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Tue, 23 Feb 2021 10:00
A financial analyst raises red flags about Bernie Madoff's record. Madoff faces an investigation from the SEC.
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It's late November 1998 at a private club in West Palm Beach, Florida. Bernie made off reclines in a chez lounge next to the pool. He pushes up his sunglasses, takes a sip of champagne, as a warm breeze blows through his hair. Nothing beats Florida this time of year. He made off turns over and looks at his wife, Ruth. From the outside they've got the perfect life, lounging at a private club that costs $100,000 to join. The stock market is booming and made off now manages billions of dollars of investments. Made off shuts his eyes, as the sun beats down on his back and lets himself drift away, far from the hedge funds and commodity stocks and far from the deep hole he's dug himself into. He'll deal with all of that at some point. Right now he won't let anything remind him of the troubles that wait for him back in New York City. But made off's peace of mind is suddenly shattered when he hears a pair of approaching footsteps. He opens his eyes and in front of him he sees a pair of alligator leather shoes. A bag of golf clubs then drops on the ground. This can be only one man. Well Bob Jaffy, you're looking like a million dollars. I was hoping you'd say a billion but we can start there. What can I do for you? Well Bernie, I was hoping we could talk business. I've got some news about Ellie Vizel. Made off sits up because now is no time to relax. For years he's been losing billions of dollars in investments but his clients don't know it. They think their portfolios are growing and that's because made off keeps sending them dividend payments and paperwork showing that their investments are doing well. But the truth is it's all fraud. The dividends and payments aren't from returns on investments. Instead made off siphons that money from the accounts of his other clients. What soon enough their money runs out and so he needs to steal more and more. That's why made off needs people like this man Robert Jaffy to feed him new investors no matter who the investors may be. And Jaffy tell me what happened with Vizel. You know when I was a kid the rabbis would talk about him. His book his survival story the horrors of the Holocaust. Vizel gave his hope and pride so tell me good news he wants to park his money with me. Jaffy breaks eye contact and made off notes what that means. Jaffy is about to deliver bad news. Bob what's going on with Ellie Vizel. Well Vizel might be a proud Jew but the guy who runs his charity he's Catholic. He doesn't have the same kind of shared trust we can offer a good Jewish community here in West Palm Beach. Okay so what does that mean? Well it means that he wants to come to your office and see the trades. If he's comfortable with what he sees then he'll assign over the Vizel foundation. Then you told him my policy. Of course what exactly did you say? That no one sees your trades. That's right. That's not going to change for this guy. But Bernie that's how I keep an edge and your edge is why people are always begging me please Bob give me an introduction to made off. The exclusivity that's how I wrote them in but Bernie Bob. I pay you a lot of money to get me new clients. Now go and get me Vizel's money. If you could just let his people see a couple of trades just a few I'm sure he'll be fine. Made off's eyes get icy as he stares at Jaffy. Bob here's what you're going to do. Go to Vizel personally and give him the pitch we give everyone. This is about trust. This is about being Jewish and supporting the Jewish people. Make it about trust and finish the deal are we clear? Jaffy breaks eye contact again and nods sheepishly. Then he lifts his golf clubs and walks away. Made off unfold to sunglasses and puts them back on. But now he can't escape his troubles any longer. He's not only angry at Jaffy but he's upset with himself and ashamed. Vizel is a Jewish hero. Made off wasn't lying about looking up to the man. And now made off is trying to steal from him just like every one of his clients. The made off knows it's too late for guilt. It's too late to turn back. Because right now made off meets the money. It's the only way he can keep himself from getting caught. If you're into true crime the Generation Y podcast is essential listening. We started this podcast over 10 years ago to dissect some of the craziest and most notable murders, crimes and conspiracy theories together and we'd love for you to join us. All the Generation Y podcast on Amazon Music or wherever you listen