JIM CAMPBELL: It almost sounds like altruism. But it was ego in the sense that he couldn’t bear or psychically accept that he lost money. And if the story is true — he returns it and all that — it is still incredibly revealing that he felt he had to reimburse rich people when the market briefly turned against him. And as Ike Sorkin, his lawyer, told me: People who were his clients figured out pretty quickly that they wouldn’t lose money with this guy.

CHARLES MIZRAHI: My guest today is Jim Campbell. Jim is known for his hard-hitting interviews of leading figures from the world of business, politics and sports. His latest book is Madoff Talks: Uncovering the Untold Story Behind the Most Notorious Ponzi Scheme in History. His book has been called the definitive, in-depth account of the spectacular rise and fall of Bernie Madoff and the greatest Ponzi scheme of all time. It features new, exclusive and never-before-published details from Madoff himself.

CHARLES MIZRAHI: I recently sat down with Jim, and we talked about how he got access to Madoff, what motivated him to run a Ponzi scheme and how his victims were victimized twice.

CHARLES MIZRAHI: Jim, I want to thank you for coming on the show. I’ve been looking forward to our conversation since we spoke about a week or so ago — and since I read your amazing book.

JIM CAMPBELL: Thank you, Charles, it’s a great honor to be here. You’ve got a great, impressive background. And talking about backgrounds, that American flag looks very nice behind you, too.

CHARLES MIZRAHI: Thank you. Same there. I see a folded flag behind you.

JIM CAMPBELL: I do. My daughter’s boyfriend was in the Air Force in Iraq. And that’s the flag from Iraq. It was raised there.

CHARLES MIZRAHI: Nice. Really nice. That’s great, man. How did you get it?

JIM CAMPBELL: He gave it to my daughter to give to me.

CHARLES MIZRAHI: Nice. He wanted to get in good with his future father-in-law. Nice. Smart boy.

CHARLES MIZRAHI: All right. So, Madoff Talks: Uncovering the Untold Story Behind the Most Notorious Ponzi Scheme in History. Before we get into anything, for those who have been living under a rock, Madoff created the most amazing Ponzi scheme in history. It was close to $65 billion — all fabricated — taking money from Peter to pay Paul. That’s all you have to know about a Ponzi scheme.

CHARLES MIZRAHI: Jim, when he was sentenced to 150 years in jail, how did you gain access to him? After I read your book, I was telling you that I got sick at certain points. That’s all a compliment to you. The book hit me really hard in certain places. How did you gain access to this man and get him to open up as best he could?

JIM CAMPBELL: Yeah, I’ll tell you, Charles, I have to be honest. There were a lot of fortuitous coincidences. I was taping a live show then and had a guest — Laurie Sandell — who’d written a book that Andrew Madoff and his girlfriend, Catherine Whooper, had cooperated with. And out of the blue, she says: If you want, for your prep, I’ll hook you up with Andy, and you can talk off the record.” He had too much litigation to do anything on the air.

JIM CAMPBELL: We talked to him. We seemed to hit it off. I started off — right from the get-go — by bombarding him with questions and accusations. I found him to be pretty open. He said: “Jim, your show is live. I’ve just talked to you now. I’m going to listen tomorrow and see if you are saying the same types of things that you’re saying now.”

JIM CAMPBELL: After we finished, the second fortuitous coincidence was that his mother, Ruth Madoff, was moving from Florida to Old Greenwich, Connecticut. I happened to live in Old Greenwich. I said I would take her out for lunch because she wasn’t going to know anybody, and no one was going to want to associate with her anyways. It was December, and she came into the restaurant. There was no one else there. She was wearing sunglasses — even inside — until she took them off. We hit it off. I found her to be very open. She ate a chef’s salad like she hadn’t had any food in three weeks.

JIM CAMPBELL: Then, when we walked out, I said: “Can I get a picture with you?” She stopped and said: “You’re wired, aren’t you?” She thought I’d set her up. But once I set her straight, she then introduced me to Bernie. Bernie said: “Based on what Andrew and Ruth have told me, I’m going to talk to you and hope you can dispel some of the myths around this.” First off, Andy never spoke another word to his father after he confessed. So, that couldn’t have been accurate — or it had to have come through Ruth.

JIM CAMPBELL: So, that’s how it happened. Now, I’ve wrecked my mind on this as well. Why did they trust me? Why did they put their legacy in the hands of a guy they knew nothing about? None of them saw the book before it came out. With Bernie, if you know his history, he didn’t have any custodians for his assets — which is a huge red flag. A Wall Street shrink told me that he probably viewed me as a custodian that he could control — just like anybody else.

JIM CAMPBELL: To this day, I can’t quite tell you why Andrew, Ruth and Catherine Hooper trusted me. They didn’t know me. After she saw me on CBS Sunday Morning — where I talked about whether the family knew or not — Catherine Hooper thanked me for following the truth. When I first interviewed her, she told me that she didn’t believe Andrew knew — to the depth of her soul. But if I found it, she would accept it. I thought that showed a lot of character.

CHARLES MIZRAHI: All right. So, for whatever reason, the heavens parted, and you were graced with communicating with this … I don’t even want to use adjectives because whatever I say is going to be wanting to how many lives he destroyed. Here, you have a guy who was literally on top of the world. There was no greater guy than Bernie Madoff. And in a few minutes, you’ll tell us why he was such a powerhouse on Wall Street. This guy did such evil to so many — no one ever came close to him. Charles Ponzi couldn’t do it, and he was the originator of the Ponzi scheme. So, before we begin, I want to start at the end. It’s December. Right before Christmas or so…

JIM CAMPBELL: He gets arrested on December 11th.

CHARLES MIZRAHI: OK, so this is December 10th. It’s December 10th, 2008. Bernie Madoff calls his two sons to his apartment. He sits down with them, and he’s been acting weird all week. He’s been having back aches and lying on the floor. What does he tell them? And he’s got Ruth there — his wife — as well.

JIM CAMPBELL: Actually, Bernie is in his office before this. And he appears to start to have a nervous breakdown. His secretary is watching this, and that’s when the boys come running in. They don’t know exactly what’s going on, but they know they’ve got to get them out of there right away. He puts his jacket on, and they almost carry him out. And then, they go to the Upper East Side — where they had a co-op on the top floor of the building. Bernie says: “It’s all fake.” And the first thing Ruth says is: “What is a Ponzi scheme?”

CHARLES MIZRAHI: Hang on, Jim. So, he’s sitting there with his two boys who were also in the business but in a different section. We’ll talk about that. They’re on a different floor and in a different type of business. He has his wife and two sons there. He confesses and tells them what? What does he actually tell them?

JIM CAMPBELL: He tells them that none of it’s true. None of the investment advisory business is true. It’s a fraud. It’s a fake. And Mark, I believe, convulses almost immediately. Andrew rounds things up. Both of the boys leave the apartment soon thereafter to figure out what to do. Obviously, Ruth stays back. And she represented to me that the first thing she asked him was: “What is a Ponzi scheme?” She didn’t even know what the heck he was talking about.

JIM CAMPBELL: The boys go and call their lawyer — who calls one of the prosecutors at the Southern District of New York. The prosecutor thinks that he says: “I have a $65 million financial scam.” And the guy says: “OK. Call us first thing tomorrow morning.” But his lawyer says: “No, I’m talking $65 billion.” And the guy chokes on it, and they send the FBI the write-up. Bernie also asks them that first question: “Is there an explanation for this?” And he says: “No.”

