Madoff Explains How He Concealed Fraud

View Video

(CBS) In a wide-ranging jailhouse interview with SEC Inspector General David Kotz, convicted swindler Bernard Madoff explained how he managed to conceal his multi-billion-dollar fraud operation.

"It never entered the SEC's mind that it was a Ponzi scheme," Madoff said, because of "the reputation I had."

"They thought the likelihood of Madoff being a big criminal was probably not something that was realistic," said Paul Atkins, a former SEC Commissioner.

At the height of his career, Madoff was regarded as a financial genius, he even served as chairman of NASDAQ, reports CBS News correspondent Randall Pinkston.

In 2003, Madoff was sure he would be caught and was surprised when investigators did not check his accounts to see if he had actually traded stocks - which he had not.

It is accounting 101, Madoff told the inspector general, to look at DTC - Depositor Trust Commission - to discover a Ponzi scheme.

"With one phone call they could have brought the whole thing down," Atkins said.

"I worried every time," Madoff said in the interview. "I wish they caught me six years ago, eight years ago."

Atkins said part of the lesson is for investors to be more skeptical.

"They need to ask questions and in the Madoff case, there were not just red flags for the SEC, there were red flags for investors," Atkins said.

Boston accountant Harry Markopolos did ask questions, but his warnings to the SEC - that Madoff was running a Ponzi scheme - were ignored.

Madoff described Markopolos as "a joke in the industry."

By last December, the joke was on Madoff when he admitted that his operation was fraudulent and had cost his clients billions of dollars.

Attorney Barry Lax says that Madoff's statement is one more reason the SEC should be held accountable.

"We're representing many victims against the SEC," Lax said. "We believe the sec was simply negligent in its investigations and examinations of Madoff's business."

In a related matter, on Tuesday, David Friehling, Madoff's accountant, is expected to enter a guilty plea on fraud charges. Prosecutors say Friehling never performed an audit of Madoff's company.

Client Reviews
★★★★★
The Lax & Neville team were total professionals in handling our case. They've clearly had quite a bit of experience handling complex legal matters in many jurisdictions and courts. I was impressed with their professionalism coupled with persistence in arguing a very complete and well-structured case. I highly recommend their services. Anonymous
★★★★★
I am very, very happy with the outcome of my case and my experience with Lax Neville could not have been better. The entire team of attorneys and staff are real professionals, they always had time to answer my many questions about my case. I was treated with compassion and respect. I am so grateful I chose to work with Lax Neville. Anonymous
★★★★★
This is an official " thank you" for all your hard work. It really was a pleasure to have you represent me, and I enjoyed seeing you, Rush and Sandra in action. I think Lax and Neville epitomizes the phrase "quality vs quantity". I think I told you before that I spent a lot of time researching firms; in this case things worked out, I picked the best firm. I hope I never need your services in the future, but if I do I know I found the best attorneys for these types of legal issues. Anonymous
★★★★★
What transpired at the [redacted] was nothing less than a truly masterful and exceptional experience regarding your intelligence, professionalism, preparedness for my case, teamwork and erudite knowledge pertaining to Securities Law, FINRA and the SEC. The facility and ease of how the case was handled, the systematic questioning of all the witnesses to obtain the facts necessary to prove our case, the preparation of the critically conclusive information and documents, the commanding coup de gras closing argument and your tireless consideration and respect for the Panel and [redacted] was, is and will continue to epitomize my feelings and conclusion that what transpired over those long three days was nothing less than raw and unabashed brilliance. Anonymous
The New York Times
BusinessWeek
Dowjones Newswires
CNN Money
Forbes
The Wall Street Journal
Thomson Reuters
Super Lawyers
Securities Arbitration Commentator