to podcasts. From Wondery I'm Lindsey Graham and this is American Skin. In the early 1960s Bernie made off gained prominence as an investor in financier. He brought technological innovations to Wall Street and over the course of decades he built a powerful investment firm, one that promised large, consistent returns. As made off fortune grew he became world famous and went on to chair the NASDAQ. But what almost no one knew was that made off was running a massive Ponzi scheme with billions of dollars of investments that he managed. It was a secret he kept from even his closest family members. But soon a curious financial analyst would begin to look into made-off record and he wanted to understand how exactly made-off had been so successful. Soon what the analyst found would raise alarms. This is episode 2. The numbers always rise. It's 1999 inside an office in Boston's financial district Harry Markopola stands tapping his foot anxiously. He looks down at an old photocopier and mudders a curse. Markopolis has a big meeting in just a few minutes but this copier has decided to move at its own pace. Finally the machine spits out the last page. Markopolis grabs the stack of papers and tucks them under his arm. Then he stalks down the hallway and begins bracing from what's bound to be a tough conversation. Markopolis is a financial analyst who works for a mid-size firm called Rampart Investments. So far at this job he's always done well but just days ago his bosses gave him a tall order. They asked him to figure out how Bernie made-off was so successful. They wanted Markopolis to reverse engineer made-offs investment strategies and while made-off is considered a genius, Markopolis eagerly said yes it'd be a good challenge. Now Markopolis heads down the hall towards his desk and glances at the boardroom where his bosses are waiting for him. He's dreaded this meeting because his bosses aren't going to be happy with the news he's about to report. No matter how he tries, Markopolis can't duplicate made-offs returns. He can't even get close but he doesn't view this as a failure. Instead, Markopolis believes he stumbled onto something far more important, something that's left him deeply troubled. An idea his bosses won't want to hear. Markopolis reaches his desk to gather his other documents and for a moment he pauses looking at photos on the wall. One shows Markopolis in fatigues from his time in the army reserves. Another is a photo of his large, Greek family. He can feel himself filling with strength because at the center of both his family and the army are two important values, integrity and honesty. Right now, Markopolis knows that's what he needs to be, honest, full of integrity, even in the face of disapproval. So Markopolis studies himself. He picks up his papers and heads to the boardroom. Markopolis enters the room, which is lit with bright fluorescent light. He greets his bosses who include the co-founders of the firm. Markopolis drops his stack of papers on the table. He decides that right now he needs to use a military strategy. You should always begin an attack with a massive show of firepower. And so, without sitting down, Markopolis turns to his boss Dave Frailey and fires away. All right, guys, there are one or two possibilities when it comes to Bernie made off. Number one, insider trading. If possible, made off has the most sophisticated operation we've ever seen. Or number two, he's running a Ponzi scheme. Either way, the numbers don't check out. Markopolis looks around, reading the room. His boss, Dave Frailey, only offers an amused smile. Well, Harry, and a good morning to you. So why don't you have a seat? Then explain what the hell you're talking about. Markopolis pulls out a chair and sits down. Then he starts handing out his photocopies. Here you go. Take a look. These are made off numbers, and let me sum it up for you. They're impossible. He never loses money, no matter how volatile the market gets. Now, Harry, you understand that this consistency is exactly why we put you on the project. We want to offer these kinds of returns to our clients, but you're telling us you can't do it. Oh, no, no. I can do it. I can replicate the numbers. Ah, well good. So why did you say you couldn't? Well, that's the thing. I can replicate made-offs numbers, but only by committing fraud. Otherwise, it's impossible. There's no other way. Frailey chuckles as he exchanges glances with the others at the table. Fraud. All right, Harry, look. Bernie made-off is one of the most powerful and respected men on Wall Street. He just got Ellie Veezel's foundation. And then he gets Steven Spielberg, and on all the power players, how