CHARLES MIZRAHI: At first, Bernie confesses. He says: Look, it was all me. I did it all myself. I’m turning myself in.” And as the story progresses, we start to find out that there are a lot more accomplices. It’s been longer than anyone has thought — where he was taking money in and paying out. And it affected not only people in the United States but people on different continents throughout the world. I think it was close to 17,000 people, feeder funds and more. It reverberated. Some people committed suicide after seeing their fortunes gone.

CHARLES MIZRAHI: So, I want you to take us back to this guy, Bernie. You got inside his head — or maybe he got inside your head. That’s how manipulative this guy was. If I spoke to this guy, I would think he was getting inside me. It’s like Silence of the Lambs with Anthony Hopkins. I would think: “He’s really getting me. He’s too sharp.” He got $65 billion from a lot of smart people. And he was able to do this for 30 to 40 years. So, I’d be nervous. But anyway, Bernie is a guy from Queens, who starts at the bottom without any connections. Tell me the story of how this guy from Queens, ran a sprinkler business in high school — or right after high school — marries an accountant’s daughter and becomes king of Wall Street.

JIM CAMPBELL: Yes. I think it’s an important motivator under the table. Though, Bernie has no insight into his own psyche, if you will. He grew up in the what I call: “The shadow of failure.” His father had several businesses that seemed to fail. He declared bankruptcy in a sporting goods business and was found to have a brokerage — a broker-dealer — out of his house that was shut down by the SEC. Though, Bernie misrepresented to me what happened.

JIM CAMPBELL: But he was an ambitious guy. He went off to the University of Alabama, and he started dating Ruth Madoff. When she was 13 years old, he was 16 years old. He lasted a year in Alabama before he was drawn back by her. He went to Hofstra. He was set on making a name for himself on Wall Street. And out where he was metaphorically a long way from Wall Street. Though it’s a subway ride. He was dead set on doing it. And he had tremendous brilliance. He found some mentors — some highly legitimate people like Gus Levy — some Jewish leaders on Wall Street.

CHARLES MIZRAHI: Gus Levy was head of Goldman Sachs.

JIM CAMPBELL: Goldman Sachs.

CHARLES MIZRAHI: He was one of the legends on Wall Street.

JIM CAMPBELL: They, in fact, helped him. As he called it, [they were] “feeding him scraps” on what were convertible securities in an arcane part of the market — which he ended up innovating in and dominating a segment of.

JIM CAMPBELL But yes, he went down there and built this thing from scratch with his brother. He had continual insights on holes in the market. The pink sheets back then — all the OTC stocks that weren’t on the New York Stock Exchange — they weren’t transparent. There were no prices available. You actually had to call dealers on the phone, and they were all separate regional exchanges. He had a vision to put all that together. His brother had the architectural vision from the technical side, and damn it if Bernie didn’t pull this off and break the monopoly of the New York Stock Exchange.

JIM CAMPBELL: He ended up the No. 3 volume trader on Wall Street and developed a niche when it was very unpopular to even deal with discount brokerage firms. He helped legitimize them. The price of commissions came down.

CHARLES MIZRAHI: Let me just put some color on this because you’re an old Wall Street guy, and you get all of this. I’m just going to put a little color on this. I get what you’re saying. But today, you can trade on your phone. It’s an instantaneous execution. I remember when I started trading back in the late 1970s — when I was still in high school and then became a floor trader — when you wanted to trade stocks, and when you say the pink sheets, these were physical sheets that were pink. They were off the exchange in the sense that there was little volume or disclosure about them.

CHARLES MIZRAHI: The way you traded these was you called up someone who dealt in the pink sheets. They would make you a market — let’s say, to buy at $10 and sell at $12. They would make that spread. Sometimes, he spreads you even larger, and they make that $2, $5 or $10 difference. And when you’d place an order with a broker, he’d say: “Let me get back to you.” It sometimes took up to a day or two. They used to call around, get quotes and say: “The best one I’ve got is a $10 bid at $13. What do you want to do? Buy at $13 and sell at $10?” That was it.

CHARLES MIZRAHI: And let me just add one more thing, and then I’ll let you go. Commissions. There were no negotiating commissions. This was before May Day of 1975, where commissions were fixed. So, when you bought a stock, you had to figure that you had to make X% just to overcome the commissions and bid offer. So, it was a lot harder. Let me put it this way: It was more of a long-term play. Now, Bernie sees this as being archaic. It’s like we’re doing email today, and they’re still using teletype or a fax machine. He comes up with this new way to do what?

JIM CAMPBELL: [To] put the glow of the U.S. Exchange on a screen — out of cyberspace — by uniting the of the various disparate exchanges. And then, you’ve got up-to-the-minute pricing and all those kinds of things. And you’re right. With fixed commissions, he was putting a lot of money in his pocket — which led to payment for order flow. We could discuss that separately because that’s a big issue right now.

JIM CAMPBELL: But the fact is: It was legitimate, and he was finding niches in the market — on the convertible side. You talked about how archaic it was. At the time, conversions were sometimes taking three weeks. And he actually built a back office to get rid of that whole time spread. It was very unusual for a tiny brokerage firm to build a back office like that. He ended up getting into that field as well. That was actually his first niche before the split-strike conversion.

CHARLES MIZRAHI: Let me interrupt for one second. It’s very important to appreciate this, folks. Back in the day, this was to the major brokerage houses’ advantage to not have this so automated. Then, they could quote you prices. You had no price discovery. It’s like a comic book or baseball card store back in the 1970s. If you walked in, and they said: “This card is $5,” you had to pay $5. Today, you go on the internet, and you see that it’s $0.14.

CHARLES MIZRAHI: There was no price discovery back then. Sometimes, these stocks are traded by appointment. Convertible securities, as you mentioned, were a more complicated issue. They made a huge margin. Wall Street was a was a moneymaking machine. And in comes this guy from Far Rockaway — him and his brother — without the pedigree or knowing many people. They burst in on the scene and said: “We see inefficiencies in the way the market is displaying this information. We’re going to revamp it and squeeze money for the investor.” Is that more or less accurate?

JIM CAMPBELL: Yeah. You talk about no interest in innovation. The specialists, especially, had no interest in innovation because they’re watching their jobs go bye-bye. It’s pretty obvious that all this stuff can be made electronic. And so, Bernie was viewed as a big threat. In fact, the head of the stock exchange basically tried to bribe him by offering a great specialist book if he’d come inside.

CHARLES MIZRAHI: So, we’re not talking about the illegitimate Ponzi scheme. We’re talking about the two faces of Bernie — as you say perfectly in the book. I really love the analogy in the book: “The front of the restaurant.” He creates the front of the restaurant. You use a mafia example. The front of the restaurant looks totally legit. It’s down in the basement. And behind — in the freezer — is where the bad stuff takes place.

CHARLES MIZRAHI: But the front of the restaurant was really the front of the restaurant. It was a five-star, Michelin-type restaurant. It was top-class. It was a moneymaker for as far back as we know — about 2000 or so. We’ll get into that a minute. And at one time, this innovation part — where his sons worked on a different floor in the lipstick building. What is the address of the lipstick building?

JIM CAMPBELL: It’s around 50th on the east side. It’s somewhere in there.

CHARLES MIZRAHI: It’s called the lipstick building because it looks like a case of lipstick.

