An Interview with "The Wizard of Lies" Author Diana B. Henriques
For those seeking answers as to why and how Bernie Madoff could perpetrate the biggest Ponzi scheme in history, Madoff has proven an elusive and slippery villain. He is serving a 150-year prison sentence for his—he claims--sole role in masterminding the crime which destroyed his own family and left thousands of others destitute. Diana B. Henriques, a senior financial writer for The New York Times and the first journalist to interview Madoff in prison, has written The Wizard of Lies: Bernie Madoff and the Death of Trust, which charts a story as gripping as any fiction. In the first of this two-part interview, Henriques offers a peek behind the curtain to tell how she managed to land one of journalism’s biggest “gets,” and the challenges of interviewing a wily subject with an agenda at odds with the facts she uncovered.
MillionareCorner.com: Had you known Bernie Madoff before writing the book?
Diana B. Henriques: I had known him slightly. He was certainly a source in my Rolodex for many years dating back to when I was a reporter at Barron's. He was very much in the vanguard of what we take so much for granted, 24/7 round-the-world stock trading. It may be because he knew I knew his background that he was more inclined to talk to someone who didn’t see him just as a crook, who understood that he had played a bigger role on Wall Street before this disastrous crime. I think it helped too that (the New York Times') coverage of the crime was fair and moderate with respect to his family. I know that meant a lot to him, at least that’s what he told me when I met him in prison for the first time in August of 2010. But who knows why he decided to finally talk? It took him months to agree.
MC: What was that process like?
DH:It was like pounding rocks. Nothing seemed to happen until finally one of them cracked. I wrote him a letter requesting an interview when he was still in jail here in Manhattan between the time he pled guilty in March of 2009 and the date he was sentenced in June. I sent letters, but got no response. His lawyer told me he wasn’t going to make any decisions about an interview until he got into the federal prison itself. So I waited. He finally moved there that summer and I started sending notes. He sent me a note back that fall not saying 'no,' but saying 'not now.' It was a very flattering note (along the lines of) 'You're at the top of my list if I decide to give any interviews.’ I took that for what it was worth.
Every couple of months I wrote him a one-page letter describing why I thought it was important for him to talk and what I was hoping to provide to history; the definitive insightful book that could only be as good as I wanted it to be if I could have his cooperation. At some point that spring in 2010, I started to pick up signals from his lawyer that maybe this was going to work. Once he agreed there was another six weeks to get the prison authorities to agree. I was able to sit down with him for two hours in August 2010.
MC: Would there have been a book without him?
DH:It was written under the assumption I would not get Bernie Madoff. My deadline for the initial draft was October 2010 and I didn’t get to see him until August. I think that was the saving grace when I did get to talk to him. I came in to the interviews with an enormous amount of background information. I could challenge Bernie's fabrications against what I already knew. I identified the holes in the story that only he could fill; his family background, his childhood. It was a benefit in a way that it had taken so long for me to get in to see him. I think the book is much stronger. But after I did see him, it shifted the center of gravity of the book. We actually changed the title. Up until August 2010 it was going to be called A World of Lies. After I interviewed him, my editor said it wasn’t quite right and between us we came up with The Wizard of Lies.
MC: What was his reaction to the title?
DH:He did not like it. He said it was too sensationalistic. I wrote back and said, 'Bernie, you must have known that any book about your crime was going to have the word ‘lies’ in it somewhere. It’s the currency you used to keep this crime going.' He’s a very slippery person. He read the book a few weeks ago. He was not thrilled. He is grateful for the fairness with which I treated his family. But he still insists that his crimes began in 1992. I reached different conclusions. He is still challenging (me) and insisting I’m wrong and he’s right.
MC: How on guard were you in that he was an unreliable narrator of his own story?
DH:This is not the first time I’ve interviewed someone of dubious credibility. If you cover Wall Street for as long as I have, that’s an opportunity you get almost daily. I was more interested in how his mind works. I wanted to see was how he lied, how he rationalized those lies to me, how he shifted from things that I had already verified and knew he was telling the truth about to outright lies, things I knew he wasn’t telling me the truth about.
MC: Was there a pattern to what he lied about?
DH: I understood why he was so adamant about when this fraud began and I think he understood that I understood. He is trying to curb the forfeiture claims that the government and the trustee in bankruptcy can make against his family's assets by persuading them and the world that the fraud started in 1992. (That way) he limits the reach of the government back into the 1980s and his assets that his children and his wife acquired then. That was the primary focus of what he was trying to persuade me.
MC: Beyond the size and scope of his crime, what else fascinated you about this story?
DH:You can’t look far behind this size and the scope; almost $65 billion of paper wealth wiped out in an instant and a web that stretched far beyond the reach of any Ponzi scheme in history. It grabs one's attention right off the bat. But what made it so compelling was the human story. Here is a father turned in by his sons. Here is a wife of almost 50 years who stands by her husband and is vilified and becomes almost a pariah. Here are a couple of lawyers in bankruptcy court who are trying to recover assets and themselves have become lightning rods for the hopes, fears, anger, and grief of a whole community of Madoff victims. Every journalist dreams of writing a novel someday. I can take that off my list. This was like a novel (with) such incredible characters and primal forces at work: trust, betrayal, family, friendship.
MC: One thing I admired about the book is that you make a very complicated story accessible.
DH:I wrote it for the general reader for a deliberate reason. Ponzi schemers don’t prey on financial journalists for The New York Times. They are looking for people who are baffled by the complexities of the marketplace and who are looking for something safe, simple and secure. Madoff was brilliant in the way he targeted his victims. The classic Ponzi schemer going back to Charles Ponzi himself was a bon vivant, very much a charismatic fellow--and it's almost always a fellow. Madoff was not like that at all. He was never the most charming person in the room. He always made you feel like you were the most charming person in the room. He wasn't trying to show off his brilliance. He let you show off your brilliance. Nothing about him would have set off the traditional trip wires of 'Whoa, be careful about this guy.'
His approach to his role was very different from the classic Ponzi schemer. Most promise you the sun, moon and stars. Madoff promised you low but safe and steady returns. There were many years during the life of his scheme where his investors could have made more money in the Magellan Fund or in a public mutual fund than they did with Bernie Madoff, but the markets were volatile. You didn’t lose money with Bernie. He attracted not people who were greedy but people who were fearful.
I’m concerned as a financial reporter that the Ponzi schemes of the future will be Madoff schemes. They will be schemes that don’t make promises, they won’t attract regulatory attention, and they won’t raise red flags in your own mind. They will exploit your fear of how complex and difficult and volatile the markets have become. That was Madoff’s genius. He attracted people who thought they were making a safe conservative bet by investing with Bernie Madoff.
(In part two, to appear on Tuesday, Henriques discusses her prison interviews with Madoff and how his old habits die hard, as well as regulatory changes since his crimes were uncovered).