can this be fraud? And if it's so obvious, why hasn't anyone else said anything? Well, I think that's the thing exactly. It's because he's Bernie made-off, because he's got the Ellie Veezels, the Steven Spielbergs. It's reputation, so no one second guesses him. Mark Polis grabs one of his photocopies and points to a comparison of investment returns. Look here. See, made-off says his returns are market-driven, but here's the line for the market. It goes up and down every day. That's what markets do. But here at made-off, he's on a constant, constant, 45-degree angle, always going up. It's just not possible. For a moment, frayly and the others are quiet. Mark Polis feels a trickle of hope. Maybe he got through to them. Maybe now they can see the madness, the totally impossibility of Bernie made-offs whole business. But frayly looks toward the other end of the table, nods, and then looks back at Mark Polis. OK, Harry. Yeah. Thanks for your take. I think that'll be all. That's it. We're not going to do anything about it. I promise you, the man's a thief. Harry, thank you for your time. Mark Polis feels his shoulder slumping. He feels defeated. But then he rises, gathers his papers, and walks out of the boardroom. As he stumbles back to his cubicle, Mark Polis feels his face burning with resentment. It's not just that his bosses don't believe him. They must now think he's incompetent. It's just not smart enough to figure out made-off strategy. Mark Polis reaches his desk and collapses into his chair. Once again, he looked at the photos of his family and friends from the army. He feels something burning inside him, pushing him forward. Mark Polis knows his bosses are wrong about him. He is smart, and he's brave. And it doesn't matter if the whole world trusts Bernie made-off. It doesn't matter if the whole world thinks Mark Polis is crazy. Because he's seen something, something big. And he knows that no matter what he does, he'll never be able to forget it, which means only one thing. Mark Polis has to keep going. He won't stop until he finishes what he started. He's going to show everyone that Bernie made-off is a fraud. About two years later, Harry Mark Polis steps into a hotel bar in Manhattan. It's an old, dark bar with wood-paneled walls and a long row of top shelf whiskey. The drinks don't run cheap, but tonight, Mark Polis needs something good and strong. It's been a hard couple of years for Mark Polis. After he met with his bosses that day, he decided to take matters into his own hands. And so in May of 2000, he brought his accusations about Bernie made-off to the Securities and Exchange Commission, the federal agency that acts as referee for the financial markets. But despite his evidence, the SEC never called him back. Mark Polis felt deflated, but he still wasn't ready to give up. So earlier this year, he resubmitted his allegations. But once again, the SEC remains silent. This felt like a final blow. The SEC is supposed to be an independent watchdog for Wall Street. But for Mark Polis, their silence made one thing clear. They are in the pockets of big investors. And that meant he'd have to find another way to expose Bernie made-off. Bar tender finishes filling his glass, and Mark Polis turns away from the bar. That's when he spots his colleague, Frank Casey, sitting in a booth. Casey's talking on a cell phone. And when the two notice each other, Casey's eyes light up, and he waves over Mark Polis. Mark Polis approaches and Casey holds a hand over the receiver. He says he's on the phone with a man named Michael O'Crant. He's an investigative journalist who might want to do a story about made-off in fraud. And now O'Crant wants to talk with Mark Polis. The question is did Mark Polis want to talk with O'Crant on the record? Mark Polis hesitates. Filing a complaint with a government agency is one thing. But going public with a reporter is something else entirely. Could get him fired. But for Harry Mark Polis, the decision doesn't take long. He grabs the phone, begins telling the whole story to the journalist. How he raised a series of red flags with his bosses. How no matter what happens with the market, Bernie made-off always seemed to make a profit. O'Crant listens patiently, and then asks whether this could just be a sign that made-off is the genius everyone says he is. Mark Polis responds that sure, that could be the case, except he's run the numbers, and made-off's returned are mathematically impossible. And Mark Polis says there's something else. Made-off says he's trading at a high volume. But if you look at the markets, there should be some signs of all those trades. But there are never any indications