xOcean 및 MicroCloudEngine 은 p2p 사용시 깔리는 프로그램으로써 배포하는곳의 설명과는 달리 개인 PC에 악영향을 미치는 프로그램 입니다. 실행이 되지 않도록 하는 방법 입니다. 덧붙여 그리고 가능한 p2p는 쓰지 않는것이 PC 성능 저하를 막기위해 좋을것 같습니다.
저도 서민 인지라 몇십만원에서 몇백만원 하는 프로그램을 일일히 돈주고 살 수는 없어 p2p를 이용하고 있지만 불필요한 자료는 가급적 불법자료를 이용하지 않는게 자신을 위해서도 좋을것 같다는 생각이 드네요... 이런 말 할 처지는 아니지만...
1.
시작 -> 실행 을 누른다. (단축키 Ctrl+R)
2.
regedit 을 누르고 엔터
3.
레지스트리 편집기 왼쪽에 나오는 폴더에서
HKEY_LOCAL_MACHINE -> SYSTEM -> CurrentControlSet -> Services -> CloudManager
HKEY_LOCAL_MACHINE -> SYSTEM -> CurrentControlSet -> Services -> MicroCloudEngine
HKEY_LOCAL_MACHINE -> SYSTEM -> CurrentControlSet -> Services -> xOcean
HKEY_LOCAL_MACHINE -> SYSTEM -> CurrentControlSet -> Services -> xOceanUpdate
이렇게 4개의 폴더가 있는데 각각 폴더에 마우스 오른쪽 버튼 누르면 나오는 사용권한이란 항목을 선택 한다.
4.
보안탭에서 creator owner를 제외한 모든 사용자에게 사용권한을 거부로 체크 하고 확인 버튼을 누른다.
< 귀찮지만 이해를 돕기 위한 스샷... >
5.
작업관리자를 열어 xOcean, xOceanUpdate, MicroCloudEngine, CloudManager 를 프로세스 킬한다.
(작업관리자 단축키 Shift + Alt + Delete 버튼, 혹은 시계에서 마우스 우클릭 -> 작업관리자)
(프로세스 킬하는 법은 프로세스 탭에서 해당 프로세스 마우스 우클릭후 프로세스 끝내기 누르세요.)
The effort to revive the market to package loans intosecurities has turned into a battle between regulators and lenders over afundamental question: Can banks and their overseers be trusted to prevent badlending?
The Obama administration believes they can't, and one wayto prevent lenders from making bad loans on credit cards, cars and homes torequire that the lenders and companies that package loans into securities holda portion of the loans on their balance sheets.
Industry officials counter that the requirement that theykeep some skin in the game, combined with other regulatory and accountingchanges could hinder any recovery in the securitization market. And that couldprevent consumer and commercial real-estate lending from returning to normal.
Congress agrees with the president. Part of a broadoverhaul of financial rules that cleared the Senate Banking Committee lastweek, the measure would require lenders and companies that package loans intosecurities to hold at least 5% of the credit risk, though regulators could setlower standards for less risky loans. A similar measure was included infinancial-overhaul legislation passed by the House of Representatives inDecember.
The Securities and Exchange Commission is about to weighinto the debate, proposing a rule that would include, among other things, thatbanks need to hold onto a portion of the securities in order to be granted anexpedited offering. As early as next week, the SEC will propose a series of newrules to require more disclosure about the pool of assets, steer investors tohigher quality securities, and slow down offerings by giving investors more timeto review prospectuses.
The risk-retention requirement is a key part of the Obamaadministration's efforts to restore confidence in the securitization markets.The provision "is meant to address a critical weakness of thesecuritization process: it reduces incentives for prudent underwriting,"says Assistant Treasury Secretary Michael Barr. Lenders and underwriters issuedtoo many risky loans in part because they had little stake in how these loansperformed, administration officials say.
Industry groups counter that the risk-retention measure,combined with other changes, could hurt credit availability.
"[G]iven the totality and far reaching implications ofregulatory and accounting changes, there are serious concerns about the futureviability of the securitization markets," a coalition of 21 industrygroups said in letter sent Thursday to Sens. Christopher Dodd and RichardShelby.
The groups include the American Bankers Association, theCommercial Real Estate Finance Council, the Mortgage Bankers Association andthe Securities Industry and Financial Markets Association.
Some critics of risk retention say that banks held afinancial interest in many risky loans made during the housing boom."People seem to forget that … the banks were holding too many subprimemortgages, not too little," says Dwight Jaffee, a professor of finance atthe University of California at Berkeley.
Issuers of bonds backed by credit cards, auto loans andstudent loans typically keep a portion of the risk on their books. In 2003, hedgefunds and other investors began investing in the riskiest slices of bondsbacked by residential mortgages, making risk retention in these deals lesscommon.
Appetite for these high-yielding slices helped fuel themarket for so-called private-label mortgage securities, which don't carrygovernment backing. At the peak of the housing boom in 2006, private-labelsecurities accounted for 38% of mortgage originations, according to InsideMortgage Finance, an industry newsletter. But the private-label market collapsedin 2007 amidst lax underwriting and rising mortgage delinquencies.
Some industry groups, including the Mortgage BankersAssociation and the Financial Services Roundtable, which represents the largestfinancial institutions, say they don't oppose the concept of risk retention.But they want traditional 30-year fixed-rate mortgages and otherwell-underwritten loans to be exempt from the requirements.
"Mainstream products should not require riskretention," says John Courson, chief executive of the Mortgage BankersAssociation. "We believe it needs to be on the riskiest products."
The American Securitization Forum, the trade group for thesecuritization industry, says that a better way to align incentives is tostrengthen "representations and warranties," which spell out thecircumstances under which troubled loans must be repurchased.
Tom Deutsch, executive director of the ASF, says that theproposed rules, combined with recent changes in accounting rules and capitalrequirements, would make it "highly unlikely" that banks would domany securitizations. Those rules, which took effect in January, will over timerequire banks to hold regulatory capital against the full value of anysecuritization in which they hold a meaningful interest.
Banking regulators, meanwhile, are split about the best wayto foster better underwriting. The Federal Deposit Insurance Corp.included a 5% risk retention requirement in its preliminary proposals for howsecuritizations should be treated when a bank fails.
"Retaining some of the risk of the loan on the balancesheet will realign incentives," says Michael Krimminger, the FDIC's deputyto the chairman for policy.
Comptroller of the Currency John Dugan, on the other hand,has suggested that a better approach would be for regulators to set minimumloan standards, such as verification of borrower incomes and a requirement thatborrowers make meaningful down payments, for all mortgages.
On Dec. 11, 2008, Bernard L. Madoffconfessed that his vaunted investment business was all "one big lie,"a Ponzi scheme colossal in volume and scope that cost investors $65 billion.Overnight, Madoff became the new poster child for Wall Street gall, greed andcorruption.
Through exclusive television interviews with those closestto Madoff's operation, veteran FRONTLINE correspondent Martin Smithunearths the details of the world's first global Ponzi scheme -- a deceptionthat lasted longer, reached wider and cut deeper than any other business scandalin history -- in The Madoff Affair.
