The Madoff Tapes

One evening, my home phone rang. “You have a collect call from Bernard Madoff, an inmate at a federal prison,” a recording announced.

Photo: Louis Lanzano/AP/Shutterstock
Photo: Louis Lanzano/AP/Shutterstock

Bernard L. Madoff is in therapy. Each week, he waits for the signal that prisoners are allowed to leave their housing units, then he walks the five minutes from his “room,” as he calls it, to the psychiatric unit at the Federal Correctional Institution in Butner, North Carolina, where he can unburden himself. The sessions are often teary.

“How could I have done this?” he asks. “I was making a lot of money. I didn’t need the money. [Am I] a flawed character?”

In some ways, Madoff has not tried to evade blame. He has made a full confession, telling me again and again that nothing justifies what he did. And yet, for Madoff, that doesn’t settle the matter. He feels misunderstood. He can’t bear the thought that people think he’s evil. “I’m not the kind of person I’m being portrayed as,” he told me.

And so, sitting alone with his therapist, in the prison khakis he irons himself, he seeks reassurance. “Everybody on the outside kept claiming I was a sociopath,” Madoff told her one day. “I asked her, ‘Am I a sociopath?’ ” He waited expectantly, his eyelids squeezing open and shut, that famous tic. “She said, ‘You’re absolutely not a sociopath. You have morals. You have remorse.’ ” Madoff paused as he related this. His voice settled. He said to me, “I am a good person.”

There aren’t many who would agree. For most of the world, Bernie Madoff is a monster; he betrayed thousands of investors, bankrupted charities and hedge funds. On paper, his Ponzi scheme lost nearly $65 billion; the effects spread across five continents. And he brought down his own family with him, a more intimate kind of betrayal.

Madoff, 72, is in prison with a sentence of 150 years, which seems more than just, given the enormity of his crime. Though the financial damage continues, prison seemed to conclude Madoff’s part of the story. Then, on the second anniversary of Madoff’s arrest, his son Mark, age 46, slipped a vacuum-cleaner cord over a pipe on the living-room ceiling of his Soho loft and tried to hang himself. When it broke, he tried again with a dog’s leash, and succeeded. This was the kind of cosmic retribution that might have been exacted in the House of Atreus, the suicide an accusation of a vast betrayal. It seemed a death designed to hurt the living—even a monster’s conscience must be moved by such a demonstration. After all, before he was exposed as a fraud, Madoff had been a family man.

After Mark’s suicide, I became interested in this most tragic of families and the elemental forces that had torn them apart. And so I began calling everyone connected to the business and the family. Soon a picture began to emerge. Madoff’s youngest son, Andrew, harder-edged and less prone to self-doubt than his brother, had been protected by his anger at his father’s betrayal. Mark’s rage consumed and overran him. Neither would speak to their father, even if their lawyers had permitted it. Their mother, Ruth, had to choose between her husband and her sons. She had chosen her husband of five decades—though after Mark’s suicide, she too no longer speaks to Madoff. After the death, Ruth rushed from her apartment in Florida—but wasn’t at the memorial service at his widow’s house. Most of the family didn’t want her there. Mark’s widow still won’t let her visit Mark’s two young children. Andrew, who hasn’t spoken to his father since December 10, 2008, the day Madoff confessed, is still largely estranged from his mother and distant from his brother’s widow, Stephanie. As he tells friends, his rage at his father, far from dissipating, has metastasized. To friends, he’d described his father as a bully and a gifted manipulator. Madoff was a family man, yes, but to Andrew, that was yet another manifestation of his narcissism. The family served the needs of Bernard L. Madoff.

And so I was left where I’d started: with the black hole at the center of this exploding galaxy, its destructive waves still radiating outward. I tried to reach Madoff multiple times. But the Bureau of Prisons intercepted and returned my letters. Requests through his lawyer were met with polite refusal.

Eventually I came across an unusual inmate named Robert Rosso, who is serving a life sentence for a drug offense and is one of Madoff’s new friends. In recent years, he’d turned writer—he’d even interviewed Madoff himself. As a favor, he agreed to pass Madoff a letter from me.

Then one evening a few weeks ago, my home phone rang. “You have a collect call from Bernard Madoff, an inmate at a federal prison,” a recorded message announced. Out of nowhere, there was that accent, familiar to anyone who’s visited Queens. Madoff apologized for calling collect. “I don’t have that much money in my commissary account,” he told me, before starting on a remarkable conversation that would stretch to several hours in more than a dozen phone calls. This being Bernie Madoff, in dollar terms the greatest criminal in history, I didn’t know what to believe. But I listened.