JIM CAMPBELL: It looks like a tube of lipstick.

CHARLES MIZRAHI: There are two floors there. It’s 885 Third Avenue. So, it’s on East 53rd. If you live in New York … or just Google it on the internet and you’ll see exactly what it looks like. So, there are two floors. There is the 17th and the 19th. The castle with the moat around it is the 17th floor. That’s where all the shenanigans take place. No one has access to that. Now, I’m not talking about that yet. The 19th floor — where he puts his two sons — is a thriving business where Bernie is getting trading volume from the Schwabs and the Fidelities.

JIM CAMPBELL: Yes, that’s exactly right. First off, it looked like a Hollywood set. He was OCD to the hilt. All the screens had the same tilt. Everything had to be black and white. No papers on your desk at the end of the day. And he was adamant that there was to be no regulatory screwing around. He didn’t even like slaps on the wrist up there. It all had to be by-the-book. Of course, Wall Street thought he was front-running all the time, which is jumping ahead of customer’s orders. That’s going to move the market. And that’s how they thought he was getting teeny-weeny spreads that never resulted in losses. He had insights.

CHARLES MIZRAHI: Hang on, Jim. Don’t jump. We’re talking about the legitimate side of the business. We don’t know the back of the restaurant yet. So, the front of the restaurant is a Hollywood set — regulatory spick and span and triple-A. They could write textbooks about how to run a market making operation from Bernie Madoff. What were the initials?

JIM CAMPBELL: BLMIS.

CHARLES MIZRAHI: Bernie Madoff…

JIM CAMPBELL: Investment securities.

CHARLES MIZRAHI: So, that part of the business is totally legit. It’s capturing how much of the volume of the stock market?

JIM CAMPBELL: He ended up getting 10% of the share of the volume — which is third. And by the way, he had top-caliber technology. He was ahead of The Street in technology. He had real-time P&Ls — which didn’t even exist when he did it. That obviously allowed him to do great risk management. He automated traders from 100 down to 10 or 15. So, he was ahead of the curve in that business all the time.

CHARLES MIZRAHI: So, he not only created a phenomenal business, but from the perspective of an investor, they were getting the best execution. Back in the day, if you were buying or selling something, your execution might not be the best because the brokerage firm could move the market or open up the spreads. There are a whole bunch of Wall Street tricks where they make a huge amount of money by taking zero risk. Bernie closed that gap tremendously and made it more of a democratized trading. Fair?

JIM CAMPBELL: Yes. Not only did he do best execution … They used to brag about it. He did price improvement, which is better than the publicly-listed prices on the screens. He was beating that while he was paying for order flow.

CHARLES MIZRAHI: Right. Which is absolutely amazing. So, if you closed your podcast right now, you just heard, “Bernie Madoff: The Messiah of Wall Street.” He was the messiah of the average investor. He was doing stuff that created a level playing field. He became president or chairman of the Nasdaq.

JIM CAMPBELL: He was the chairman of the Nasdaq. The SEC used to contact him when they couldn’t understand the shenanigans at one of the major firms. And Bernie would explain what it meant.

CHARLES MIZRAHI: So, he knew where the bodies were buried. It was almost like Joseph P. Kennedy being in charge of the SEC back when Roosevelt put him there. Roosevelt said: “Put the fox in charge of the hens. He knows all the tricks.” I just want to impress upon our listeners that this guy…

CHARLES MIZRAHI: How do people get caught up in this? I can’t even give an example because it boggles my mind. Here is a guy who is as straight as straight can be. He’s making a huge amount of money in a profitable area — for the average investor. He’s beating Wall Street at its own game. One out of every 10 trades go through his firm. So, it’s not like you didn’t know Bernie Madoff. If you didn’t know Bernie Madoff, you shouldn’t have been on Wall Street.

CHARLES MIZRAHI: That’s like going into any business and saying: “I don’t know who Jeff Bezos is.” Or, “Who the hell is Bill Gates?” No. Everyone knew this guy. You couldn’t get any more top-shelf. He was the chairman of Nasdaq for crying out loud. OK, now, he’s running this business. As you said, he’s OCD. It’s spick and span. There are no papers — nothing on the desk. Everything looks great. I think when regulators used to come in, and they used to leave behind their resumes so Bernie could hire them. You knew that, right?

JIM CAMPBELL: Yes, and as I said, the FINRA actually put their freshman orientation classes over at his place because they thought it looked like a Hollywood set. So, they would send them over there. And then, they’d put those guys on his audits, too.

CHARLES MIZRAHI: And these guys would want to come and work for Bernie. It was absolutely amazing. I really think it’s so important. I think you did a fantastic job in your book. You spent a lot of real estate in the book explaining to the average reader how Wall Street works and how this guy revolutionized — and I’m not using that word lightly — The Street. You’d want him as a son-in-law. You’d want him as a family member. Having Bernie was like having royalty.

JIM CAMPBELL: Yeah. He was everybody’s Jewish grandfather. He wasn’t Gordon Gekko at all. He was a low-key kind of guy. He was a great con man because he wasn’t a con man. He wasn’t trying to con anybody.

CHARLES MIZRAHI: Right. Let’s get into the psychological thing in just a second. The more I think about Bernie — I have read about him throughout the years, seen the two movies and read your book — which I think is outstanding because there are so many lessons in it. I want to talk about them when we get to that at the end. But if you don’t appreciate what kind of guy he was, you can’t fully comprehend how bad a deed he did. Agreed?

JIM CAMPBELL: Not only do I agree, but that business — Pete — was worth $3 billion.

CHARLES MIZRAHI: So, he had a business that he created from scratch with no contacts…

JIM CAMPBELL: With $5,000.

CHARLES MIZRAHI: Right, it was $5,000. That’s the Bernie that he wanted the world to see. What you use in your book — which I think is a great analogy — is “the front of the restaurant.” It couldn’t be better. Perfect. Now, we go to the crap — how they make the sausages. He had his second business, which was called…?

JIM CAMPBELL: An investment advisory business.

CHARLES MIZRAHI: An investment advisory. He took people’s money and said: “I’m going to invest it for you.” Forget about what he invested in. But basically, an investment advisor says: “I’m going to take and manage your money and get you a real nice, consistent return that doesn’t fluctuate much.” It’s perfect if you’re retired! You live off that money. Great Uncle Bernie’s taking care of you.

CHARLES MIZRAHI: Now, he takes this money, and he — I don’t know what the psychological term is — starts taking this money. He can’t deal with losses, right? That’s one of the reasons. He loses money in the beginning. We don’t know where the beginning is. Where did you see the beginning of the Ponzi scheme start to develop — where Bernie couldn’t deal? It wasn’t the money. I got that sense from the book. It wasn’t money that was driving him. It was something much bigger than that.

JIM CAMPBELL: It was not the money that drove him. Remember, too, that he obviously loved this public posture of the success of the market making business. But for some reason, he doesn’t want anybody to know that he’s in the investment advisory business. He was telling everybody and his feeder funds: “You tell them I’m executing trades. I don’t have any discretion on the investment strategy.” That’s what he was doing upstairs: executing trades. So, he was not looking for any kind of profile.

JIM CAMPBELL: And as you said, in 1962, he had 12 family members — and then 12 more non-family for 24 clients. He put them into an IPO that was supposed to be stabilized by the underwriters. They ran to the shores, and he totally panicked, borrowed $30,000 and paid them all back. No firm pays somebody for losses.