"The first flush of reports came out at a time whenmany people were still reluctant to talk," says Smith. "FRONTLINEgave us the time to burrow deeper, gaining access to some of the key playerswho gave us an understanding of how Madoff pulled it off."
In a search for clues on how the fraud began, FRONTLINE traces Madoff'sstory back to the early 1960s, when he first opened a small investmentadvisory business and hired two accountants, Frank Avellino and Michael Bienes,to help him recruit clients. In anexclusive television interview, Bienes describes those fruitful early years.It was "easy, easy-peasy, like a money machine," Bienes tellsFRONTLINE. When asked if he had ever questioned Madoff about his approach,Bienes says: "Never. Why would I ask him? I wouldn't understand it if heexplained it."
By the early '90s, Avellino & Bienes had amassed morethan 3,000 clients. But the accountants were violating the law, sellingunregistered securities. Acting on a tip, the SEC closed down Avellino &Bienes. Madoff was forced to return more than $400 million to investors. It wasMadoff's first brush with the SEC, and as would happen again and again duringthe course of 30 years, Madoff would remain untouched by regulators.
After the 1992 SEC investigation, Madoff insulated himselffrom his client base by finding several financiers eager to do business withhim and willing to accommodate his unusual demands for secrecy. In an exclusiveTV interview, Sandra Manzke, the founder of the hedge fund giant Tremont,admits she agreed not to use Madoff's name in her fund's prospectus, and she acceptedthat Madoff would only use a small, off-the-radar accounting firm to audit hiswork. "Of course it bothered you," she tells Smith. "But thatwas one of the conditions of doing business, that you accepted that. That washis proprietary trading model, the black box that he used, and he wasn't goingto disclose what was in it" -- not even to Manzke, who for more than 25years placed upward of $3 billion of investors' money with Madoff.
The incentive for fund managers like Manzke to ignore theirreservations was enormous. Running a feeder for Madoff was a very lucrativebusiness, and nobody got richer than Walter Noel and his partners at FairfieldGreenwich Group. "It's fair to say that Fairfield, more than anyone else,took Madoff global," says attorney Stuart Singer of Boies, Schiller &Flexner, who is now representing former Fairfield Greenwich investors in aclass-action suit.
Through interviewswith former employees of Madoff Securities and footage FRONTLINE unearthed ofMadoff's operation, the film ultimately takes viewers inside the heart of thefraud. Rich Caputo, who maintained the computers and printers at MadoffSecurities, saw the volume of paperwork that went into sustaining the fiction."We were spitting out statementsconstantly," Caputo tells FRONTLINE. "The fact that all of thesestatements were just sort of made out of thin air is pretty shocking."
Madoff was repeatedly investigated by the SEC, but it foundnothing amiss. Madoff remained a pillar of the financial world until themarkets came crashing down in late 2008. "The fact is, he easily couldhave gone through his life without this being found out," says Madoffinvestor Burt Ross. "The only reason that this ended was because, atone given point in time, the economy did so badly that people wanted -- needed-- to get money out of Madoff's investments."
ANNOUNCER: It was too good to be true.
MICHAEL BIENES, Avellino &Bienes: Would you believe it, how themoney rolled in?
ANNOUNCER: But nobody wanted to ask questions-
BOB NORMAN, The Daily Pulp: You see a willful ignorance. Nobody wants to get in theway of all this money.
ANNOUNCER: -from small-time investors to sophisticated hedge fundmanagers.
ROSS INTELISANO, Rich &Intelisano, LLP: All these guys did was justdump money in, do no due diligence, and count their money. Amazing.
MARTIN SMITH, Correspondent: Did Madoff say to you, "Don't put me in yourprospectus?"
SANDRA MANZKE, CEO, MaxamCapital: Yes. He did.
MARTIN SMITH: Do you think that's right?
ANNOUNCER: And where were the regulators?
Rep. GARY ACKERMAN (D-NY),Financial Services Cmte.: Why didn't youfind him, is the question.
ARNOLD SINKIN, MadoffInvestor: I blame the government. Ireally, truly do.
ANNOUNCER: Tonight on FRONTLINE, correspondent Martin Smithunravels The Madoff Affair.
MARTIN SMITH, Correspondent: [voice-over] The news broke on December 11, 2008,and within seconds, phones were ringing around the world. Michael Bienes was inLondon when he got a phone call from his business partner, Frank Avellino.
MICHAEL BIENES, Avellino &Bienes: And I said, "Frank, what'swrong?" Because I could hear it in his voice. "Michael, BernieMadoff-" I said, "He died!" In a nanosecond, "Hedied." "Was arrested." I said, "Oh, no." And then inanother nanosecond, "Sex crime or some [expletive deleted],"you know? "For stock fraud."
MARTIN SMITH: Phones were ringing in Palm Beach, too.
SANDRA MANZKE, CEO, Maxam Capital: I received a call from an investor in Aspen who said hehad heard that Bernie was arrested. And I called Bernie's office and I calledhis secretary, and I said, "Gee, we just got this really strangecall." And she said, "No, no, everything's fine."
MARTIN SMITH: Emails were flying.
BETTE GREENFIELD, MadoffInvestor: I read it, and then I read itagain. I was, like, in shock, like, non-believing shock. And I thought,"He couldn't. He couldn't possibly have- this isn't true. It's impossibleto be true."
MARTIN SMITH: It was the largest stock fraud in history.
LAWRENCE VELVEL, MadoffInvestor: I said, "Oh, my." Youknow, in an instant, as with everybody else, you see everything just gone.
1st REPORTER: Mr. Madoff, what you have to say for yourself?
MARTIN SMITH: There are lots of questions.
1st REPORTER: What do you have to say to the public, to yourinvestors?
BERNARD MADOFF: Don't push me.
MARTIN SMITH: How did he pull it off?
1st REPORTER: Mr. Madoff-
2nd REPORTER: How do you feel?
MARTIN SMITH: Who helped him?
3rd REPORTER: Are you sorry for what you did?
4th REPORTER: Mr. Madoff, what would you say to all those people thatlost money, Mr. Madoff? What would you say to them?
MARTIN SMITH: And when did it all begin?
PHOTOGRAPHER: Bernie! Hey, Bernie! Give me one nice shot, buddy.Bernie! Turn around, buddy. Come on!
MARTIN SMITH: The year was 1960. Madoff had just graduated fromHofstra College and married his high school sweetheart, Ruth Alpern. He wasworking out of her father's accounting firm in midtown Manhattan. From there,he launched a career as a market-maker, matching buyers of stocks with sellerson Wall Street.
DIANA HENRIQUES, The New YorkTimes: He started this little stocktrading firm, one of many in Wall Street's outer fringes at that time, andslowly built it up, building up customers. It was kind of like a wholesalefirm.
KATHERINE BURTON, Bloomberg: He would actually pay clients such as Fidelity, CharlesSchwab. He'd pay them a penny a share to come and trade through him. So he sawlots of trading volume that way.
MARTIN SMITH: [on camera] In other words, he would pay for whatthey call, "order flow?"
KATHERINE BURTON: Exactly.
MARTIN SMITH: [voice-over] What wasn't known on Wall Street wasthat Madoff had a side business as an investment advisor.