Butner is good for Madoff, “as good a place as I could possibly be,” he said. Other inmates respect him. “My notoriety impresses them. It shouldn’t, but it does.”

Harder for him is what is happening in the outside world. He reads the newspapers, following his case. “What’s most upsetting is the way the media blasted my wife and family,” he said. Also, he insisted, he had been mischaracterized. He wanted to clarify his criminality, to separate it from what he saw as his legitimate career. “We made a very nice living,” he said. “I didn’t need the investment-advisory business. I took it on and got myself involved in it, but if you think I woke up one morning and said, ‘Well, listen, I need to be able to buy a boat and a plane, and this is what I’m going to do,’ that’s wrong. I had more than enough money to support my lifestyle and my family’s lifestyle. I allowed myself to be talked into something, and that’s my fault. I thought I could extricate myself after a short period of time. But I just couldn’t.

“Does anybody want to hear that I had a successful business and did all these wonderful things for the industry?” he continued. “And got all these awards? And so did my family? I did all of this during the legitimate years. No. You don’t read any of that.”

This kind of moral parsing was not going to make anyone happy.

“No one is going to feel sympathetic for Bernie Madoff,” I said.

“I agree,” he said with a swallowed laugh.

The current chapter in Bernard L. Madoff’s story began on the morning of December 11, 2010, when the prison chaplain came to his cell at Butner to tell him about Mark’s suicide. “Ruth called the chaplain, and the chaplain came in to get me,” Madoff said. “As soon as the chaplain came to get me, I knew something happened. That’s how they notify you when someone dies. Ruth was hysterical. The chaplain was in tears speaking to Ruth.”

I asked him what Ruth thought. Ruth was in the middle, the monster’s only ally. “She’s angry at me,” Madoff says. “She tries not to be, but it’s hard not to be. I mean, you know, I destroyed our family.”

RuthPhoto: Rex USA

The pain that Madoff visited upon those closest to him has certain echoes in his own background, part of what drove him to succeed. “I had a father who was very successful in business,” he told me, a sporting-goods-manufacturing business. “He invented the punching-bag stand,” Madoff said. “The Joe Palooka punching-bag stand.” But the business failed when Madoff was in college. “You watch that happen,” said Madoff, “you see a father whom you idolize all of a sudden lose everything, and you’re frightened about something like that happening.”

His father’s collapse also affected Madoff in an immediate and practical way. He headed to Wall Street without the pedigree, connections, or capital that ease a young man’s way. “Of course my father was not in a position to offer me that,” Madoff told me. To the young Bernie Madoff, Wall Street was an exclusive club that barred the door against the likes of him. “I was upset with the whole idea of not being in the club. I was this little Jewish guy from Brooklyn,” he said.

From the beginning, Madoff, who’d moved to Queens at age 7, had a chip on his shoulder, along with a certain contempt for the industry he’d chosen. “It was always a business where you had to have an edge, and the little guy never got a break. The institutions controlled everything,” he said in a voice surprisingly thick with emotion. “I realized from a very early stage that the market is a whole rigged job. There’s no chance that investors have in this market.”

In 1960, borrowing office space from Ruth’s father’s accounting firm and investing his savings—a meager $500, he told me—he launched Bernard L. Madoff Investment Securities. “The SEC had never even heard of anybody going into business with $500,” he explained. “They had to have a special interview with me to make sure I wasn’t out of my mind.” At first, Madoff ground out a modest but steady income on the scraps of business tossed his way by Goldman Sachs and Bear Stearns, action that was too much trouble and too little profit for them. “I was perfectly happy to take the crumbs,” he said. Madoff was a market-maker, a middleman between those who wanted to buy and sell small quantities of mostly bonds—odd lots. “It was a riskless business,” he said. “You made the spread,” buying at one price and selling at a higher one, and in those days the spreads could be substantial, 50 or 75 cents or even a dollar a share. Madoff increased his profits by trading on the side. “And I had my niche.” By most accounts, Madoff had a trader’s instinctive understanding of the market. He was an “unbelievable trader,” said a person who watched him in the eighties.

Madoff wanted to grow his trading business, and a good way to do that was to expand his market-making business. But that meant going up against the New York Stock Exchange, the heart of the club. At the NYSE, a few firms controlled market-making, executing most large trades while getting rich on the spread. Madoff was one of the first to see that technology could match buyers and sellers more efficiently and cheaply than a human trader shouting orders amid a blizzard of paper on the floor of the exchange. By 1970, Madoff had hired his brother, Peter, who proved gifted at designing trading technology, and soon Madoff’s automated-trading systems began siphoning trading volume, and profits, from the NYSE. “They offered us all sorts of deals,” said Madoff, but he didn’t bite. Dick Grasso, head of the exchange for eight years, paid Madoff a backhanded compliment by calling him his “arch-nemesis.”

