is right up there with the worst of the worst.

He just chose not to physically kill people.

He did it emotionally.

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