DIANA HENRIQUES: The investment advisory business operated, so far as wecan tell, completely under the radar. We know to some extent that it begansmall. Customers of his who go back the longest started with very small nesteggs.
MARTIN SMITH: Madoff's first clients were friends and associatesrecruited in places like Queens, Long Island and the Catskills. With promisedreturns of around 18 percent, entire families jumped in.
As word spread, Madoff enlistedtwo accountants from his father-in-law's firm. First it was Frank Avellino - onthe left - and then Michael Bienes. Now facing lawsuits, Avellino refused totalk, but Bienes agreed to tell us how Madoff brought him and Frank into theinvestment advisory business.
[on camera] Tell me howyou got going with investing with Bernie, how that-
MICHAEL BIENES, Avellino &Bienes: Well, Saul, his father-in-law,had been doing it. He gave Frank a piece. And I got a piece when I became apartner. It was only about $2.5 million in the account. That was big money tome. We were only taking a small clip off the top. That's all it was. Couldn'ttake more, we thought that was the rule. And we never were pigs. That's the onething that kept us going. We were never pigs. We were never pigs.
MARTIN SMITH: [voice-over] The arrangement was simple. WithMadoff's guarantee of 20 percent or better, Avellino and Bienes could pocket afew percentage points while issuing promissory notes to their clients with setrates of return.
[on camera] You werepromising people how much?
MICHAEL BIENES: All depends. Big amounts, 18 percent. Smaller amounts,17, 16, even as low as 15.
MARTIN SMITH: What made you think that he could return 20 percent?
MICHAEL BIENES: I don't know! How do I know? How do you split an atom? Iknow that you can split them, I don't know how you do it. How does an airplanefly? I don't ask.
MARTIN SMITH: Did you ask him?
MICHAEL BIENES: Never? Why would I ask him? I wouldn't understand it ifhe explained it. Something with arbitrage between bonds and stocks, and blah,blah, blah, blah, blah.
MARTIN SMITH: [voice-over] Among the first investors Bienesbrought in were Arnold and Joan Sinkin. They started with $5,000.
JOAN SINKIN, Madoff Investor: Michael Bienes said to my uncle, "I know that youdon't have much money and that I can really get you an investment that's goingto do very well for you." And before long, there were probably about 18 to20 people that were involved with Bienes.
MARTIN SMITH: [on camera] Did you know where that money wasgoing?
JOAN SINKIN: No.
MARTIN SMITH: Had you ever heard the name Bernard Madoff?
JOAN SINKIN: Not at that time. No.
ARNOLD SINKIN, MadoffInvestor: Not at that time.
MARTIN SMITH: [voice-over] Madoff liked it that way.Unbeknownst to even his oldest associates, he was quietly taking on otherso-called "feeders."
It didn't matter to Avellino andBienes. By the mid-'80s, their cut was reaching upwards of $10 million a yearjust for passing along their clients' money.
[on camera] So is thiseasy money, would you say, that you're making with Madoff?
MICHAEL BIENES, CPA, Avellino& Bienes: Easy. Easy-peasy. Like amoney machine. I always said I never lifted any heavy weights. People have saidto me, even recently, "Oh, you must have worked very hard." I said,"No, I didn't." "Oh, come on!" I said, "No Ididn't." I never worked hard.
We were like an airplane. Anairplane, you know, flies itself. But if you make a mistake in yourcalculations, oh, boy, you do a John Denver. You run out of fuel.
MARTIN SMITH: Did you ever think to yourself, "This just is tooeasy, this is too good"?
MICHAEL BIENES: I said, "I'm a little too lucky. Why am I sofortunate?" And then I came up with the answer. My wife and I came up withthe answer. God wanted us to have this. God gave us this.
MARTIN SMITH: [voice-over] In 1987, Avellino & Bienesopened a second office in Fort Lauderdale, Florida, and began looking for a newwell of investors.
BOB NORMAN, The Daily Pulp: They start actually doing what they did in New York.They just pick up investors, people they met, an art dealer, friends that theypicked up, doctors. You know, they would- they would get them involved in theinvestment scheme.
MARTIN SMITH: The problem was, they were getting too many clients. Bythe early '90s, they had amassed over 3,000, far too many clients to beoperating as unregistered investment advisors. Avellino and Bienes worried theymight get busted by the SEC.
MICHAEL BIENES: We had doubts, and we passed them on to Bernie inmeetings. And he said, "Listen to me, OK? I know the biggest lawyers onWall Street. And I've told them about this, and they say it's OK. You're justguys who work for my father-in-law. You- you're an- you're an- you're a clientof my firm. That's all you are."
MARTIN SMITH: [voice-over] So you did have doubts? You wonderedif you should be licensed with the SEC?
MICHAEL BIENES: I like to be licensed. I was a licensed CPA.
MARTIN SMITH: So why didn't you just get yourself licenses?
MICHAEL BIENES: Because you just can't do that because Bernie didn'twant us to.
MARTIN SMITH: So Bernie's calling the shots here?
MICHAEL BIENES: Oh, of course he is! Always was. I was always- we werealways captive to him. He owned us.
MARTIN SMITH: [voice-over] But then in 1992, there was trouble.An investment advisor in Seattle had called Avellino & Bienes to inquireabout their steady returns. Those promissory notes didn't smell right. He wasgiven the brush-off. The advisor called the SEC, and they launched aninvestigation. They suspected that Avellino and Bienes were running a Ponzischeme.
MICHAEL BIENES: They came over, the SEC, and they talked and they lookedand they looked and they talked. And we said, you know, to Bernie, "We gotto do something. This is not going to be good. We just can't sit here."And he says, "Yeah, you're right. Let me recommend an attorney, IraSorkin, who used to be with the SEC."
MARTIN SMITH: Ira Sorkin, the lawyer Madoff recommended, hadexperience handling fraud cases, and in the mid-'80s, he'd even run the SEC'sNew York office.
There was a lot of money at stakein the case. By 1992, Avellino & Bienes had $441 million dollars investedwith Madoff. Sorkin tried to figure out a way to keep Avellino & Bienes inbusiness, but before he could come up with a solution, the SEC ran out ofpatience.
MICHAEL BIENES: All of a sudden, in November, the SEC said, "Gameover. We're closing you down. Sign the consent decree, or we'll run you intocourt."
MARTIN SMITH: [on camera] Did you understand why Michael Bieneswas shut down?
JOAN SINKIN: Michael Bienes said he had too many people that hehelped invest and the SEC said he didn't have a license. So he was just goingto stop doing this because it wasn't good. And we could go with Madoff.
MARTIN SMITH: [voice-over] At first, the SEC was worried thatthe money wouldn't be there, but were relieved that the trail led back toMadoff. By then, he had a solid reputation on Wall Street. His market-makingoperation was handling trades equaling 9 percent of all trading on the New YorkStock Exchange. And he had recently been named chairman of NASDAQ. The SECnever paid serious attention to Madoff.
HARVEY PITT, Chairman, SEC,2001-'03: They had Madoff in their sights.And the SEC looked at Madoff, but it reached no adverse conclusions as toMadoff.
MARTIN SMITH: [on camera] But they knew that Madoff wasservicing, as an investment advisor, 3,200 different clients.