By the late eighties, Madoff was getting rich as a market-maker. “I was making at one point over $100 million a year,” he told me. As his innovations spread to the mainstream, Madoff attracted some of Wall Street’s most prestigious firms, including Goldman Sachs, Merrill Lynch, Morgan Stanley, and Smith Barney, all of which went into business with him.

The story Madoff told me is that he became a criminal near the peak of his legitimate success. He’d always continued to trade with other people’s money, an activity that eventually fell under a separate investment-advisory business. His largest clients had invested with him for decades, records later showed. In the early days, Madoff mostly employed technical and fairly low-risk arbitrage techniques built around his market-making business. “I always had a good feel for the direction of the market because of the order flow I was seeing,” he said. In the eighties, he said, he produced consistent returns of 15 to 20 percent, and he insists he did it legally. (The trustee representing Madoff victims says he can’t find records that Madoff ever traded, though the records are incomplete.) By the late eighties, he had, he estimates, $3 billion to $4 billion under management.

After the crash of 1987, Madoff’s investment-advisory business had an early scare. The panic set in gradually. Some of his big clients got spooked, Madoff told me, leaving him to unwind long-term hedges on unfavorable terms, which depleted his capital—“they betrayed me,” Madoff said. And his stalwart old trading strategy, built on arbitrage, no longer worked as effectively as it had—for one thing, spreads were narrowing, in part as a result of the technology he’d helped introduce. He’d come up with a new trading strategy based on index options. But the new strategy needed volatility to work, and in the early nineties, the recession had settled in. “The market went to sleep,” said Madoff. He had too much of other people’s money and not enough to invest in.

That is when, he says, the scheme began in earnest. Madoff started borrowing from his investors’ capital to pay out those solid returns. The returns, false though they were, were their own advertisement. New money started pouring in, saving him in the near term. And this was a different sort of money, the kind that came from bankers who wouldn’t have given Madoff the time of day earlier in his career. “The chairman of Banco Santander came down to see me, the chairman of Credit Suisse came down, chairman of UBS came down; I had all of these major banks. You know, Safra coming down and entertaining me and trying [to invest with Madoff]. It is a head trip. [Those people] sitting there, telling you, ‘You can do this.’ It feeds your ego. All of a sudden, these banks which wouldn’t give you the time of day, they’re willing to give you a billion dollars,” he explained. “It wasn’t like I needed the money. It was just that I thought it was a temporary thing, and all of a sudden, everybody is throwing billions of dollars at you. Saying, ‘Listen, if you can do this stuff for us, we’ll be your clients forever.’ ”

So Madoff took the money. While he waited for the market to wake up, he parked their billions in treasuries earning 2 percent a year, while generating statements that maintained they were earning about 15 percent—fantastic money in a slow market. He couldn’t bring himself to tell them that he had failed. “I was too afraid,” he said.

But Madoff distributes the guilt. “Look,” he said, “these banks and these funds had to know there were problems.” Madoff told them absolutely nothing about how he made those returns. “I wouldn’t give them any facts, like how much volume I was doing. I was not willing to have them come up and do the due diligence that they wanted. I absolutely refused to do it. I said, ‘You don’t like it, take your money out,’ which of course they never did.”

And as Madoff sees it, as everyone seemed to be getting rich, he was the one who was secretly suffering. “It was a nightmare for me. It was only a nightmare for me. It’s horrible. When I say nightmare, imagine carrying this secret,” he said. “Look, imagine going home every night not being able to tell your wife, living with this ax over your head, not telling your sons, my brother, seeing them every day in the business and not being able to confide in them.

“Look,” he said, “even the regulators felt sorry for me … The first day I came in here, they said, ‘How did you live with this? Not being able to tell anybody?’ ”

By 2000, as spreads and profits were squeezed in the market-making business, Madoff had a chance to sell for $1 billion or more. But he refused. “As far as my sons and brother and my wife were concerned, they thought I was nuts for not selling out,” he told me. His family was “livid,” and he didn’t dare explain it to them. “I couldn’t at that time, because it would have uncovered this other problem I had.”