CHARLES MIZRAHI: OK, so let me put that in everyday English. He invested people’s money. There were 24 people — 12 family members and 12 non-family members but close friends — who entrusted him with money. He took the money, bought into an IPO with shady sponsors, walked away, the stock plummeted to $0 and Bernie felt so terrible that he lost people’s money — even though they knew was a big risk.

JIM CAMPBELL: They had the money anyway. It was only $30,000.

CHARLES MIZRAHI: Right. He went and got the money from his father in law — who was an accountant — and paid everyone back. First of all, by FCC rules, you’re not allowed to do that. It’s illegal to reimburse clients for losses. But Bernie did it in a sense of what? Why did he do that?

JIM CAMPBELL: Again, it almost sounds like altruism. But it was ego in the sense that he couldn’t bear or psychically accept that he lost money. And if the story is true — he returns it and all that — it is still incredibly revealing that he felt he had to reimburse rich people when the market briefly turned against him. And as Ike Sorkin, his lawyer, told me: People who were his clients figured out pretty quickly that they wouldn’t lose money with this guy.

CHARLES MIZRAHI: OK. So, the legend builds. And now, once he gets a taste of that … What was it? The sense of walking into a room and being godlike? Was it an ego thing of: “I never lose”? Is that, more or less, it?

JIM CAMPBELL: The way he saw it was: “I’m a people pleaser, Jim. I have to be the go-to guy. I have to deliver whatever is asked.” I used to think it was absurd, Charles, when he’d have these cash crises and almost get caught. But at the same time, he’d offer his sons $2 million loans because they needed it to buy co-ops or whatever. He wasn’t going to say: “No. I don’t have any money right now,” “I can’t do it” or “It doesn’t make sense.” He’d be scrambling for money while he was giving his kids money. It wasn’t in his psyche to be able to say: “I made a mistake,” “I need help” or “No. I’m not going to give you that return.”

CHARLES MIZRAHI: Right. It’s not normal. Bottom line: In investing, there’s always the possibility of loss. Everyone who invests, know that.

JIM CAMPBELL: It’s crazy on Wall Street! James Simons of Renaissance is the best hedge fund manager in history. He has 39% average returns after fees. He only makes money on 51% of his trades.

CHARLES MIZRAHI: And he experienced a down year last year? I’m not sure.

JIM CAMPBELL: Yeah, you’re right. He has a big fund. His core fund is 39%. And by the way, he had money with Madoff for a while.

CHARLES MIZRAHI: And he took it out, which was amazing. But it goes to show that even smart guys who know the business got sucked into this. So, Bernie has this compulsion — not only in terms of OCD or building a business on the outside, but he also can’t say “no.” He can’t face the fact that he’s mortal and can lose money. So now, he starts getting whom into this fund? In the beginning days, it wasn’t feeder funds or hedge funds. Who was he getting into the fund at the time?

JIM CAMPBELL: Initially — and this sort of gave him the model to how to build it. Saul Alpern —the father in law who gave him the money — when he retired, the accounting firm became A&B. And that was essentially his first feeder fund. They were funneling money over. The clients did not know where it was going. They were not allowed to reveal who the money manager was. And the money manager, Bernie, insisted that they put that he was only executing trades. And that’s what it began as. The money was coming in, and the A&B folks had structured it as borrowing from their clients and paying them interest.

JIM CAMPBELL: So, what was happening was they were offering their clients 9%, and Bernie was guaranteeing them 11%. The numbers were actually higher. But it’s just an example. So, they pocketed 2%. They gave the client 7%. And that’s how it all started until the SEC came in and said: “That ain’t kosher.” And then, it went from there.

CHARLES MIZRAHI: So, these people were feeding Bernie money. They weren’t asking too many questions as to how this guy was giving a guaranteed rate. They didn’t care or put a blind eye to it. Whatever it was, they were making money. This guy had all the creds as his career started to take off. And how could you not trust him?

CHARLES MIZRAHI: OK, so like any Ponzi scheme, it goes after the people of its own. Bernie is in touch with the Jewish working man and woman. Those are his original suckers. I don’t know what they’re called, but “victim” is really the best term. They’re his victims, right? So, he goes after them, and word spreads that you have to be asked by Bernie to be in this fund. He doesn’t solicit, and you can’t ask him to be in the fund, is that right?

JIM CAMPBELL: Yes, that’s right. After the A&B, the SEC insisted that the structure it had was not was not legal and that Bernie had to return all the money to them. What happened was these guys didn’t want their money back. They were making so much. So, the individuals sent it back, and that’s how it started. Bernie and his right-hand man figured out how to scale that up. Suddenly, they went from 300 to 3,000 clients.

JIM CAMPBELL: And by the way, when you said that you couldn’t get into it, there were 14 banks in Europe that all thought they were exclusive to Bernie. We’re the only guys here in Europe. And there were 14 of them. It was always like: “Bernie’s shut right now, but I can get you in.” And he did. He sat back and counted money. He didn’t ask people for money.

CHARLES MIZRAHI: So, what he did was use the most basic instinct that people have — exclusivity and scarcity. He played on the exclusivity and scarcity. And if Bernie wanted you, you couldn’t ask questions. If you asked questions, you’d piss him off. If you recommended someone to him that he didn’t approve of, he would yell at you for spreading his name around. You’re out of the fund. He always threatened people with being [thrown] out of the fund.

JIM CAMPBELL: He would not take them in. His sons, who were seen by the public as running the market making business, couldn’t often get people into his fund because Bernie was turning them down. He knew that they were going to be crash dummies. But the boys didn’t know that. And it was totally hurtful to them that they didn’t even have the power with their dad to get guys into his fund.

CHARLES MIZRAHI: It’s amazing. It’s like your dad being able to get everyone else courtside seats at the game, and you have to sit in the bleachers. You can’t even get anybody courtside seats. What a bad father. But that was Bernie’s way of protecting it. Let’s stop here. There’s nothing. There’s no mercy. There’s no apology or anything for Bernie here. We’re just explaining what went on and the mindset of people. So, I don’t want anyone to think that Jim Campbell wrote a book trying to explain — in the sense of having sympathy for Bernie.

CHARLES MIZRAHI: In fact, you read the book, and as I mentioned, I read it right before I went to sleep each night. Some parts were really sickening because it was so sad what happened to some of these victims who, at 70 or 80 years old, lost everything and had to go live with their children. Some committed suicide. Many people had mental health issues and physical sicknesses that nobody counted. But there were a couple of suicides attributed to Bernie losing money — stealing money…

JIM CAMPBELL: Including his son.

CHARLES MIZRAHI: Yeah, he lost everything. It’s poetic justice, right? One son dies slowly from cancer. The other hangs himself. And his wife is living out her days in a small apartment now — with nobody talking to her. He destroyed his house. So, Bernie goes ahead, and his fame starts spreading because he’s not promising 50% or 60% returns. What was he promising, Jim?

JIM CAMPBELL: Yeah, you’re right. That’s the other thing. He kept himself under the radar. And toward the end, there was 11%. I talked to victims whose accountants and advisers were saying: “Why is your money in here? You can do much better than this.” So, you’re right. Now, in the beginning years, when there was higher inflation, he was paying his big four — his co-conspirators — 30%, 40% or 50%. So, he was giving returns that looked excessive. And that was coming out of the lower returns that his core group was getting.