HARVEY PITT: Yes.
MARTIN SMITH: Madoff was not registered as an investment advisor.
HARVEY PITT: That's correct.
MARTIN SMITH: Even after Avellino are Bienes are effectively shut downand the money is returned, Madoff goes forward and is not registered. Why?
HARVEY PITT: I can't explain why. On the face of it, if an investmentadvisor services more than 15 clients - 15 or more clients - he is supposed toregister.
MARTIN SMITH: He had 3,200.
HARVEY PITT: Thirty-two hundred seems to me-
MARTIN SMITH: More than 15.
HARVEY PITT: -to be more than 15, yes.
MARTIN SMITH: [voice-over] Avellino and Bienes had to pay$350,000 in fines and return all their investors' money. And while Madoff paidback the lion's share, he didn't pay all of it. He shortchanged them $18million dollars.
Avellino and Bienes asked for ameeting with Madoff at his new office in midtown Manhattan's"lipstick" building.
MICHAEL BIENES: "All right," I said, "you son of a bitch.It's over now. It cost us a lot of money and a lot of grief, and it's all yourfault, Bernie. Damn you, it's your fault, because we asked you, `Should we beregistered? Should we get registered?' We were willing to do it. We werewilling to pay any lawyer any fee. And you said, `No, no, no, no, no, no, no.'And you assured us, big shot, that we were fine, we were just investors, whenyou knew damn well we weren't."
After I got done, and he says,"Look, I heard enough from you, now. I want you to stop. You're startingto get to me"- very low, very cool. So I said, "Bernie, I'm sorry.I'm just a very scared person. And let's forget what I said and go on withthis. I apologize."
MARTIN SMITH: In a 1992 interview with The Wall Street Journal, Madoffclaimed he had no idea his two front men were operating illegally.
[on camera] Does the factthat Bernie Madoff returned $400 million to those accountants, who thenreturned it to their clients, mean that it was a legitimate operation at thattime?
DIANA HENRIQUES, The New YorkTimes: Not necessarily. Many peoplepoint to that and say that it must have been legitimate because he was able toraise that much money. But we don't know how he raised it. We don't know wherehe got it.
MARTIN SMITH: Did you ever think it was odd that you go through allthese hearings, and all the paperwork is all about you and Frank, but nothingabout Bernie? And Bernie gets off scot-free, continues doing what he's doing?That seem odd to you?
MICHAEL BIENES: No. We just wanted to get out of it. And I wanted to runaway and hide in a cave. I didn't worry about Bernie or Ernie or Sid, the kid.I was not interested. I just didn't want my name in the paper again. One day,once, and that was enough for me.
[www.pbs.org: Bienes'sextended video interview]
MARTIN SMITH: What did you tell the clients that had left, that had gottentheir money back?
MICHAEL BIENES: "Good-bye. Here's your- here's your"- theyknew. It was in the papers. "Here's your money. Don't bother me."
MARTIN SMITH: [voice-over] But sources tell FRONTLINE that'snot what happened. Avellino and Bienes continued to move money to Madoffthrough other front men, taking lucrative kickbacks on the referrals.
BOB NORMAN, The Daily Pulp: One case in point in Fort Lauderdale is MichaelSullivan, who was a friend of Avellino's. And he basically took these pools ofinvestors that they- and they routed them right into Sullivan, and he's movingit to Madoff.
MARTIN SMITH: Avellino knew Sullivan through Bible group at this FortLauderdale church. After 1992, Sullivan took on around 30 of Avellino &Bienes's accounts.
BOB NORMAN: Avellino and Bienes kept their hands in the jar. The SECaction was simply a bump in the road. It was- it barely slowed them down.
MARTIN SMITH: Bienes denies routing clients through Sullivan or anyoneelse.
MICHAEL BIENES: If they called me, I said, "Listen, the only adviceI can give you is call Bernie if you want to get in. I don't know if he'll takeyou."
MARTIN SMITH: [on camera] Or call Michael Sullivan.
MICHAEL BIENES: No. Absolutely not. Never!
MARTIN SMITH: Now, why does that push a button?
MICHAEL BIENES: Because it's not so. And that's what really bugs me.
MARTIN SMITH: But you've got people saying that they were advised-
MICHAEL BIENES: I don't care what people say. They're lying.
MARTIN SMITH: [voice-over] But documents show that after 1992,former Avellino & Bienes clients began moving their money into partnershipsthat were Michael Sullivan's conduits to Madoff. Avellino and Bienes alsocontinued to invest their own personal money with Madoff and went on to amassfortunes. The Avellinos bought this $4.5 million dollar house in Palm Beach andstocked it with paintings by Degas, DeKooning, Hopper and Bacon, paintingsworth tens of millions of dollars. The Bieneses became major donors tocharities throughout Broward County. In 2002, Bienes accepted an award from alocal business college.
COLLEGE ANNOUNCER: With wisdom and grace, this modern day renaissance manhas left an indelible mark on our community, Michael Bienes.
MARTIN SMITH: In the '90s, Madoff didn't really need Avellino &Bienes anymore. He had moved on to bigger pools of money.
MITCHELL ZUCKOFF, Author,Ponzi's Scheme: There are two pieces to aPonzi scheme. You always have to attract new investment, and you have to makesure that all- you don't have a sudden outflow. The key is stability.
MARTIN SMITH: By the '90s, Madoff had already formed alliances withfinanciers like Ezra Merkin, president of New York's prestigious Fifth AvenueSynagogue, Stanley Chais of Beverly Hills, who worked the Hollywood crowd, andBob Jaffe of Boston and Palm Beach.
ROSS INTELISANO, Rich &Intelisano, LLP: People who had access toMadoff, whether they were advisors or accountants or attorneys orfund-to-funds, built sort of a cottage industry of just feeding money to Bernie,and it sort of mushroomed.
MARTIN SMITH: Madoff was also being courted by private bankers, mostlyfrom Greenwich, Connecticut, the capital of the hedge fund business. One of thefirst to knock on his door was Jeffrey Tucker, a former SEC lawyer with a lovefor horse racing. He joined private banker Walter Noel to found FairfieldGreenwich Group.
DIANA HENRIQUES, The New YorkTimes: Fairfield Greenwich started as asmall-scale investment advisory business led by a gentleman, Walter Noel, whohad a pretty good reputation on Wall Street, not just in U.S. money circles,but in foreign money circles, as well. He attracted a partner who also had agood track record, Jeffrey Tucker. They joined forces and got FairfieldGreenwich up and going.
MARTIN SMITH: Walter Noel's assistant remembers how at first theystruggled, until they found Madoff.
SHERRY COHEN, FairfieldGreenwich, 1987-'98: Jeffrey just toldWalter, "I've got this guy who's got really impressive returns." Youknow, "Come meet him. Let's look into it. Maybe there's a product we candevelop." Once they created Fairfield Sentry to invest exclusively withMadoff, that's when things really started to accelerate.
MARTIN SMITH: And what attracted them was not just Madoff's steadyreturns but an unusual fee arrangement.
JOE WEISENTHAL, Clusterstock: Madoff didn't charge them any fees. He said, "I'mmaking all my money on trading through my market-making operation andcommissions. And so I won't take any fees and you can keep it all."