Madoff’s lies to his family are perhaps the most stunning aspect of his criminal enterprise. The intimacy of that deception, the difficulty of keeping such a secret at the core of a close family, has led some to suggest that the family must have been complicit, but no one has found any evidence that they knew about the scheme. All of the Madoffs believed that they were the happiest of families. Even Madoff believed this, the ultimate compartmentalization. Ruth, whom he’d begun to date when she was 13, was Madoff’s constant golf and dinner companion; his brother, Peter, one of his regular ski buddies. And his two sons didn’t seem to want to let him out of their sight; they were happy to spend summers with their parents at the family place in Montauk. As Andrew wrote in his high-school yearbook: “mom, dad—ur the best.”

Except for Bernie’s secret life, the Madoffs were just like many other affluent Jewish families in their hometown of Roslyn, Long Island. In the early days, Madoff worked long hours building his business in the city, but even when absent, he was the core around which the Madoffs orbited. Ruth, lively, social, pretty, unassuming, took care of the family’s social and emotional life.

But it was business that kept the boys on the edge of their seats. They sat raptly at the dinner table listening to their father’s adventures taking on the powers of Wall Street. And wherever they went, they heard of his mastery—strangers lavished on them tales of their father’s genius. Their father was a Wall Street player, a wizard, a man who’d made a lot of people a lot of money. At the time, these were reasons to follow in his footsteps. In fact, neither of the boys seemed to ever experience a rebellious impulse—“Mark wouldn’t wear pink,” said a friend from high school—and neither considered any employer besides BLMIS. In that high-school-yearbook entry, Andrew wrote, “Mark—future partner MADF,” and continued, “u’ll all see—I’m the 1.”

AndrewPhoto: GI/BM/Getty Images

Andrew, younger by two years, was the more intellectual—“a step up over Mark or myself,” said a friend of Mark’s—but more difficult to read. “Thornier,” said a friend. He was a numbers guy, and he jumped onto the trading desk, which he found as exciting a place as he’d ever been. Mark was the easy one. Easy on the eyes, to start with. “The best-looking kid in high school,” said a friend. If Andrew seemed to never speak before reflecting, Mark was gregarious, a hugger, a pleaser, and, said a friend, “a mama’s boy … in a good way.” Both boys adored their mother. But with Mark, the attachment was more obvious. “He was incredibly close to Ruth for years,” said the friend.

The boys, as they’d be called well into middle age, joined the Madoff business straight out of college, and within a decade, they and their uncle Peter were building it into an unlikely Wall Street powerhouse—except for Madoff’s investment-advisory business, which was, Madoff maintains, off-limits to them. “We were a very close family, and it was a family business,” Madoff told me proudly from prison. “We spent every day together. My brother, my sons.” Ruth loved that her men worked together, and took an office at BLMIS to be with her family and, of course, to look after Madoff’s every need.

They idolized their father, and “I idolized them,” Madoff said. Mark and Andrew eventually sat side by side above the raised trading floor, with Andrew overseeing the proprietary-trading desk and Mark the market-making business, the legitimate concerns. “I was very proud of my sons, and they were very proud of me, what I accomplished,” said Madoff. “They liked being a Madoff. There was a lot of recognition in that, you know.”

MarkPhoto: GI/BM/Getty Images

Even when his business was legitimate, Madoff was a bit astonished by his success. Andrew and Mark, having been born into the club, took it more for granted and were comfortable with the privileges that came with it. They might fly to the family home in Montauk or jet off to Montana for some weekend fly-fishing. Madoff was happy to see them prosper. He, too, had become accustomed to luxury. As he told me, “I lived very extravagantly. In the end, I bought a plane with another person. I had a boat [and four homes]. You’re talking about someone who had a billion dollars.” He took pleasure in financing a home for Mark in Nantucket. In addition to his Manhattan place, Andrew had one in Greenwich, though he rarely used it. And yet Madoff was aware of the difference between the generations. He lived in the shadow of a failed father. “My sons never had to deal with that,” Madoff said.

However happy Madoff was to have his family in the office with him, he made no bones about whose business it was. He once shouted at his brother, “Until your name is the name on the door, don’t tell me what to do.” The business revolved around Madoff, his thoughts, his needs, his idiosyncrasies, including his compulsion for order. “I definitely have obsessive-compulsive tendencies,” he said; everyone remembered him on his knees, straightening the venetian blinds. Revere him as they did, the sons could feel like props in Madoff’s perfectly aligned world, and for years they bristled at this unfairness. They and their uncle did the heavy lifting while Bernie, as Andrew vented to a friend after the fraud, “didn’t have to do shit,” though the credit naturally fell into his lap.