of his activity. It's as if he's trading in a different market, or he's not trading at all. O'Crant goes quiet, and Mark Polis takes another sip of his whiskey. He can feel it, yet another person is going to call him crazy and write him off. But he's surprised when O'Crant says, all right, he'll investigate the story. And if Mark Polis is right, he'll write up an article and reveal made-off as a fraud. The two say goodbye, and Mark Polis hands the phone back to Casey, his colleague. Then he finishes his whiskey in one big goal. Shoot in Casey a worried look. Because he knows no matter what happens now, there's no going back. It's the spring of 2001. Frank Deepis Galley is racing up the stairs in the Manhattan offices of Bernard L. Made-off investment securities. Deepis Galley leaps up the stairs two at a time, gripping a laptop with his right hand. And he bursts through the doors of the 19th floor and catches his breath as he makes his way to Bernie Madoff's office. Deepis Galley takes a moment to compose himself. He's Bernie Madoff's right hand man, and he knows he needs to look presentable, given the crisis they're facing. Days ago, the office got a call from yet another investor who'd read the report by the journalist Mike O'Crant. It's a story that's given them endless headaches. Because O'Crant reported that Bernie Madoff appeared to be running some sort of investment fraud. Client is named Jeffrey Tucker, and his company, Fairfield Greenwich Group, is absolutely crucial for Bernie Madoff's business. They pool together hundreds of investors and then funnel their money to Madoff. Altogether, they account for billions of dollars. If they decide to pull out, Madoff will be ruined. So Deepis Galley and Madoff came up with a plan. It's extremely risky, but they're best option. And today, they'll see if it's going to work. Deepis Galley enters the office and finds Madoff standing by a window. Jeffrey Tucker, the client, is seated on a couch. After a quick reading, Deepis Galley sits down next to Tucker and opens the laptop he's been clutching for the last 10 minutes. Then, Deepis Galley shows Tucker a detailed list of activity within his account. Tucker nods and then opens a briefcase. He takes out a series of spreadsheets and silently begins to compare them to the numbers on the screen. Tucker glances back and forth at the spreadsheets and then back to the computer. Deepis Galley feels like he might be sick. This is about as risky as it gets. Because while the details on the computer may look real, they're all entirely fake. Deepis Galley spent the last two days developing a program that would make the activity look real. But the truth is there is no activity. The investments are all gone. For minutes, Deepis Galley sits quietly beside Tucker, waiting for the verdict. Tucker keeps scanning the figures, going back and forth between the spreadsheets and the computer. And then suddenly he stops, focusing in on a discrepancy between the two sets of records. At that moment, Deepis Galley feels a wave of nausea wash over him. There's no doubt about it. They're going to be caught. The business will go down. Deepis Galley will go to prison. Everything they've worked for, the money, the fame, all that it will be gone. Truth is about to come out. But then something surprising happens. Jeffrey Tucker smiles. He says he's happy and pressed with the performance of his account. Then he rises and shakes hands with Deepis Galley and made off. He says he's not sure what all the fuss is about ever since that article came out. Then Tucker thanks Deepis Galley for his time and walks out of the office. For a moment, Frank Deepis Galley stands in silent shock. Then he looks at made-off and laughs, feeling an incredible relief. That was close. But Deepis Galley is now sure of it. If they can fool one of the most savvy investors in the country, there's no one who can stop them. If you're into true crime, the Generation Y podcast is essential listening. We started this podcast over 10 years ago to dissect some of the craziest and most notable murders, crimes, and conspiracy theories together. And we'd love for you to join us. Generation Y is one of the longest running true crime podcasts out there. And we are still at it, unraveling a new case every week. We break down infamous cases like the Evil Genius Bank robbery and lesser known cases like the case of Kimberly Rico. Did she actually kill her husband after they took part in a murder mystery game? We cover every angle, breaking down theories, diving deep into forensic evidence, and interviewing those close to the case. And with over 450 episodes, there's a little something for every