MARTIN SMITH: For a feeder fund like Fairfield Sentry, those clientfees added up to around $100 million a year.
ROSS INTELISANO: The feeder fund's taking, you know, 2 and 20, or 1 and10- 1 percent of the assets and 10 percent of the returns- and all these guysdid was just dump money in, do no due diligence, and count their money.Amazing.
MARTIN SMITH: And while Tucker handled Fairfield Sentry's account withMadoff, it was Noel's family that did the marketing.
DIANA HENRIQUES: Walter Noel's bevy of lovely daughters married intofamilies that were well known in those moneyed circles. And the FairfieldGreenwich sales team, if you will, the Walter Noel extended family, began tomarket its services far and wide.
MARTIN SMITH: Noel's eldest daughter married a Colombian investmentbanker, Andres Piedrahita. Other sons-in-law marketed Sentry in Latin Americaand the Middle East. Their annual Christmas card chronicles their rise.
SHERRY COHEN: The unofficial motto was, "If we act rich, we willbecome rich." This was about being able to finance a lifestyle that peopleonly- that some people only dream about. They read about these things in W andin Town and Country, and they wanted that sort of lifestyle. They wanted to bein society.
KATHERINE BURTON, Author,Hedge Hunters: Walter Noel was making anextraordinary amount of money, and all he had to do was market. And there weremany people that just looked at what Fairfield Sentry was doing and said,"Hey, this is free money."
MARTIN SMITH: Fund managers everywhere wanted in on it - LatinAmerica, Asia and Europe - and they went to major banks looking for clients,nowhere more than in the world's capital of discretion and secrecy, Geneva.
MYRET ZAKI, Le Temps, Geneva: These guys were going around to all the banks, reallydoing road shows and saying, "Here it is. We have a 2 percent managementfee on this fund. Then we give you back 1 percent of it if you buy thefund."
MARTIN SMITH: [on camera] So "You bring the clients to us,and we'll give you a kickback"?
MYRET ZAKI: Exactly. It's a way, really, to attract, to catch, to bevery aggressive in catching new clients, yeah.
MARTIN SMITH: [voice-over] By 2008, one third of all Genevafund managers had invested with Madoff to the tune of $14 billion.
MICHEL DOMINICE, Dominice& Co.: It's extraordinary how the hedgefund industry in some way works like Hollywood. You know, you have stars. Youdon't understand, but you have big stars. And you need to invest in big fundwith big names, famous people. You need to invest in that thing because it's abig name.
MARTIN SMITH: One of the biggest names in Europe was French aristocratThierry de la Villehuchet, an avid sailor, well connected with Europeanroyalty. He approached the world's biggest private wealth manager, UBS, to helphim gather clients for his Madoff fund at his company, Access International. Onhis marketing team were Prince Michael of Yugoslavia and Philippe Junot, oncemarried to Princess Caroline of Monaco. At lavish parties, they marketed topeople like L'Oreal's Lilliane Bettancourt, the world's wealthiest woman.
JAMES MACKINTOSH, FinancialTimes: Thierry de la Villehuchet wouldsay to them, "Look, come to dinner. We'll have your friends, a good time,good wine." And then here comes the hard sell. "I've got this greatmoney manager in New York. He makes money whatever the weather. I can introduceyou. Put money into my fund, I'll hand it on to Bernie Madoff."
BERTRAND DE LA VILLEHUCHET: [subtitles] He studied all the Americantechniques, notably the funds.
MARTIN SMITH: His brother, Bertrand, said Thierry believed completelyin Madoff.
BERTRAND DE LA VILLEHUCHET: [subtitles] He had such high professional regardfor Madoff that he invested the totality of his wealth, his assets, with him.You should know that my brother handed all of his personal investments toMadoff.
MARTIN SMITH: But Madoff had one condition he had to impose oneveryone. Funds were forbidden from listing him as an investment advisor in anymarketing material. That's because Madoff was unregistered with the SEC, eventhough he had thousands of clients and billions under management.
SANDRA MANZKE, CEO, MaxamCapital, '06-present: I met BernieMadoff in the early '90s.
MARTIN SMITH: Sandra Manzke, the founder of hedge fund giant Tremontand later Maxam Capital, has publicly advocated for more transparency in thehedge fund industry. In an exclusive interview with FRONTLINE, she said she wasunaware of how big Madoff had become.
SANDRA MANZKE: Did I know about all the feeder funds in Europe?Absolutely not.
MARTIN SMITH: [on camera] Access-
SANDRA MANZKE: Access. I did not know of Access.
MARTIN SMITH: Banco Santander had a big fund.
SANDRA MANZKE: Didn't know that.
MARTIN SMITH: Optimal.
SANDRA MANZKE: Didn't know that.
MARTIN SMITH: [voice-over] Manzke says everyone operated byMadoff's secrecy rules.
[on camera] Did Madoff sayto you, "Don't put me in your prospectus"?
SANDRA MANZKE: Yes. He did.
MARTIN SMITH: Do you think that's right? Do you think that'sappropriate?
SANDRA MANZKE: I don't know. Every one of my clients knew that this wasa Madoff feeder fund, and-
MARTIN SMITH: So why not put it in a prospectus, then?
SANDRA MANZKE: That was one of, always, Bernie's conditions of gettingan account.
MARTIN SMITH: But you've publicly called for transparency. That'stransparency.
SANDRA MANZKE: Yes. But many funds and investors were very secretive.They didn't mention that they had money with Madoff. It was something youdidn't talk about.
MARTIN SMITH: [voice-over] And that's exactly how Bernie Madoffwanted it.
DIANA HENRIQUES, The New YorkTimes: The question of when it became afraud is fundamental to the Bernie Madoff mystery. This went on for anastonishingly long time for a Ponzi scheme.
LUCINDA FRANKS, The DailyBeast: Madoff was driven. He has thekind of personality that is extremely proud of the incredibly intricate andcomplex web that he's woven.
MARTIN SMITH: Madoff's firm used to advertise its "high ethicalstandards."
1st SECRETARY: Hey, Dave. It's Deb at Madoff. How are you, honey?
2nd SECRETARY: Good afternoon. Madoff. Elizabeth speaking.
MARTIN SMITH: Investors who asked were shown the operation on the 19thfloor of the "lipstick building."
TRADER: R-Y-A-N is good at three eights and pending, Erickson,26 and five teenies.
LAWRENCE VELVEL, MadoffInvestor: It was very impressive, youknow? Scores of people, basically younger people, sitting at these computers,looking away or watching the screen or whatever. And you know, and one thinks,"Lord, here are all these people in their 20s and 30s who are each makinga million dollars a year." [laughs] And they probably were.
MARTIN SMITH: But this was Madoff's market-making operation, run byhis two sons, Mark and Andrew, and his brother, Peter. His wife, Ruth, came inonce a month. On the Street, it had a good reputation.
RICH CAPUTO, MadoffSecurities,1993-'05: It was a greatcompany to work for. A lot of people didn't leave that place. Usually withMadoff, you stayed there.
NADER IBRAHIM, MadoffSecurities, 2000-'03: It was almostlike you would work there, and you know, the only way that you would get firedis unless you did something incredibly wrong.