The boys had their separate spheres, but Bernie didn’t hesitate to get involved. “He didn’t have a filter,” as one observer put it. He’d say things to his sons that other employees thought shocking, even abusive. His version of an explanation was, “Because I said so.” More than once, the boys thought, He’s a bully. Andrew told friends that the abuse rolled off his back. After all, he knew that in private, “there was a constant expression of pride and love on his part,” as Andrew told a friend.

Later, they wondered what fraction of that love was sincere. They’d always known their father was a master manipulator, one quality that had helped him succeed on Wall Street. Through his attorney, Andrew declined to speak, but his friends make clear how he felt. “My father had a way of winning you or imposing his will that sometimes felt good and sometimes didn’t, but it was undeniable,” Andrew told a friend. Andrew had experienced the force of his father’s persuasive abilities when he’d tried to strike out on his own. A couple of years after surviving lymphoma—he was diagnosed in 2003—Andrew talked about leaving BLMIS to do something of his own, but his father persuaded him to stay. To Andrew, his father deployed his special mix of love and bullying. Some of it was good-natured cajoling, flattery so subtle he realized it only in hindsight, some of it as direct as an offer of money.

Andrew gave in. Persuading a son to stay in a business a father knows will eventually take everyone down is, in retrospect, an act of deep selfishness. But it wasn’t a hard sell. A person close to Mark explained: “They wanted their independence, yet they were very grateful for the chance to participate in what they thought was a very successful business. They were proud of that business. But they were men in their forties working for their father. When they were certain of Madoff’s love for them and certain of their family’s closeness and solidarity, they were able to make the sacrifice.”

It took them a few more years to understand exactly what kind of a sacrifice it was.

The dynamic with Madoff’s other victims was different. Later, it was said that Madoff insinuated himself into the sympathies of wealthy, often older people, the better to fleece them. In Madoff’s mind, everyone understood the terms of friendship: They liked him because he made them money. And Madoff insists that rather than the pursuer, he was usually the pursued. People begged him to take their money. Madoff says that he waved red flags, issued caveats that should have been obvious to even an unsophisticated investor. “They were all told by me, ‘Don’t invest any more money than you could afford to lose. This is the stock market. There’s always stuff that can happen. Brokerage firms can fail. I could go crazy and do something stupid. If you want a [safe thing], put your money in government bonds. So everybody understood this.

“Everyone was greedy,” he continues. “I just went along. It’s not an excuse.” In his mind, the hedge funds and the banks were little more than marketers, skimming their 1 to 2 percent off the top, a fee for their supposed “due diligence,” though they exercised little oversight. “Look, there was complicity, in my view,” Madoff told me.

Madoff didn’t exclude his individual investors in his list of those who, at least tacitly, played along with the game. “Their friends had told them, ‘How can you be making 15 or 18 percent when everyone is making less money?’ ” he told me. “Believe me, if you don’t think they had doubts, they had doubts … I would say, certainly, by the mid-to-late nineties,” it should have been obvious to everyone that his investment business was a fraud.

Madoff’s thoughts about his four largest early investors are especially barbed. Privately, Madoff resented many of his clients whom, legitimately or not, he’d carried for years, turning modest nest eggs into luxurious lifestyles. “It was his friends he had made rich—and he certainly talked about that all the time—he just resented them,” said one man who worked with Madoff. Madoff’s four big investors have little reason to complain, as Madoff sees it: Carl Shapiro, an apparel manufacturer, Jeffry Picower, a Wall Street investor, Stanley Chais, a money manager, and Norm Levy, a real-estate developer who told his children on his deathbed, “Trust Bernie Madoff.” “All of those four people, even though my friends, you also have to understand, every one of them made tons of money with me, hundreds of millions. Picower, billions. Shapiro, well over a billion. Levy, billions. Real money.” And, he insisted, legitimate money. They all became giants of philanthropy, happy to take public bows, while, in his view, it was Bernie from Brooklyn who thanklessly drove the engine. “Let’s put it this way: Shapiro probably built more hospitals in Boston and put more buildings in Brandeis University than you can imagine” with money Madoff says he earned.

And now there are limits to his sympathy. He sees himself not as some evil mastermind but as part of a system of corruption, maybe its linchpin, but he believes that people have lost their perspective on what actually occurred. “Look, none of my clients, even if they lost every penny they put in there, can plead poverty,” he said. “Look, it doesn’t mean I’m excusing what I did, doesn’t mean I don’t feel sorry for them. I’m embarrassed … It was the people that came in very late in the game that got hurt. All of my friends, most of my individual clients, are not net losers,” he said. “Now if you listen to [them], they’re living out of Dumpsters and they don’t have any money, and I’m sure it’s a traumatic experience to some, but I made a lot of money for people. Does it justify it? No.