CHARLES MIZRAHI: Let’s be totally clear. These aren’t really returns. Bernie will tell you that they were legit at some point. But from your discovery, and I want to tell you: When I read the book … Don’t even start with how many mountains of data you had to go through to actually piece some of this stuff together and refute or prove what Bernie was saying. In many cases, he was a bold-faced liar. It was not there. When he was taking this money, and producing these types of “returns,” was any of it — from what you’ve uncovered forensically — real? Any of it?

JIM CAMPBELL: I don’t believe that it was ever real. I think he was always short on money. As you said, a Ponzi scheme means there’s no real investment activity going on. And I don’t think there was any real investment activity. I think he faked it all along — once he saw that he couldn’t tolerate any kind of losses. The forensics support that. As you know, he was trading more options than existed in the market. The prices didn’t match the days, and on and on.

CHARLES MIZRAHI: OK, so he does this through the 60s. He told you: “No. I started in 1992”?

JIM CAMPBELL: Yeah, 1992.

CHARLES MIZRAHI: OK, so that’s a lie because Bernie was doing this way back. You caught him in 13 different lies. That’s the problem with a liar. They can’t remember all of their misstatements. My mother used to say: “When you tell the truth, you never have to remember anything.” When you lie, you have to piece all this stuff together. So, in the 60s, 70s, 80s and 90s, too, by his own admission, Bernie was able to continue this game. It started to mushroom to the point where, by 2000, how much money is he supposedly managing?

JIM CAMPBELL: He scales up. Remember I mentioned A&B and 1992. That was the first feeder fund. And then, all of the sudden, the feeder funds avalanched him. And $65 billion was the final number. I don’t know exactly what it was. I know that he was at $15 billion and $16 billion at a time when that would have likely been the biggest hedge fund in the world. That would have been right after the 1992 to 1995 timeframe. And then, it exponentially grew. Remember, he was having +1% returns a month. Think about that.

CHARLES MIZRAHI: I managed money from 1986 on. I remember running into a few clients, throughout my career, who told me: “Even though your returns are been beating the S&P, I’m not going to give you money because I have a guy.” It wasn’t Bernie at the time. It was some other guy who was in real estate and guaranteeing them 10%. Or, they had something else where they were getting 8%.

CHARLES MIZRAHI: I kept saying: “Look, God has not created an instrument with no risk, seven to eight percentage points above a Treasury bill and consistent. It just doesn’t exist.” And they said: “No, it does for me.” It all blew up, eventually. But put that aside. People were willing to suspend any type of reality, put themselves in a chamber of ignorance and say: “He must be doing X.” Meanwhile, it was virtually impossible. Right?

JIM CAMPBELL: Yeah, I break it into a couple of segments. There are the big four, and they know that there’s fraud going on.

CHARLES MIZRAHI: Talk about who the big four are.

JIM CAMPBELL: Oh, sorry. The big four were his old-line big investors who bailed him out repeatedly over the years or helped provide cash to get him through — collateral that they could use for loans. These guys came to have the power to extort him. The biggest was Jeffrey Picower, who I mentioned took $7 billion out — nine times what Bernie put into the fund.

JIM CAMPBELL: I call those guys co-conspirators. Then, there’s the willfully blind — who are the hedge fund guys. They know that something’s not right, and they don’t know what it is. And then, there’s a third group that falls into: “We totally trust Bernie. We don’t know what he’s doing, but we know that he’s an honest, good guy.” The willfully blind are: “We don’t know what he’s doing, but he’s our guy. We think it’s frontrunning, but we’re not going to look, and we’re not going to ask.” So, there were different types — from guys who knew it was fraud to people who didn’t look to people who were totally suckered.

CHARLES MIZRAHI: OK, so these big four were stealing as well. They were telling people what numbers they needed to make, and they were making this spread between what they promised and what they asked Bernie. So, they offered their clients 10%, and Bernie was paying them 15%. And they would take 5% for themselves. Is that right?

JIM CAMPBELL: Of the four, one of them — Stanley Chais — was doing that. He had his own fund. But these four were only investing for themselves. Picower called and said: “This is the gain I want.” And they’d go calculate it. Then, he’d call back and say: “This is the loss I want.”

CHARLES MIZRAHI: This was only for themselves?

JIM CAMPBELL: It was only for them. Stanley Chais was also allowed to have a hedge fund where Bernie did the same thing with all the other guys. Chais had no idea what the strategy was and said: “Don’t even try to explain it to me. All I want is no losses.”

CHARLES MIZRAHI: Wow. I didn’t know those other three guys were doing it for their own money. That’s insane. That’s absolutely insane.

JIM CAMPBELL: Picard put in — at most — $200 million of his own money and got out $7 billion.

CHARLES MIZRAHI: That’s a great investment! OK, so fast forward through the years. He’s calling it some split-option strategy. If you can explain it — which I don’t want you to do at any point because the book has it in there. I’ll just explain it to people very simply. If Bernie did what he said he did, there were not enough options in circulation to accomplish what he said.

CHARLES MIZRAHI: I was mentioning to you, Jim, about Ponzi. I read a book on Charles Ponzi. He did the same thing with postage stamps back in the day. There weren’t enough postage stamps in creation to do what Ponzi was saying. So, Bernie followed the same thing. But people turned a blind eye to what was going on by trying to rationalize it. What’s the term?

JIM CAMPBELL: Off-exchange.

CHARLES MIZRAHI: So, they were willing to close their eyes because life was good. Now, I do remember that, in 2000, there was an article in Barron’s. We used to get MAR at the time — Managed Account Report. I remember they looked it up, and they used to write about every hedge fund. Bernie wasn’t even a hedge fund. He flew under the radar, right?

JIM CAMPBELL: He wasn’t even registered.

CHARLES MIZRAHI: He wasn’t registered. Then, the SCC is tipped off to this. Barron’s writes a whole article that says the returns are too good to be true. I think there are 20 or 30 points in that article or something?

JIM CAMPBELL: You’re right. It was too good to be true — and only positive returns. The 30 red flags is Harry Markopolos — a whistleblower.

CHARLES MIZRAHI: So, a whistleblower comes and looks at him. And by the way, folks, I want you to realize: If you’re in the money management business, you are losing money in terms of assets coming into your house instead of Bernie’s house. You are losing money because you can’t beat Bernie’s returns. Why would someone risk 15% types of returns with you, which you may or may not get — because you’re honest, and markets go up and down — when Bernie is guaranteeing you “X.” So, what people — like Harry Markopolos — did was try to recreate this?

JIM CAMPBELL: Yeah, he tried to reengineer it. And by the way, it only took him about two hours to figure out that the returns couldn’t be true and that: A: His own strategy couldn’t deliver what he said. And B: It couldn’t have worked anyway because there were no losses. It only took him two hours. I actually have a screenshot of the spreadsheet in the book.

CHARLES MIZRAHI: Now, the other co-conspirators have to be, as you point out, government regulators. The SEC knew about this. The Boston office knew about this. Because of the politics between New York and Boston — and a whole bunch of other crap that goes on — Bernie still gets to wiggle out for another eight years and take in billions of dollars while destroying more people.

JIM CAMPBELL: Yes. And also, he brilliantly exploited the SEC silos. What do I mean by that? He didn’t register as an investment adviser. Investment advisory examination teams are separate to broker-dealers. So, the bad stuff was on the 17th floor — needed an investment advisory team. They never came because they didn’t think he had one. And the broker-dealer guys were clueless about how to uncover a Ponzi scheme.