MARTIN SMITH: As is now well known, the heart of the fraud was twofloors down, on 17. Here a dozen employees worked under the direction of a33-year veteran of the firm, Frank DiPascali.
RICH CAPUTO: Nobody really knew his role. You know, I knew he wasimportant because he would speak with Bernie often. And essentially, like,whatever Frank wanted, he would, for the most part, get.
MARTIN SMITH: But few staffers, even Caputo and Ibrahim and the restof the IT team that had access to the floor, understood what he did.
RICH CAPUTO: We were spitting out statements constantly. The factthat all of these statements were just sort of made out of thin air is prettyshocking.
MARTIN SMITH: [on camera] Well, did people ever suspect that itwasn't legitimate?
NADER IBRAHIM: It was very rare that- since I was there, that anybodywould ask questions about something in the- in the firm.
MARTIN SMITH: You didn't do that.
NADER IBRAHIM: You just didn't do it.
MARTIN SMITH: [voice-over] After the statements were printed,they were mailed to clients, providing them a paper record of trades in stocks,Treasuries and S&P 100 index options.
Most customers were focused onthe bottom line. But for anyone who looked hard enough, there were a few clues.Some statements showed investments in Fidelity Spartan, a fund whose name hadchanged and was not open to new investors. And FRONTLINE's own investigation ofa small sampling of statements found unusual accounting of cash balances.
[www.pbs.org: Examine Madoff'sstatements]
Also, the fact that Madoff senttrading confirmations in the mail two to five days after a trade was reportedlymade allowed him the benefit of hindsight, like betting on a horse race afterit had begun.
[on camera] Did it everraise red flags that all his confirmation tickets were sent to you in the mail,whereas all other broker dealers were providing electronic confirmations?
SANDRA MANZKE: They were sent to us in the mail and we never thoughtanything of it. But I get my confirmations, when I trade tickets, in the mail.
MARTIN SMITH: But you can also opt to get one electronically, which issomething Bernie Madoff didn't offer.
SANDRA MANZKE: Well, Bernie also- again, it was part of his not havingthe world know when he went into the market.
MARTIN SMITH: But it never seemed odd that he didn't issue anelectronic confirmation?
SANDRA MANZKE: No.
MARTIN SMITH: [voice-over] But if an investor complained abouthow Madoff did business, DiPascali would threaten them.
JOAN SINKIN, Madoff Investor: I remember one phone call I made. He said, "If youdon't like what I do, we'll send your money back." It was veryintimidating because, first of all, I didn't want the money back. And I didn'tknow what was so terrible about the question I was asking.
MARTIN SMITH: [on camera] So he didn't really want to hear anyquestions.
JOAN SINKIN: No. Absolutely not. And we got intimidated by it.
MARTIN SMITH: [voice-over] There were many on the outside whosuspected something was wrong. A persistent rumor dogged Madoff that he wasinvolved in an illegal form of insider trading called front-running.
ROSS INTELISANO, Rich &Intelisano, LLP: The idea behind that wasbecause you had this market-making business, and market making means you seethe trades coming from big institutions, and the big concern with market makersis that you can step in in front of, say, Merrill Lynch buying a million sharesof IBM, and buy your own. So that when Merrill buys the million shares, thestock goes up a little bit and you make some money.
KATHERINE BURTON, Bloomberg: People couldn't figure out any other way for him to makemoney except if he was front-running.
MARTIN SMITH: [on camera] People ran those sort of models andcouldn't make money doing it.
KATHERINE BURTON: They couldn't make anywhere near the kind of returnsthat he did, especially when markets were falling. But he consistently mademoney every year, almost every month.
MARTIN SMITH: [voice-over] In Boston, a team of risk analystswas puzzled, wondering what Madoff was up to.
FRANK CASEY, RampartInvestments, 1998-'01: There's alwaysthat potential, that one little potential that you've got a rocket scientist,an Einstein here, and he's found some piece of information that's flowing tohim proprietarily because of the nature of this business of executing bigtrades.
MARTIN SMITH: [voice-over] In the late '90s, Casey was workingwith Harry Markopolos, the now famous whistleblower. Casey and Markopolos firstheard about Madoff's returns from the French aristocrat Thierry de laVillehuchet.
FRANK CASEY: Back in those days, I understand that Mr. Madoff didn'tlike his investors mentioning his name, let alone what he was doing. ButThierry, knowing that I was an options fellow, I guess, and the fact that hewas a sailor and I was a sailor, established some common ground and trust, Iguess. And he mentioned that it was this fellow by the name of Bernie Madoff.
I said, "Well, what's hedoing?" And he said, "Split strike conversion work." I didn'tsay much about that. But I thought that, "Well, wait a minute. It ispredominantly a bull market strategy, and how can you make money in bearmarkets or down markets?" So something's amiss.
MARTIN SMITH: Casey asked Markopolos, who understood esoteric tacticslike "split strike conversion," to do some reverse engineering.
FRANK CASEY: I brought the return stream, the track record, back toHarry. And I said, "Harry, if you can do this for me, we can make a lot ofmoney." Harry started engineering, looking at it and dissecting thereturns, and after four hours of work or so came up and said, "Frank, thisis a Ponzi scheme." I said, "Harry, that's a strong word." AndHarry said, "Look at this. The market goes down. He's not hurt at all. Heproduces 1 percent. Market goes up, he produces 1 percent."
MARTIN SMITH: [on camera] To be fair, he did report a few badmonths here and there.
FRANK CASEY: Sure. Harry looked at that later on over the years andtold me that, basically, a baseball player would have to be hitting .925straight for 10 years in a row. Would you want to bet on a player like that,that he wasn't doing something illegal?
MARTIN SMITH: [voice-over] In May 2000, Harry Markopoloscontacted the SEC for the first time, submitting an eight-page memo. FrankCasey, meanwhile, flew to meet with de la Villehuchet at his New York office.
FRANK CASEY: I said, "What happens if you've got all your eggswith Bernie and he is a fraud?" And Thierry says, "He can't be. I'vegot all my money with him. I've got most of my family's money with him. I'vegot- almost every royal family that I know has got money with him." So hesays, "We really have done our work, Frank. You just don't have all thefacts."
MARTIN SMITH: Casey decided to hand the story to an investigativereporter who covered hedge funds, Michael Ocrant.
MICHAEL OCRANT, MAR/Hedgenewsletter: When he said "BernieMadoff," my ears immediately picked up. And I said, "What are youtalking about? Bernie's a market maker."
MARTIN SMITH: Casey told Ocrant that Madoff had billions undermanagement.
MICHAEL OCRANT: I immediately knew it was a great story, no matter what,because just the fact that Bernie Madoff was managing this much money was astory in itself.
MARTIN SMITH: [on camera] That came as a surprise to you?
MICHAEL OCRANT: That was a shock. I mean, nobody knew that.
[www.pbs.org: Read Ocrant'sarticle]
MARTIN SMITH: [voice-over] In his reporting, Ocrant questionedMadoff's consistent returns and why other money managers were unable toduplicate them. He then arranged for an interview with Madoff.