true crime listener. Follow the Generation Y podcast on Amazon Music, or every listen to podcasts, or you can listen ad-free by joining Wondry Plus in the Wondry app. It's June, 2005, in Witton, Massachusetts, a sleepy town about 25 miles south of Boston. On this morning, Harry Markopolis climbs a set of creaky stairs leading to his attic. He steps into the dark space, and feels around for a cord that's dangling from the ceiling. He grabs it and tucks it down. There's a click, and then a pale yellow light turns on it. Markopolis pauses to gaze around the dusty space. It's full of faded boxes and stacks of old board games. But there's also a wooden desk covered with a pile of folders. Markopolis size. This is now his office, and the place where he makes a living, or tries to. A year ago, Markopolis left his job as a financial analyst in Boston. He'd worked there for 13 years, and he planned to stay at the company. But after he tried to blow the whistle on Bernie Madoff, and spoke with a reporter, his life took a turn for the worse. He could hear his co-workers whispering about him at the water cooler. The jokes went on and on. Everyone thought he was crazy that he was a fool for going after Madoff. It all became too much. And so Markopolis decided to quit and go work for himself as a fraud investigator. He was confident he could find lots of work and uncover misdeeds on Wall Street. But so far, he hasn't pulled a single paycheck. He has no illusion why. It was his attempt to expose Bernie Madoff. Now, no one will take him seriously. Markopolis sits down at the desk and opens a folder. He begins reading a document, but stops. He feels demoralized. He risked everything speaking to that reporter. That story should have changed the country, changed the world, but instead no one seems to pay attention to it. And now, here Markopolis sits in a dusty attic with no prospects for making a living. Markopolis snarls, pounds the desk, and he reaffirms for himself once again that he's not ready to give up. So he grabs another folder and makes a decision. He's going to file yet another report with the Securities and Exchange Commission. Maybe this time, he can actually convince them to go after Madoff. Markopolis turns on his computer and begins typing a report. He feels driven by an intense sense of purpose, a fire burning inside him. It's bad enough that Madoff is stealing from his clients or committing some sort of fraud. But by avoiding any scrutiny, Madoff has now hurt Markopolis himself. Markopolis knows that if he can get the SEC to take on the case, prosecute Madoff, everything will change. People will finally see Markopolis as legitimate. Maybe finally, they'll get some work. He begins typing the cover page. He includes a title in a large font that says, The world's largest hedge fund is a fraud. He smiles. He knows that should get the SEC's attention. Then he cracks his knuckles, takes a sip of coffee, and begins typing as fast as he can. He describes the fraud in minute detail and feels his momentum picking up. He keeps going, page after page, not pulling any punches. Finally, Markopolis stops typing. He thought he'd been working for maybe 15 minutes, but when he looks at the clock, he sees that nearly four hours have passed. He chuckles to himself. Because for the first time in months, he feels good again, driven. What he's written offers undeniable proof of Madoff's guilt, and he can only hope that this time, the SEC will take him seriously. Five months later, Megan Chung approaches an office building in Lower Manhattan. She unrats her scarf and gazes up to the top of the building, which towers in the cold, clear sky. Chung smiles. Despite all the time she's been here, somehow coming to work never gets old. Then she steps into the building which houses the New York office of the Securities and Exchange Commission. Although Chung is only in her 30s, she's already the branch chief of the Office's enforcement division. That means she investigates financial crimes committed in New York City, the financial hub of the United States. Chung steps into the building, and a few minutes later, she walks into her government office. The work may not have the glitz and glam of investment banking, where you can make millions overnight. And Chung knows that most people have a low opinion of SEC officials. They have a reputation of just putting in time until they can get a high paying job on Wall Street. But for Chung, that's not the goal. She's proud of her job and proud to be policing Wall Street. Someone who makes sure the financial industry plays fair. Chung is setting her things on her desk when she hears a ding from her computer. She