“When you deal with people’s money, as I did for all my life,” he continues, “you realize how strange they are; it’s all like, ‘What have you done for me lately?’ If you made money for me, I was smart because I gave you the money and I went there, and if you lose money, then it’s all your fault. So you become somewhat callous about people lying.”

Through the nineties, Madoff dreamed of climbing out of the hole he’d dug. “I kept telling myself that some miracle was going to happen or that I was going to be able to work my way out of it. I just didn’t know when that was.” By around 2002, he realized this was a fantasy. “By then, the number was so astronomical I didn’t know what I was hoping for, quite frankly.” So he continued. The scheme demanded endless funds. Money flowed out almost as quickly as it came in, at points. It isn’t clear that the fraud was even designed to make money. “He left millions and millions on the table,” one of the trustee’s lawyers said, implying that if it had been about the money, he could have taken more. And yet the scheme demanded constant attention. Madoff felt he had to handle every inquiry from a significant investor. “He’d pick up the phone wherever he was—he wouldn’t go places on earth where he couldn’t be reached by phone,” said a person who worked with him. And increasingly, it was some of his largest investors, with their outsize expectations, their winks and nods at the mounting facts, who called the shots. According to one of the trustee’s lawsuits, the power relationship had been turned upside down. The suit alleges it was the swindler who took marching orders. Picower, probably his largest individual investor on paper, dictated the returns he sought or “needed”—one reason the trustee accused him of being tacitly in on the scheme, and his widow agreed to return $7.2 billion. Outwardly, Madoff basked in the admiration the scheme brought him, but it was a humiliation too. “I would stare out the window,” he said. “Sometimes I would talk to myself.”

Madoff told me he wished he’d been caught earlier, anything to put an end to a nightmare he didn’t have the courage to end himself. In his mind, he even tried to act honorably. “I was always able to rationalize it … Look, I tried to give moneys back to my individual clients when I realized it was impossible to get myself out. I tried to return funds to my friends, moneys to the smaller clients. They wouldn’t take it back … Everybody said, ‘No, you can’t do that. You can’t send me my money back. I’ve been a friend of yours, or a client, for years’ … I couldn’t tell them I would have been doing them a favor. I couldn’t. I mean, could I have insisted? Yes.

“I did block it out of my mind,” he said. “I had no choice.”

On December 10, 2008, three months after the stock market cratered, Andrew and Mark went into their uncle Peter’s office, not far from theirs on the nineteenth floor of BLMIS—Madoff’s investment-advisory business was located two floors down. “What’s wrong with Dad? He just looks like he’s falling apart,” the boys told their uncle. He’d been alternately frantic and near comatose. The boys had seen similar behavior before: when Andrew had been diagnosed with lymphoma. Madoff had been “a vegetable” for weeks. He could barely speak and rarely left home. This seemed even worse. They sent Peter in to speak to him, and he confessed. Peter insisted he tell his sons. “I said, ‘Look, let’s all go to my house,’ ” Madoff said. “ ‘I haven’t told Ruth either. I have to tell her as well.’ So we got into my car, and my driver drove me the few blocks to my home.” They went to Madoff’s study. On the couch, Madoff broke down crying.

He faced $7 billion in redemptions, which he didn’t have. He’d been feverishly trying to raise money and in fact had commitments for $700 million, which could have kept the scheme afloat for several more weeks. “What was the point? It wasn’t going to solve my problem. And I was so exhausted and deep down with worry, and so on. I just said to hell with it. I decided I wasn’t going to take [the money]. There was no point in me hurting additional people,” he told me. The authorities found checks for $173 million in his desk—uncashed.

“I owe all of this money out, and I’m not going to be able to recover it,” he told his family. Everyone was crying. “Look, I don’t know what else to tell you. I don’t know what you’re supposed to do,” Madoff continued. Mark stood there in shock. “Andy, I remember, took me in his arms,” Madoff told me sadly. “He felt sorry for me at that stage.”

A few minutes later, Andrew and Mark found themselves on Lexington Avenue in a daze—they headed to their lawyer and soon made the most wrenching decision of their lives: They turned in their father, knowing he’d spend the rest of his life in jail.

Ruth was torn by Madoff’s confession, her emotions complicated by 50 years of marriage. “She was mortified by what I did,” said Madoff. “We had a very luxurious life. There’s no question about that. But that was not what she was interested in. She would have been perfectly happy if I’d been a teacher. My wife, quite frankly, doesn’t forgive me for what I did. But at least she understood. You know, I guess, they say for better or for worse,” he explained and gave that tiny laugh. “Better and worse. She stood by me. She’s my wife.”