MICHAEL OCRANT: This guy was just as calm as a cucumber. You know, Ididn't see any sign, and usually- I mean, that should have been sort of a signto me, in retrospect, too, you know? Any CEO that can spend two hours with you-they just don't do that. Literally, at one point, just kind of chuckled andsaid, "Give me some respect for," you know, "being in business for40 years, having this great infrastructure we've built up, having this- thisaccess to market information that we have as a result of being marketmakers."
MARTIN SMITH: [on camera] He said to you, "Give me somerespect"?
MICHAEL OCRANT: Yeah. Oh, yeah.
MARTIN SMITH: [voice-over] Six days after Ocrant's article,Barron's, a prominent Wall Street weekly, picked up the thread. The Barron'sarticle raised similar questions.
[on camera] This articlecomes out and causes a stir in the office?
NADER IBRAHIM: Yeah. A lot of people knew about the Barron's article,and people were- were, you know, having side conversations about it. But at thetime, you know, he was a supposedly very respected person on Wall Street.
MARTIN SMITH: [voice-over] Casey and Markopolos hoped thearticles would prompt the SEC to act. It had been more than a year sinceMarkopolos had submitted his memo.
FRANK CASEY: The SEC's going to swoop in. We're all sitting around,calling each other up, and emailing each other, "It's going to happensoon. Boy, the SEC's on it." Nothing happens.
MARTIN SMITH: But over at Fairfield Greenwich, now headquartered inNew York, the articles did get some attention. Jeffrey Tucker, the seniorpartner who'd first begun their business with Bernie Madoff, went over to thelipstick building. He wanted to verify Fairfield's holdings, at that pointworth around $3 billion. He met with Bernie and Frank DiPascali. According toinvestigators, Madoff showed him records of trades and named a third party whohad cleared them.
Tucker never asked for anyverification, and he never went down to the 17th floor to see where Fairfield'saccounts were allegedly being traded.
STUART SINGER, Boies, Schiller& Flexner LLP: They told theirinvestors they were conducting extraordinary levels of due diligence into theirinvestment managers.
MARTIN SMITH: Stuart Singer has filed suit against Fairfield Greenwichon behalf of investors who say that the company failed to conduct duediligence.
STUART SINGER: Fairfield's focus was on marketing and selling theproduct, which was Madoff, rather than on kicking the tires and checking to seethat Madoff was real. If they had spent as much time on due diligence as theydid on marketing, we wouldn't be here today.
MARTIN SMITH: Even though Fairfield Greenwich was in New York, theirrisk management operation, headed by Amit Vijayvergiya, was located a stone'sthrow away from this beach in Bermuda.
[on camera] Why would youhave a due diligence officer in Bermuda?
STUART SINGER: That's a good question, considering that Fairfield hasoffices in New York and Madoff is in New York. Madoff is not in Bermuda.
MARTIN SMITH: [voice-over] Fairfield's partners refused tospeak to FRONTLINE, but their attorneys insist that their due diligencesurpassed industry standards. Sherry Cohen remembers differently.
SHERRY COHEN, FairfieldGreenwich, 1987-'98: I know that therewas absolutely no due diligence done when I worked for them, certainly no deepquestions. I mean, they didn't need to know the details. It's, like, "Toomuch information. Don't bore me with the details." And they wouldn't havegotten it anyway.
MARTIN SMITH: And as for due diligence, no one seemed to question thefact that Madoff's accountant was a one-man operation in this strip mall anhour's drive north of New York.
[on camera] Did you askhim why he had such a small accounting firm?
SANDRA MANZKE, Founder,Tremont Capital, 1984-'05: Yeah. I mean,that was his- it was his family, you know, business, that it was an accountingfirm that his father-in-law had used for years and he continued to use it.
MARTIN SMITH: And it didn't bother you that it was this small thing.
SANDRA MANZKE: Of course, it bothered you. I mean, every- you know,those are the kind of things that it would bother you. But that was one of theconditions of doing business, that you accepted that. And part of that was his,you know, proprietary trading model, the black box that he used, that he wasn'tgoing to disclose what was in it.
MARTIN SMITH: I talked to one big hedge fund manager who told me thatMadoff says that he didn't want to expose his proprietary trading techniques tocompetitors, and so therefore, he went to a relatively obscure littleaccounting firm to keep his operation a little bit off the radar.
STUART SINGER: Well, that's hogwash, and anyone with any sophisticationshould know that. No one could have credibly believed that Bernard Madoff hadto use a couple people in a little accounting firm because he was concernedthat his secret sauce, his secret investment philosophy, was going to get out.
MARTIN SMITH: [voice-over] By 2005, Markopolos, determined toget through to the SEC, submitted a 21-page memo detailing more than two dozenred flags.
FRANK CASEY: When he wrote that letter and I read it, I said,"Oh, my God, they're going to be on this. This is- you're giving it tothem. You're giving them everything."
MARTIN SMITH: Markopolos wasn't the only person complaining to theSEC.
[on camera] There were otherletters that have surfaced that were sent to the SEC. In October 2005, someonewrites, "I'm deeply concerned that Madoff is running a very sophisticatedfraudulent pyramid scheme." There was another- "No down months andlow volatility all the time just doesn't add up." So there was a steadyflow of letters. It wasn't just Markopolos.
HARVEY PITT, Chairman, SEC,2001-'03: Yes. I think- I think that it isclear that there were letters and it is also clear that the SEC did look athim. What is not clear is why the SEC was unable to conclude that he wasconducting the Ponzi scheme we now know he was conducting.
[www.pbs.org: Read Pitt'sextended interview]
MARTIN SMITH: [voice-over] In late 2005, Madoff learned thatSEC investigators were about to interview Fairfield's due diligence officer inthat office in Bermuda. Madoff got on the phone. He began by saying, "Thisconversation never took place."
In this 65-page transcript of asingle conversation, Madoff coached him on how to handle SEC investigators."You don't want them to think you're concerned about anything," hesaid. "You should be casual." Madoff then instructed, "Yourposition is to say, `Listen, Madoff has been in business for 45 years. Heexecutes a huge percentage of the industry's orders. He's a well known broker.You know, we make the assumption that he's doing everything properly.' "
Finally, in January 2006,prompted by Markopolos, the SEC launched an official investigation. FRONTLINEhas been told by insiders that when SEC lawyers visited the offices, Madoffpersonally answered questions and was visibly nervous and irritable. It tooktwo years before the SEC issued a verdict: Madoff was cleared.
HARRY MARKOPOLOS: I gave them a road map and a flashlight to find thefraud, and they didn't go where I told them to go.
MARTIN SMITH: In early 2009, Harry Markopolos finally got to tell hisstory.
Rep. ED PERLMUTTER (D-CO),Financial Services Committee: My questions are,you have supposedly sophisticated investment fund managers who are investinginto this. What happened with them? Why didn't they see this?
HARRY MARKOPOLOS: They were paid so much to look the other way. Thosefeeder funds were incentivized not to ask the questions, to be willfully blind,if you will, and not get too intrusive into the Madoff scheme.
MARTIN SMITH: Later that day, the SEC was called to account.