has an email, and it's from her boss, Doria Bockenheimer. The message contains some big news. They're taking on a new case involving Bernie Madoff. Chung can't help but raise her eyebrows. Madoff's a big name on Wall Street, and one of the most powerful men in the world. He commands billions of dollars. He's the definition of success in finance. Bockenheimer explains that they received a submission, which raised the possibility that Madoff could be committing fraud. Chung shakes her head when she sees who this submission is from. Harry Markopoulos. She knows Markopoulos all too well. He's already filed reports about Madoff. He seems like some kind of eccentric, or maybe he's just jealous of Madoff. But this report appears different. It's convincing. And there's credible evidence that Madoff is either committing fraud or insider trading. And so either way, now, it's time to investigate. Chung sits down and considers the big task ahead of her. Madoff is an unquestioned legend of Wall Street, which Chung also knows that no matter how big a man's reputation may be, he is never above the law. So she writes back to Thanker Boss and opens up a new file. It's time to begin investigating Bernie Madoff. It's May 19, 2006. Six months since the SEC opened its investigation into Bernie Madoff. Today, the SEC's New York office is buzzing with quiet anticipation. It's an electric atmosphere that Bernie Madoff can feel the second he steps into the office. Right now, Madoff is walking behind three officials from the SEC. They're investigators, and while today could be a disaster if it made off, he knows what he needs to do. He has to stay calm and appear unruffled as they grill him about his company. Madoff steps into a conference room and shakes hands with the lead investigator. She looks like she's young, maybe 30. Really, no more than a kid. Madoff should have no trouble fending her off. It only takes some charm and patient explanations in order to earn her trust. That's how Madoff has conquered the world of finance by gaining people's trust across a wide network, making them believe that he is in control. The group sits down at a conference table, and then the woman grabs a no-pad. Mr. Madoff, my name is Megan Chung. Thank you for volunteering to come speak with us. Mr. Chung is my pleasure. I only hope I can help. I apologize for bringing up such unpleasant business, but we've received allegations against you, and I'll get right to it. Some have questioned how you've gotten such consistent returns in your investments. Well, Mr. Chung, many, many people ask questions about how I do what I do. I'm sure you understand my livelihood depends on not telling them anything, but that's a rule I'll break for you. Well, of course, Mr. Madoff, and thank you. So then, how did you get such consistent returns? Well, here's the big secret, and that's that there is no secret. It's just the elbow grease of finance, research, research, and making good decisions based on research. Well, if you wouldn't mind, could you give us an insight into how you make your decisions? Madoff drens and leans in. He knows that everyone likes to be part of a secret or an exclusive club. That's how he's gotten billions from his investors, and that's how he'll win over the SEC. Well, there are some things you learn after decades in the industry. Now, the market looks like it's a bunch of chaos, right? But the truth is there are patterns. My brother, Pete, he's always been a wizard with technology, and with enough research, we can identify those patterns. I don't work like other traders. They go off knee-jerk reactions. Instead, I try to stay calm, and I just make decisions based on my feel for the market. I understand. Now, onto the next point, Mr. Madoff, you have a London office. Correct me if I'm wrong. That's where you execute all your trades. Madoff maintains a gentle smile. But inside, he feels himself seizing up. This is the first big trap. Chang could subpoena his trade records from London, and if she does, she'll see that no trades exist. But still, he stays calm. Ah, that's impressive research. Yeah, you've done some yourself. But yes, as I'm sure you know, most of the trading that I do is based in Europe. And who has custody of the actual stock? Is it you or your clients? This is one of those paperwork issues you run into after so many years in this business. It can be a headache. So, Mr. Chang, the way it works is we actually hold onto the assets. That's the easiest way. If our clients want to trade again, it's just less paperwork. Oh, okay, okay. So Mr. Madoff, that means that you have the actual paper stock certificates. And your London office