Madoff was freed from his nightmare, but for his family, the troubles had just begun. At first the boys hadn’t known what to feel. Soon their emotions crystallized. Andrew, the steelier of the two, slipped into a rage—his emotion for once unmistakable. “I was furious beyond measure with my father for having done this to us,” he confided to a friend. Madoff had thousands of victims, but for Andrew and Mark, it was as if their father took direct aim at them. They’d lived in his shadow, nodding as strangers gushed about his genius. Now they’d never get their fair share of credit for the legitimate businesses they had built. Andrew told a friend: “Then we find out it’s bullshit. The genius is fake. We’d been competing with a phantom.” That was one more injustice, and they felt it intensely. Mark, as a friend recalled, knew Andrew had greater reason to be bitter. He’d tried to leave the business, but Madoff had “manipulated” him into staying, as if their father had needed the cover.

Andrew had always seemed more stoic, more cerebral, less anxious, and surviving cancer had toughened him further. He had the support of his fiancée, Catherine Hooper, who’d moved in with him four days before his father’s confession. She didn’t know Madoff and so didn’t take the betrayal personally. She wouldn’t let Andrew stay still. Two days after his father’s admission to his sons, Andrew kept a lunch appointment, at her insistence. With her encouragement, he unplugged his cable and surrounded himself with friends. The weekend after the arrest, he and Hooper invited people to their apartment on the Upper East Side.

Mark, more sensitive, joined in his brother’s fury, but less confidently, less assured of his feelings. He’d always been more dependent on the goodwill of others and more dependent on his father’s good opinion, too. “He respected his father to the 10,000th degree,” a friend explained. “Don’t forget, everyone made a fortune because of Mark’s father. Mark got respect too because of his father.” Now he suffered for his father’s betrayal, and it was all the more excruciating because of how it unfolded. A person close to Mark explained what was going through his head: “Here’s my loving father, whom I loved and who stole my money and destroyed my life, put me into a criminal inquiry, put all my assets in a mess. And on top of that, I have to live with the fact that I sent him to jail.”

Mark developed an addiction to news about his father’s case and the family’s troubles, and that made it almost impossible for him to move forward. Andrew could only do so much before losing his temper. “Shut off your fucking computer,” he told his brother. But Mark couldn’t. And so, says a close friend, “he saw the world’s perception of him through the eyes of these hateful people.”

Mark’s wife, who was pregnant at the time of the arrest and feeling vulnerable, was as furious as her husband. She changed her last name and that of their two children, citing death threats. Mark understood and urged his oldest children from a previous marriage—they are 16 and 18—to change theirs. (They refused.) It was a practical step, since even picking up a prescription at the pharmacy could provoke ugly comments. “You can’t understand the daily indignity of being a Madoff,” said a family friend.

Andrew reacted differently, deploying his anger almost as a shield. He handed waiters his credit card. Yes, I’m the son, he said, almost daring people to confront him. “Changing my name doesn’t change who I am,” he told a friend. Mark, though, was no longer sure who he was supposed to be. He desperately wanted to get back on his feet financially. He had two young children—the second was born in February 2009—and prided himself on being a provider. The trustee had filed a lawsuit against him, demanding $66.9 million, and, like his brother, Mark was required to report a monthly list of expenditures to the trustee. (Andrew is being sued for $60.6 million.) For a time, Mark deluded himself that he could still work in the securities industry. He even sent out letters, only to confirm what he already knew: The Madoff name is toxic. “The world hates us,” he often said. Later, he started a newsletter for the real-estate industry that was gaining traction. Nothing, though, could extinguish his sense of shame. “He apologized to us,” said one investor and friend. “No matter what you told him, he still felt guilty. He shouldn’t have felt it, but he did. He felt terrible, responsible.”

And then the family that had for so long been a source of pleasure and support was gone. The boys had cut off their mother—a situation for which Madoff blames the lawyers but which was also the boys’ preference. A friend asked Andrew if he thought his mother knew about the scheme. “It doesn’t matter,” he answered. “Look how she behaved after it came out.” She’d had a choice, and she stood at Bernie’s side. For Andrew, the separation was painful, but Mark may have felt the loss more deeply. “Not seeing my parents is horrible,” he told a friend. He could have reached out to her—she wanted to see him. But he wouldn’t. “He was dealing with so much pain that getting together with his mother again was going to bring more pain,” said a person close to the family. “I just think she was the closest thing to his father. He was working really hard to get through his days and deal with what he had to do. I’m not saying he didn’t want to [talk to her]. He wasn’t ready to.”