JIM CAMPBELL: It was a brilliant exploitation. Harry will tell you: In his mind, the most brilliant thing was that he didn’t let anybody in the firm talk to the examiners but himself. He locked them in a room, and he was the only interface. He fed them what he wanted. He gave them fake reports. And if you look at the silos and controlled dialogue, he ran circles around the SEC.

CHARLES MIZRAHI: Add one more point in there — which is understood. His celebrity — who he was as a person. If you brought up a claim against Bernie Madoff, and you were a junior examiner, your career was over.

JIM CAMPBELL: And not only that, he intimidated the hell out of them. Most of these examiners were young guys out of law school. They didn’t understand the market to begin with, and he would intimidate them — right to their faces. They’d be shaking sometimes. And they wouldn’t ask the questions. If they did try to ask, their management — the SEC — said: “No, you can’t go out and do that. You’re going to piss people off.”

CHARLES MIZRAHI: OK, so now, it’s on the front page of Barron’s. Harry Markopolos tells the SEC. Word gets around Wall Street pretty quickly, and it still goes on. Why?

JIM CAMPBELL: Good question. First off, the SEC repudiated Markopoulos. At first, they thought he was running a hedge fund that competed with Bernie’s. So, they said: “This is sour grapes.” It’s just like you said. You can’t compete against them. The second thing was that they didn’t understand a word he was saying — especially back then. Harry was not able to dumb himself down to explain it. They had no clue what he was talking about. Part of it was Harry’s fault — which he admits now. He’s very humble about it.

JIM CAMPBELL: Then, they send these guys in. And they keep examining the same thing — even after they cleared him. That’s how they got away with it. They kept looking for front running. Obviously, there was no front running because Bernie wasn’t trading through his own market maker. Hell, he wasn’t even trading for real!

CHARLES MIZRAHI: They were looking for something that would happen in a real world — real trading. And he never did it. Therefore, they’d never find it.

JIM CAMPBELL: He loved it. They were chasing the wrong rabbit all the time. He’d say: “Go ahead. Look at that business. You can trace every trade there. It’s totally legitimate.” And by the way, as I always say that, he gave the SEC the account number of the depository trust — which is the clearing and settlement entity. And all 500,000 trades a year of the market making could be matched.

JIM CAMPBELL: He gave them that number and said: “Just ask for my subaccount — an investment advisory. You’ll see everything is traceable.” And he told me: “Jim, I gave them that on a Friday night. I expect it to be in handcuffs by Sunday.” The SEC never made the phone call and never asked. There was never a subaccount for the investment advisory business. Forget trades. There was never even an account there.

CHARLES MIZRAHI: All they had to do was make one phone call.

JIM CAMPBELL: One phone call.

CHARLES MIZRAHI: Forget about the regulators for a minute. What about the rest of Wall Street? What about the guys who should have known better — the JPMorgan’s and Goldman Sachs’? Those companies knew what was going on but closed their eyes to it. Or, were they totally blind?

JIM CAMPBELL: Again, I would divide it up. JPMorgan was his bank. That meant that it was the only entity that could actually look into his finances. The hedge fund guys didn’t have access. They could have looked into his account — which, by the way, Bernie told me that it never had more than $5.9 billion in it.

JIM CAMPBELL: All JPMorgan would have had to do was say: OK, this is an equity fund. We’re going to find counterparties in here, and we’re going to find dividends. Because you can’t trade without counterparties. So, that would have also been a five-minute look. There was never a payment to a counterparty — ever. There should have been $4 billion of dividends over those years, and there was $1 of dividends. So, JPMorgan is a different animal. It had no excuse.

JIM CAMPBELL: Now, take Goldman Sachs and Merrill Lynch. Both firms reached the point where they forbade their employees from doing business with Bernie. So, they knew something was up, and they didn’t report him. That, to me, is not good. And then, of course, you’ve got the feeder funds all over Wall Street who didn’t do due diligence. And in some cases, they weren’t even telling their clients that their money was with Bernie. They didn’t find out until after they’d lost it.

CHARLES MIZRAHI: So, you have the complicity of Wall Street. Your figures and averages. Forget about the feeder funds. The feeder funds are at least putting on a masquerade. We have due diligence. They have a nice office, and they don’t tell you that they’re investing with Bernie. So, it’s a shock. You have no idea. Whatever. You’re not asking. You trust their due diligence. They have a whole team of PhDs and smart people doing it.

CHARLES MIZRAHI: The average person, who’s getting into this fund because a friend of a friend let them in, is saying: “My gosh, if there’s really smoke here… Come on. You’re telling me that all these people on Wall Street are being duped? Impossible. The guy’s been doing it for forty-something years.” So, you’re lulled into complacency. And at the end of the day, the government drops the ball tremendously. So, you have a confluence of events. You think: “How did anyone invest with him?” How could you not invest with him?

JIM CAMPBELL: It looked like it was a no-lose deal, and you’re right. If you think about it, the SEC actually gave him five seals of government approval. You’re an average investor. The SEC is invested in this guy — investigated and cleared him. What should I have to worry about?

CHARLES MIZRAHI: Right. They had allegations. They went and investigated. Let me clarify. Folks, you don’t really get a seal of approval from the SEC.

JIM CAMPBELL: It’s how he marketed it. He turned around and said that.

CHARLES MIZRAHI: That’s illegal to do. It’s one of the things you can’t do. You can never say: “I was examined by the SEC, and therefore, it gave me its seal of approval.” No, you didn’t get anything marked against you. But that is nothing. So, when you look at this whole package, you can understand how people were sucked in — in a huge way — for such a long period of time.

CHARLES MIZRAHI: OK, now the blank hits the fan in December 2008. It makes front page news throughout the world. Tens of thousands of people are involved — on almost every continent. I don’t know if there was anyone on Antarctica. But there probably would have been a feeder fund if the weather was good. It shook everything. Those who thought they knew said: “Look, I knew but didn’t say.” Those who should have known said: “He cornered us — blindsided like the SEC.”

CHARLES MIZRAHI: Those who were wiped out — the tens of thousands of teachers and retired people…

CHARLES MIZRAHI: Folks, these were people who their husbands or wives died, and on a friend’s advice, gave the money to Bernie. Bernie looked you in the eye, shook your hand and said: “Don’t worry. I’ll take care of you.”

JIM CAMPBELL: It’s exactly what he did. To the woman from Chappaqua — whose statement is the one that I show to people when I do presentations — Bernie said: “You have never met me. If you’re uncomfortable, I’m going to give you your money back right here in my office.” And she said: “No, no.” He puts his arms around her and says: “You no longer have to worry about anything.”

CHARLES MIZRAHI: Elie Wiesel was the famous Holocaust survivor who went throughout the world. I remember an interview with him. He lost $7 million or $8 million of Elie Wiesel’s money. This was money given to Wiesel — or Wiesel set up as a foundation for Holocaust remembrance. And Bernie takes that money knowing it’s a Ponzi scheme. I shouldn’t even be laughing. It’s so preposterous the kind of evil this man did.

CHARLES MIZRAHI: He takes that money and loses it all. And Elie Wiesel, who is always trying to find good humanity — after going through the Holocaust and Auschwitz — says: “He is evil. He personifies evil to take that kind of money.”