sends those to you. Madoff's panic begins to rise. This is another trap. Next, you'll of course ask to see those stock certificates, because those stock certificates offer proof that Madoff trades on the stock he says he does. But the certificates don't exist. So Madoff thinks as fast as he can. Well, as you can imagine, when you manage tens of billions of dollars of investments, you end up with a lot of stock certificates. And Mr. Chang, even though I'm an older man, I've always hated having to file away papers. So, what I do is I store the actual certificates in the depository trust company here in New York. We're fortunate to live in this day and age when you can store your stock in something like a bank vault. Chang writes a final note, and then rises. Well, Mr. Madoff, I think we're done here. Thank you again for coming. But it was my pleasure. You let me know if you have any other questions. Big or small? Madoff stands and maintains his gentle smile. But as he walks back to the elevator, his chest begins to constrict. He was sure that he could control the situation that he could carefully strong on the lead investigator. She is just a kid, after all. She was no fool. She did her homework, and now she has everything she needs to start looking into his entire business. And if she does, she'll be able to put him away for a very long time. It's early 2007. Franty Pasquale stares out into a hallway in the office building the house's Bernie Madoff's investment company. A hallway is silent, and looks like it's clear. So D Pasquale makes a bee line for the door to the stairwell. He throws it open, then ducks into the stairwell and waits. So far, so good. It doesn't seem like anyone noticed him. Then D Pasquale begins to climb the stairs, up past the 18th floor where Madoff's employees do their work. Then he reaches the 19th floor, where Bernie Madoff himself has an office. Before he enters, he stops to catch his breath. Normally, D Pasquale wouldn't be sneaking around like this. He's Bernie Madoff's right-hand man, and he's worked in this building for years. But these aren't normal times. About a year ago, Bernie Madoff grew certain that he and D Pasquale were about to be arrested. He was sure the SEC was going to have them locked up, but the police never came. Instead, investigators from the agency showed up, and then never left. They camped out on the 18th and 19th floor, they decided to continue their investigation in person. And while they still haven't asked for any stock certificates, they've been pouring over documents, and looking for evidence of fraud or other financial crimes. D Pasquale knows they won't find much evidence on the 18th and 19th floor, but the SEC can't know about the 17th floor. That's where D Pasquale and a small group of others work. It's the beating heart of Bernie Madoff's Ponzi scheme, the operational center where D Pasquale moves funds from one client's account to the next, and it's where he generates fraudulent records, showing the clients still have money in their accounts. The SEC can never know about the 17th floor, and that's why D Pasquale has spent the better part of a year sneaking around the building like some kind of cat burglar. D Pasquale exits the stairwell and heads toward Madoff's office. He doesn't know why Madoff asked him for a meeting, but when he enters the room and sees Madoff's sour expression, he can tell something is wrong. D Pasquale gingerly steps forward, and then he asks Madoff if this is it, if today is the day. Madoff looks out the window, had Manhattan's skyline. D Pasquale can see his face reflected in the glass, and he sees Madoff nod. Madoff then says, from now on, their lives won't be the same. Things are about to change. D Pasquale feels his legs grow weak. He knew it was only a matter of time. They may have kept the SEC from the 17th floor, but something was bound to catch up with them. Madoff then picks up several sheets of paper from his desk and steps toward D Pasquale. But then he stops, shakes his head and suddenly breaks into roaring laughter. D Pasquale stammers and laughs nervously along with Madoff. Then he demands to know what's going on. Madoff tells him that it's over. The SEC analysts have gone home. They've just cleared Madoff of all suspicions of fraud. D Pasquale is stunned. He can't believe what he's hearing, and now starts laughing uncontrollably. They should be in prison, serving life sentences, but that's it. The investigation is just closed. Madoff keeps laughing and hands over the sheets of paper he's been holding. D Pasquale glances at them, and at first he almost can't make sense of what he's looking at. Then it hits him. These