Mark missed his father too. He’d counted on his father’s love, but now he couldn’t even be sure that was real. “Mark thought that Bernie had lied about business, and so he thought, ‘What else did he lie about? Did he lie about his love for his sons?’ Mark couldn’t get that out of his mind. He thought, ‘Who knows what’s true and what’s not?’ ” said a person close to the family.

“I tried to tell him many times that that was ridiculous,” said a friend. “People tried to reassure him that he was loved.” But he couldn’t make himself believe it. Two years after the crime was revealed, the scandal was again in the press. Mark had tried antidepressants and therapy. On the second anniversary of his father’s arrest, with his wife and their 4-year-old in Disney World with his mother-in-law, Mark hanged himself while his 2-year-old slept in a room nearby. Shortly before, he wrote an e-mail to his lawyer: “No one wants to hear the truth … Please take care of my family.” And another to his wife: “I love you …”

Madoff says he was devastated by the death of his son. “Let me tell you, I cried for well over two weeks. I cried and cried. I didn’t come out of my room. I didn’t speak to anybody, and so on. I have tears in my eyes when I’m talking to you, even. Not a day goes by that I don’t suffer. I may sound okay on the phone. Trust me, I’m not okay. And never will be.”

He was on suicide watch; the guards looked in on him every hour. But they needn’t have worried. “I never thought of taking my life,” he told me. “It’s just not the way I am.” After a few days, Madoff forced himself out of bed and back to his job filling inmates’ commissary orders.

For Madoff, prison offers a measure of relief. A man—and even a monster—who has put his greatest fear in the past is, in some way, a happier man, no matter what else has occurred. “What was before the fear of this”—getting caught—“eventually happening, that was over because it was over,” Madoff said. And with that worry behind him, Madoff moved on to others—“I was always a worrywart,” he said. He worries about his family, of course, and he worries about his victims, though he’s confident they will be okay. Most of his victims, he says, will get a substantial amount of their money back—he’s met with the trustee’s lawyers and tried to help lead them to the money. “It’s 50 cents on the dollar,” he told me. “These people probably would’ve lost all that money in the market. I’m not trying to justify what I did for one minute. I’m not.”

He’s come to terms with his crime, his pariah status. “It is what it is,” said Madoff.

He sees himself at this stage as a kind of truth-teller. He has disdain not only for the industry but for the regulators. “The SEC,” he says, “looks terrible in this thing.” And he doesn’t see himself as the only guilty party on Wall Street. “It’s unbelievable, Goldman … no one has any criminal convictions. The whole new regulatory reform is a joke. The whole government is a Ponzi scheme.”

Madoff had a purpose in reaching out to me. “To set the record straight,” he said. The record, as he sees it, should reflect that he’d risen from modest beginnings to change the way business is done on Wall Street. Even from prison, he is determined to resurrect his legacy, one reason he talks to me.

There is another.

“With both my sons, I could never even explain to them what happened,” Madoff said. “Of course, it’s too late for my son Mark, but my son Andy …” Madoff often thinks of that last day, that meeting in his study when he confessed to them. “I can’t get a message to Andy,” he continues, getting emotional. “The lawyers don’t want that to happen.” I think that Madoff talks to me, in part, as a way of reaching Andrew.

But the world is not as Madoff imagines it from behind prison bars. To a friend, Andrew mocked his father’s thoughts: “Yes, I stole every penny that you had, and you’ve got to dive into a Dumpster to get a meal, but, you know, that’s the past, get over it.

And so Andrew won’t change his name, but he’s finally free to strike out on his own and create his own identity, an irony not lost on him. He runs a small energy company, Madoff Energy Holdings, and Abel Automatics, a fishing-reel-manufacturing company. But the most fulfilling part of his work life is Black Umbrella, his fiancée’s new venture, which prepares families for disasters—“I’m helping people,” he told a friend. It’s the kind of activity his father had once talked him out of pursuing. Andrew won’t forgive his father. He won’t grant that his father is a good person who made a mistake. Andrew finds that almost comical. At times he wants to tell him that directly. “Am I supposed to forgive you and feel badly that you got trapped into this terrible thing?” he asked the friend rhetorically.

Madoff knows his son’s mind. “At this stage, I just have to give it time,” he said. “I guess I just have to hope.”

In the meantime, Bernie Madoff is still keeping his own moral ledger, adding things up in his own way, telling himself that someday, he’ll come out ahead.

Ed. note: In the Madoff Tapes story, some of Bernard Madoff’s quotes have been edited for clarity and space.

The Madoff Tapes