CHARLES MIZRAHI: Bernie wipes these people out. Now, the second time they got victimized — as you put in the book so heart-wrenchingly — was the perceived government and federal protection of their money. I want you to talk about that.

JIM CAMPBELL: Yeah, I’m glad you asked that. That’s, to me, the unheralded scandal. It really hasn’t gotten a lot of exposure. SIPC is the Securities Investor Protection Corp. It is the equivalent of the FDIC — although the FINRA and SIPC try to deny that they’re exactly the same. The only difference is that they say they don’t make up recoveries for market losses, which is obvious.

JIM CAMPBELL: But in any event, the FDIC was formed during The New Deal, and it has honored and paid off every single legitimate claim. And it hasn’t cost the government $1 because the banks pay risk-based premiums. SIPC comes in. It was born 16 years before by the GAO — that you are inadequately capitalized and unprepared for a major Wall Street broker-dealer failure.

CHARLES MIZRAHI: Who is the GAO?

JIM CAMPBELL: The Government Accountability Office. It does the independent investigations for Congress. It put SIPC on notice — at least through Congress. So, before Bernie’s Ponzi scheme collapsed, the premiums that the firms were paying them — whether you were Goldman Sachs or a one-man guy clearing through Bear Stearns — was $150 a year. Merrill Lynch and Goldman are paying $150 a year into the protection fund of SIPC. And there was a total of $1.06 billion in SIPC. Their losses on their statements were $65 billion.

JIM CAMPBELL: So, what does SIPC do? You’re an investor. It says on every statement that they will come in if you’re a victim of fraud. Right? Well, they say: “We don’t recognize Ponzi schemes. We don’t recognize final statements of Ponzi schemes.” So, imagine this: The message is your statement at the end of the month might not be real money. It might not be recognized — which, to me, is totally absurd.

JIM CAMPBELL: So, how did they get $14 billion back out of the $18 billion that was the original investment? Well, $10 billion of it came from Bernie’s big four. And Bernie put the pressure on Picower to get $7 billion back. The rest came, believe it or not, from a subset of Madoff victims who had money clawed back that went to another subset of Madoff … SIPC sidestepped any responsibility.

CHARLES MIZRAHI: Let me stop here and put this back into English because it’s amazing. It’s amazing what I read in your book. I couldn’t believe what I was reading. SIPC was like the FDIC, folks. Your bank fails. They pay X amount of dollars for the money on deposits. SIPC is the same thing for brokerage firms — for fraud. So, this way, it makes you feel comfortable putting your money with Schwab, TD or whatever it might be.

CHARLES MIZRAHI: Now, Jim was mentioning that the SIPC — the premiums — because the banks pay premiums to the FDIC to create this fund. With SIPC, the premiums are paid by the investment banks — the investment houses. And they paid $150 — not a percentage of assets or client segregated funds, but $150. A different story. A different conversation. Let’s move on.

CHARLES MIZRAHI: SIPC fails to pay these people back a penny. What did they do? A trustee was assigned to it — whose name was Irving Picard. That’s a tragedy in and of itself. What happens here is Bernie actually helps SIPC because it wants to pad its own funds. It doesn’t have enough money.

CHARLES MIZRAHI: He goes and rats on Picower, and these other guys are making so much money and give back into that. So, you mentioned $15 billion, but $10 billion comes from the discovery, on Bernie’s behalf, of the $7 million. And then, [there’s] another $3 million. Picard goes out there and claws back — which means going back to the victims of Bernie’s Ponzi scheme and saying: “You took out money in 2002. Those profits weren’t really profits.” When you took out $100,000 dollars, you put it into your house. Or, you bought yourself a boat. [He says]: “We want that money back today.”

JIM CAMPBELL: Not only do we want that money back today, but you might not even have that money anymore. You could have spent it. These were Madoff victims who took out more than they put in. And they were the ones who were susceptible. If I had left my money in, and hadn’t taken it out, I’m eligible to get money from the Madoff guys who took the money out. And that’s how they sidestepped SIPC itself having to pay for it. Picard’s law firm, by the way, has earned $2 billion in fees and expenses out of that $14 billion. That’s a pretty good spread on Wall Street in and of itself.

CHARLES MIZRAHI: He was going out, banging old people in the head and threatening them with letters, visits and calls. Imagine for a second, folks, you’re a 75-year-old retiree. Your whole life — your money was with Bernie. You took out $50,000 three or four years ago. You happen to be considered a net-gainer — net profit. They went and clawed you back — meaning that 75-years-old guy — and you didn’t have the money. What did you do? You lost the money that you had with Bernie because it was never real. And [you lost] the $50,000 you took out. It was disastrous! It was the second victimization of these poor people.

JIM CAMPBELL: Yes. And he threatened liens on their houses. Some of these people had to rent out floors to survive. He went after IRAs — which were the only assets that these folks had left and weren’t supposed to be tough. He played hardball. And he played against the feeder funds. He did a tremendous job. They’re building cases there. In places where it was excessive like that, you’re right. He was victimizing victims again.

CHARLES MIZRAHI: It’s absolutely astounding. OK, so here we are 12.5 years from when the Ponzi scheme was discovered. Many lives have been shattered. What has Wall Street learned from this?

JIM CAMPBELL: What has Wall Street learned from this? I would ask what the regulatory bodies have learned from this. If there isn’t some learning backed up by changes in regulations or culture — it’s even more important on Wall Street in my mind — then they tend to make the same mistakes over and over. Right now, we’re seeing what I call Robinhood and Archegos — the family offices and hedge funds. You see all these things that are obviously still around and will likely blow up.

JIM CAMPBELL: I would say that I’m more oriented toward what has to change than what has changed. I’m very skeptical of the whole thing. I don’t think there’ll be another Bernie. I do think there’s a lot of offshore money that’s sitting out there and could cause problems — and could blow up as well.

CHARLES MIZRAHI: I might have caught you off guard a bit. But why I said: “What did Wall Street learn?” was because I don’t expect much from the regulators. I really don’t. We both know. We’ve been in the industry for a long while. If the regulators were good, they’d be in private industry. They wouldn’t be serving the public. Many of them are good civil servants, but they use it as a stepping stone to get into the private sector. That’s fine. I don’t besmirch them. I don’t think that’s a bad thing. God bless you. It’s done in government all the time. And I have no problem with it.

CHARLES MIZRAHI: But Wall Street should have known better. For example, JPMorgan, who was his banker. The so-called helpers of Wall Street — anyone getting commission or making money. It was an open secret that Bernie was doing something crafty. This happened when I was 36 — in 2000 or so. I remember reading and saying: “It’s impossible to get these types of returns. You just can’t get them. Markets don’t go straight up, and they don’t flatline forever. You can’t keep making money. That’s called a Treasury bill. Anyone who thinks they’re getting that is really deceiving themselves. Or, on the other hand, it’s fraud. You just can’t do it.”

CHARLES MIZRAHI: Right off the bat, if I could pick this up in my little hole in the ground, these big banks — and the rest of Wall Street — should have blown the whistle. But no one did because I think the fees were just too good.

JIM CAMPBELL: You talk about JPMorgan. JPMorgan had entities within the bank and saw that something wasn’t right. The U.K. actually finally turned them in over there. So, even within the bank, it’s awfully hard for them to claim that they didn’t know.

CHARLES MIZRAHI: Bernie was doing something. Someone called it out in New York. And someone says: “No. He brings in too many fees for us. The fees are too great.” I think there was something there with one of the JPMorgan bankers. There was a note or email that said: “Leave it alone because the fees are good.” Is that right?