Rep. GARY ACKERMAN (D-NY),Financial Services Committee: What the heckwent on? With all of your investigators and all of your agency and everythingthat you all describe, one guy with a few friends discovered this thing nearlya decade ago, led you to this pile of dung that is Bernie Madoff and stuck yournose in it, and you couldn't figure it out!
LINDA THOMSEN, EnforcementDirector, SEC: We have a pending actionpending in the southern district of New York -
Rep. GARY ACKERMAN: You took action after the guy confessed! He turnedhimself in. Don't give yourself any pat on the back for that.
LINDA THOMSEN: Congressman, every time -
Rep. GARY ACKERMAN: Why didn't you find him, is the question.
LINDA THOMSEN: I understand your question, and we cannot answer as tothe specifics. I can talk generally-
MARTIN SMITH: SEC officials refused to answer questions because theysaid they didn't want to compromise an ongoing investigation. But privately,officials told FRONTLINE the agency had for years been severely understaffedand overwhelmed.
Rep. GARY ACKERMAN: You know, if anybody made the case better than Mr.Markopolos - and I don't think anybody could - about you people beingcompletely inept, you have made the case better than him.
MARTIN SMITH: Linda Thomsen, the SEC's chief of enforcement, and oneother on this panel were forced out.
When the housing bubble burst inthe spring of '07 and markets collapsed, hedge funds were hurting.
HENRY PAULSON, TreasurySecretary: Our economy and our markets willnot recover until the bulk of this housing correction is behind us.
MARTIN SMITH: As the markets continued to tank - down 40 percent byNovember - hundreds of hedge funds stopped allowing clients to withdraw money,or simply shut down.
ROSS INTELISANO, Rich &Intelisano LLP: In October, it's the worstmarket we've seen in, you know, maybe 70 years. But Bernie's still makingmoney. And why would you invest in the equities markets when you could put asubstantial portion of your monies into this fund that's generating veryconsistent returns even in this down market? So it was very appealing to theinvestors. If anything, people wanted to get money out of the equities marketsand move them more into Bernie because he's the only one making money,consistent money, in this marketplace.
SANDRA MANZKE: He stopped buying AIG and he stopped buying CitiBank. Itwasn't in his basket. They were always in his basket. And you know, I calledhim and he said- I said, "You know, it was really terrific that youavoided all these financials."
MARTIN SMITH: [on camera] What did he say?
SANDRA MANZKE: He said that he thought that the investment bankers andthe major banks were destroying the United States.
[www.pbs.org: Watch thisprogram on line]
MARTIN SMITH: [voice-over] Manzke and de la Villehuchet placedeven more money, including their personal accounts, with Madoff. The problemwas that by December, even Madoff started getting more requests for withdrawalsthan deposits.
ROSS INTELISANO: People are losing money. Everyone's got margin calls.There are- everyone- there's a lot of movement of money. So I think a lot ofthe large institutions needed money, even if it was parked in Bernie's funds,to help pay back other investors or to run their own businesses, whatever itwas. So I think anytime there's a down market, that's when a lot of these Ponzischemes blow up because there's often lots of redemptions even if theinvestment's doing well.
BURT ROSS, Madoff Investor: The fact is, he easily could have gone through his lifewithout this being found out. The only reason that this ended was because atone given point in time, the economy did so badly that people wanted- needed toget money out of Madoff's investments.
MARTIN SMITH: In the final days, Madoff called his biggest feeder,Fairfield Sentry, and demanded they stem the bleeding. Eager to help, Noel,Piedrahita and Tucker began a massive fund-raising campaign, launching a newMadoff fund called Fairfield Emerald. It didn't attract enough new capital, andwithdrawals from Sentry continued.
A desperate Tucker then wroteMadoff, "Dear Bernie: We apologize. These redemptions are panic-driven.Our firm is very dependent on its relationship with your firm. Our mission isto remain in business with you."
But it was too late. The schemewas up. On December 11th, the morning after Madoff had allegedly confessed tohis sons, the FBI knocked on his door and asked if there was an innocentexplanation. Madoff said no. It was, quote, "one big lie."
LUCINDA FRANKS, The DailyBeast: He confessed with pride, like,"Look what I did. I mean, you're not going to believe what I did when youget to the bottom of this."
ROSS INTELISANO: Here's a guy who thinks he got over on the world for thelast 30 years and doesn't have a bit of remorse. And too bad.
BURT ROSS, Madoff Investor: I have no interest in psychoanalyzing Madoff. The man-the man is a monster. He's evil. I cannot fathom hurting every single person Imet, every dear friend. It just doesn't get worse than that.
LAWRENCE VELVEL, MadoffInvestor: There's nothing that I wouldlike to say to Bernie Madoff that I could say on television. But this may bethe only huge fraud in history where the government has extreme complicity. Sothat's what I would have to say.
ARNOLD SINKIN, MadoffInvestor: I blame the government- Ireally, truly do- that red flags went up over the years and nothing was doneabout it. It's just- it's mind-boggling. What can I tell you?
SANDRA MANZKE: How do you do something like that? And how do you dothat to your employees, to your family?
MARTIN SMITH: Sandra Manzke is facing a lawsuit from a pension fundand other investors who allege she failed in her obligation to do duediligence. She, in turn, has sued her accountants. Other Madoff feeders arebeing sued- Ezra Merkin, for concealing where his clients' money was placed,and Frank Avellino for misleading investors. Stanley Chais made so much moneyfrom the scheme, a court-appointed trustee claims he must have known of thefraud.
Michael Bienes and his wife,Dianne, are selling their 16,000-square-foot home and have moved into a smallapartment.
[on camera] Did you haveany warning that anything was amiss?
MICHAEL BIENES: As God is my only judge, on my mother's grave, not aninkling. May he strike me dead!
MARTIN SMITH: [voice-over] Bienes has hired a lawyer, though nolawsuits have been filed. His old attorney, Ira Sorkin, is now representingMadoff.
Fairfield Greenwich has seenmultiple lawsuits filed. They range from gross negligence to fraud. In lateDecember, planned year-end multi-million-dollar bonuses for Jeffrey Tucker,Walter Noel and Andres Piedrahita were canceled.
One more postscript. A few blocksfrom where Madoff began his investment advisory business nearly 50 years ago,Thierry de la Villehuchet took his own life.
FRANK CASEY: Thierry was a sailor and he was a hunter. He could havetaken himself out any way he wanted to, if he wanted to just remove himselffrom the pressure. The man chose the method he did, in my mind only, as an actof atonement.
MARTIN SMITH: [on camera] Slitting his wrists.
FRANK CASEY: Watch himself bleed to death slowly.
BERTRAND DE LA VILLEHUCHET,Brother: [subtitles] He was wrong,and that's why he couldn't forgive himself. It was an honorable suicide. It'sperhaps a little outmoded these days, but that is the heritage of our family.
MARTIN SMITH: Meanwhile, investigators are talking to Madofflieutenant Frank DiPascali and others, still trying to figure out what happenedon the 17th floor.
1st REPORTER: Mr. Madoff, do you have anything to say?
2nd REPORTER: Mr. Madoff, say something to your victims!
MARTIN SMITH: Bernard L. Madoff will be sentenced next month.
The Madoff Affair
WRITTEN AND PRODUCED BY Marcela Gaviria & Martin Smith