are resumes and job applications from the SEC officials. They've finished investigating Madoff and they put in applications to work at Madoff's company. D Pasquale looks up and shakes his head, and then he begins to laugh again. This is unbelievable. D Pasquale claps Madoff on the shoulder, who gives it a squeeze. The investigation is over. They're free. Nothing can stop them. It's August 2007, just a few months later. On this evening, Bernie Madoff is beaming as he gays across the newest member of his family, an 88-foot yacht. It's named the bull, and it cost him $7 million. But Madoff knows this glorious ship is worth every penny. Right now, he's steering it to dock him on a group of other massive yachts in the French Riviera. Madoff breathes the salty air as he looks out at the sky above. It's a wash and a sunset of orange and yellow. This is going to be a perfect night. Madoff will have exactly what he wants. The ocean breathes, dinner with his wife Ruth aboard a new ship. Bernie turns the ship's wheel as the vessel glides toward the dock. But as he approaches a buoy, he realizes that docking this craft might be more difficult than he imagined. It's a massive boat. He looks right and catches a look of concern on Ruth's face. Ruth, I see that look. You worry too much. You worry too little. I promise you nothing's going to hit us. Nothing can ever hurt us. Bernie steers the ship around the first barrier dock, and then glimpses the white rock houses that pepper the hills around the French Riviera. One of those is their newest vacation home. Bernie grins, gestures toward the house. Look at that. Not bad, huh? You know, sometimes I still can't believe this is our life. Well, believe it Ruth, it's all very real. But you know, I get this feeling sometimes. I wonder if it's all going to vanish. Suddenly, reality is just going to hit us in the face. Bernie shoots a glance at his wife. He's not sure whether she knows something she shouldn't, whether she even has a clue about the hole he's dug himself into. He doubts it, but either way, he won't let her hold onto any fears. Not tonight and not in the future. Because even if his ponds he scheme has gotten deeper, someday soon he'll find his way out of it. Because there's nothing in his way, now that the SEC has stepped aside. Ruth looked around. Look at the boat, the blue water, the sky, that house. This whole world, it's ours, we earned it. Nothing's going to vanish, nothing's going away. This is reality. And I'll say it's perfect. You know, you sound like when we were kids, on a hint of doubt. Bernie slows the engine and grins at Ruth. Well, that's because I know what I want. Oh, what's that? Come on over here. With the sun setting behind them, Ruth saunters over to Bernie. She stops and Bernie takes a hold of her hand. Then he leans in in the two kiss as the sun dips below the horizon, and the waves laugh against the side of the boat. Bernie pulls back and looks at Ruth. He's filled with a tenderness that's almost overwhelming. He can't remember the last time he felt this happy, or this free. Sure, he has problems at work, but so does everyone. And no problem is too big to overcome. What's most important is the life he's built, the choices he's made. He's proud of himself, and he's ready to celebrate. So he grabs a bottle of champagne and launches the court. Goes flying into the opposite side of the deck and rattles around. He and Ruth burst into laughter, and then Bernie pours each of them a glass. Two glasses clink in a toast to the good life they lead. As he sift's champagne, Bernie thinks again about the puns he's keen he's built. He has no doubt he will get out of it. It may be slow, it may be difficult, but he'll deal with everything soon enough. For now, he's happy to feel like the king of the world. From Wondering, this is episode two of four, a Bernie made off from American's Gando. On the next episode, Wall Street gets pummeled by a financial crisis. And as markets crash, Bernie made off has to find a way to keep his clients from panicking. If you'd like to learn more about Bernie made off, we recommend the book The Wizard of Lies by Diana and Rekas. This episode contains reenactments and dramatized details. And while in most cases we can't know exactly what was said, all our dramatizations are based on historical research. American Scanel is hosted, edited and executed produced by me, Lindsay Graham for Airship, audio editing by Molly Bach, sound design by Derek Barons. This episode is written by Charles Olivier, edited by Dave Kane. Our senior producers Gabe Riven, executive producers are Stephanie Jens, Jenny Lauer Beckman and Arnon Lopez for Wondering.