JIM CAMPBELL: There was another completely illegal fraud that Madoff perpetrated — unrelated — where he ran a check kiting scheme against the banks with one of his big four. And again, some management at JPMorgan knew it. But Norm Levy was the No. 2 big four guy. And Bernie, of course, was the Ponzi guy. They said: “Yeah, leave it alone.”

JIM CAMPBELL: Now, when I talked to JPMorgan folks off the record, they denied that they’d looked the other way in the check kiting scheme. But believe me, it went on for a long time. They were doing $90 million a day of kiting. For those who don’t know, kiting is taking advantage of a flow between when a deposit is made and when it’s actually credited in your account.

CHARLES MIZRAHI: Right. It’s that couple-day spread. They’re making that interest. It’s small, but on millions and millions of dollars it adds up to a lot of money for doing nothing. They’re stealing.

JIM CAMPBELL: There’s another story like that at JPMorgan where they find out that he has a one-man auditor in New City — in a strip mall. One of the future chief operating officers says: “Somebody should call that to find out if it’s a car wash or something.” And I said to myself: “Yeah, it was actually a money laundromat, but nobody called it.” There were all these red flags.

CHARLES MIZRAHI: OK. As we conclude here, how could the average investor listening to this feel good? How can I feel good that my money is in Schwab? I have no faith anymore in SIPC. I’m trusting that the numbers that Schwab says are on my statement are actually on my statement. It’s the same way with E*TRADE, Chase or any other brokerage firm. How do I sleep better at night?

JIM CAMPBELL: The only way I think you can sleep better at night is to put your money into the low-cost index fund, and watch it grow. I say take the 9% and sleep — versus any of these other things. We should say, too, that I don’t believe the major Wall Street firms are perpetrating any fraud on your statements and things like that. Even though they don’t have independent custodians, you can trust that they’re not doing anything.

JIM CAMPBELL: Now, if something happens and SIPC comes in, I can’t vouch for what SIPC will do to recognize your statements or not. The Hippocratic Oath needs to apply to the investment community. You need to take responsibility and do no harm to your own money, too. If somebody tells you about an investment that you don’t understand, but it’s guaranteed, you’ve got to walk away from it. If you can’t figure it out in two seconds…

JIM CAMPBELL: If somebody like your dentist is telling you about it, walk out of his office. Don’t do things that don’t make sense. People want to believe this stuff, Charles. They want to be able to say: “I’ve got this inside thing, and it’s great. It’s the best thing since sliced bread.” You’re taking advantage of people’s natural wanting to believe that it’s too good to be true.

CHARLES MIZRAHI: Right. And one more thing: I think that’s well said, Jim. I think there’s one thing — being around this business for a long while. It’s not as complicated as you might think it is. If something is really complicated, hold on to your wallet and run. The way to make money is pretty simple. Buy stocks that are going up. Buy sound companies, and hold them for the long term.

CHARLES MIZRAHI: Any time you get away from that — with guarantees, arcane types of spreads, options strategies, forex and Bitcoin — watch out because there’s no net below that. God has not created something where you can make a boatload of money without risking for long periods of time and call it legal. It does not exist.

JIM CAMPBELL: It does not exist. And the whole point of an interest rate that’s higher than the T-bill is because there is a risk factor.

CHARLES MIZRAHI: Right, correct. If the T-bills are paying 2% per year over 10 years … which they’re not. They’re paying 1.5% or so. If someone’s offering you 6%, 8% or 10%, you have to ask: “Why did the heavens part?” and “I’m the luckiest person out of more than seven billion people because I’m getting 8.5% more than a Treasury bill by taking no risk.” And the answer is: It’s too good to be true. It is. There is no Santa Claus or Easter Bunny. I’m sorry to say it.

JIM CAMPBELL: I have been stunned by how few people understand what their money is invested in. I could never find a Madoff victim that could explain to me what the strategy was. I couldn’t find Madoff people on the 19th floor who understood what it was. It’s conceptually simple. It should have mirrored the market. By the way, by definition, it can’t always go up.

CHARLES MIZRAHI: Jim, by definition, you can’t outperform the market. He was outperforming the market. So, owning the market, you can’t outperform it. The average is the average for a reason. That’s what you’re getting. You can’t get better than the average if you’re investing in the average. But so be it. Jim, I want to tell you: I really enjoyed your book. And the points where I got really sick about it — and I say this as a compliment — were when I’d look at it and say: “My gosh. So many people were sucked into this. It’s a real tragedy.”

CHARLES MIZRAHI: At the end of the day, Bernie got his due. His family, unfortunately, who you wrote about in the book … you went through several chapters.

CHARLES MIZRAHI: And you went through each chapter. In chapter seven, eight and nine, you laid out a case like a lawyer. This is it. They had no idea what was happening. And folks, read the book. Don’t say Jim doesn’t know what he’s talking about. Read the book. He lays it all out there. He lets you know what happened, who knew what and why they could not have known. Bernie was a genius in that sense.

CHARLES MIZRAHI: The name of the book is Madoff Talks. Jim, I want to thank you so much. I think you did the investing community a great service by spending years of your life looking through every nook and cranny. You didn’t do this as academic research. You did it as a warning shot.

JIM CAMPBELL: I want to thank you for saying that, too, because I’m not anti-Wall Street. I’m not trying to destroy Wall Street. I also want to say another thing, Charles. You came from modest circumstances out of Brooklyn, right? You can be a big success on Wall Street by being honest, playing it straight and admitting when The Street does things that aren’t good. You’re a walking example of the good that does exist on Wall Street.

CHARLES MIZRAHI: I greatly appreciate that. I really do. Everyone, Jim Campbell. Go on, and get the book: Madoff Talks. He takes a lot of financial jargon and puts it into really palpable terms. And if you don’t like those chapters, skip over them. You don’t need them. You know what I also like, Jim?

CHARLES MIZRAHI: Before I let you go — and I don’t want to keep letting you go because I could speak to you for hours. I find this so amazing: Each chapter is a self-contained book. Each one is its own article. You’re getting different glimpses of Bernie during the whole process. I found that I didn’t have to know what went on before to read chapter seven. I didn’t have to know what went on in chapter three. I did read the whole book. How many years did this take you?

JIM CAMPBELL: That’s a great point, too, by the way. And it’s one of the reasons that Netflix is interested in doing a documentary. The chapters are kind of standalone stories — which fits a series like that. And it would get much broader exposure to the whole story than reading a book. I first talked to Bernie in 2011 — 10 years before the book came out.

CHARLES MIZRAHI: Well, there’s talk. I heard that, in Hollywood, Brad Pitt is looking to play Jim Campbell. That’s just what they say. I see the resemblance. Jim, thanks so much. God bless you. And keep doing some great stuff.

JIM CAMPBELL: All right. Thank you for the interest and all the time you put into this.

CHARLES MIZRAHI: Great, man. Thanks.

JIM CAMPBELL: Take care!

CHARLES MIZRAHI: Thanks for listening to this episode of The Charles Mizrahi Show. If you’re a new listener, welcome! If you’ve been listening for a while, we’re glad to have you back. Either way, we’d love to know what you think of the show. Please leave a review if you listen on Apple Podcasts. Reviews make it easier for others to find the show. You can also see the video of the interview on The Charles Mizrahi Show channel on YouTube.