TO some, Bernard L. Madoff was an affable, charismatic man who moved comfortably among power brokers on Wall Street and in Washington, a winning financier who had all the toys: the penthouse apartment in Manhattan, the shares in two private jets, the yacht moored off the French Riviera.

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Jason Decrow/Associated Press

Times Topics: Bernard L. Madoff

 

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Associated Press

Bernard Madoff, right, in 1993 at a House hearing with David S. Ruder, formerly of the S.E.C., center, and Richard Grasso of the New York Stock Exchange.

Although hardly a household name, he secured a longstanding role as an elder statesman on Wall Street, allowing him to land on important boards and commissions where his opinions helped shape securities regulations. Along the way, he snared a coveted spot as the chairman of a major stock exchange, Nasdaq.

And his employees say he treated them like family.

There was, of course, another side to Mr. Madoff, who is 70. Reclusive, at times standoffish and aloof, this Bernie rarely rubbed elbows in Manhattan’s cocktail circuit or at Palm Beach balls. This Bernie was quiet, controlled and closely attuned to his image, down to the most minute details.

He was, for instance, an avid collector of vintage watches and took time each morning to match his wedding ring — he owned at least two — to the platinum or gold watch band he was wearing that day.

Per his directives, the décor in his firm’s New York and London offices was stark. Black, white and gray — or “icily cold modern,” as one frequent visitor to the New York operation described it.

Despite nurturing a familial atmosphere in his offices, he installed two cameras on the small trading floor of the firm’s London operations so he could monitor the unit remotely from New York.

This Bernie also ran a money management business on the side for decades that he kept hidden far from colleagues, competitors and regulators.

While he managed billions of dollars for individuals and foundations, he shunned one-on-one meetings with most of his investors, wrapping himself in an Oz-like aura, making him even more desirable to those seeking access.

So who was the real Bernie Madoff? And what could have driven him to choreograph a $50 billion Ponzi scheme, to which he is said to have confessed?

An easy answer is that Mr. Madoff was a charlatan of epic proportions, a greedy manipulator so hungry to accumulate wealth that he did not care whom he hurt to get what he wanted.

But some analysts say that a more complex and layered observation of his actions involves linking the world of white-collar finance to the world of serial criminals.

They wonder whether good old Bernie Madoff might have stolen simply for the fun of it, exploiting every relationship in his life for decades while studiously manipulating financial regulators.

“Some of the characteristics you see in psychopaths are lying, manipulation, the ability to deceive, feelings of grandiosity and callousness toward their victims,” says Gregg O. McCrary, a former special agent with the F.B.I. who spent years constructing criminal behavioral profiles.

Mr. McCrary cautions that he has never met Mr. Madoff, so he can’t make a diagnosis, but he says Mr. Madoff appears to share many of the destructive traits typically seen in a psychopath. That is why, he says, so many who came into contact with Mr. Madoff have been left reeling and in confusion about his motives.

“People like him become sort of like chameleons. They are very good at impression management,” Mr. McCrary says. “They manage the impression you receive of them. They know what people want, and they give it to them.”

As investigators plow through decades of documents, trying to decipher whether Mr. Madoff was engaged in anything other than an elaborate financial ruse, his friends remain dumbfounded — and feel deeply violated.

“He was a hero to us. The head of Nasdaq. We were proud of everything he had accomplished,” says Diana Goldberg, who once shared the 27-minute train ride with Mr. Madoff from their homes in Laurelton, Queens, to classes at Far Rockaway High School. “Now, the hero has vanished.”

If, in the end, Mr. Madoff is found to have been engaging in fraud for most of his career, then the hero never really existed. Authorities say Mr. Madoff himself has confessed that he was the author of a longstanding and wide-ranging financial charade. His lawyer, Ira Lee Sorkin, declined to comment.

During the decades that Mr. Madoff built his business, he cast himself as a crusader, protecting the interests of smaller investors and bent on changing the way securities trading was done on Wall Street. To that end, like a burglar who knows the patrol routes of the police and can listen in on their radio scanners, he also actively wooed regulators who monitored his business.

“He once mentioned to me that he spent one-third of his time in Washington in the early 1990s, late 1980s,” says a person who has known Mr. Madoff for years but requested not to be identified because he does not want to be drawn into continuing litigation. “He was very involved with regulators. I think they used him as a sounding board and he looked to them like a white knight.”

“He was smart in understanding very early on that the more involved you were with regulators, you could shape regulation,” this individual adds. “But, if we find out that the Ponzi scheme goes back that far, then he was doing something much smarter. If you’re very close with regulators, they’re not going be looking over your shoulders that much. Very smart.”

MR. MADOFF spent his early years in Laurelton, a close-knit, Jewish enclave where he and his friends ate ice cream at the local five-and-ten and attended activities at the community center.

“It was an idyllic place to grow up in,” recalls Vera Gitten, who attended elementary school with him. She remembers him as “very thin,” a good student and extremely outgoing. She recalls a musical skit that he and his best friend wrote, rehearsed and performed for the class when they were in fifth or sixth grade.

“It was a broad company, sort of a ‘Sheik of Araby’ kind of thing where they wore costumes, which were their parents’ bedsheets, that made them look like they were desert sheiks,” Ms. Gitten says. “They would have us rolling.”

None of Mr. Madoff’s former elementary school friends could recall what his parents, Ralph and Sylvia, did for a living. According to Securities and Exchange Commission documents from the 1960s, it appears that his mother had a brokerage firm called Gibraltar Securities registered in her name with an address in Laurelton.

In 1963, the S.E.C. began investigating whether a number of firms, including Ms. Madoff’s, had failed to file financial reports and whether that required revoking their registrations. Early the next year, Ms. Madoff withdrew her registration and the S.E.C. dropped its proceedings against her.

While Mr. Madoff’s friends remember little about his parents, they all clearly recall his childhood sweetheart, and future wife, Ruth Alpern, a pretty, bubbly blonde who was voted “Josie College” by her Far Rockaway High School class.

Mr. Madoff, after graduating from high school in 1956, spent a year at the University of Alabama, where he joined Sigma Alpha Mu, a Jewish fraternity. A year later, he transferred to Hofstra University, where he graduated in 1960 with a degree in political science. He later became a Hofstra trustee, but the university never invested with him.

Mr. Madoff spent the next year at Brooklyn Law School, attending classes in the morning and running his side business — installing and fixing sprinkler systems — in the afternoon and evening, recalled Joseph Kavanau, who attended law school with Mr. Madoff. When Mr. Kavanau married his wife, Jane, who was Mrs. Madoff’s best friend from Queens, Mr. Madoff was the best man.

“Bernie was very industrious,” Mr. Kavanau explains. “He was going to school and working at the same time.”

Mr. Madoff was never interested in practicing law, Mr. Kavanau says. Instead, Mr. Madoff left law school and, using $5,000 saved from being a lifeguard and from his sprinkler business, joined the ranks of Wall Street in the 1960s.

“For many years when we were first married, my wife and I would go to their house or we would all go out to dinner, maybe a couple of nights a month,” said Mr. Kavanau, who says that the first home Mr. Madoff shared with his bride was a modest, one-bedroom apartment in Bayside, Queens.

Over the years, however, the two couples drifted apart. From time to time, Mr. Kavanau said he turned on the television and caught a glimpse of Mr. Madoff — now a successful financier — being interviewed, realizing that he had made his mark on Wall Street.

“The last time I saw him, we had run into him and Ruth on Worth Avenue in Palm Beach,” Mr. Kavanau recalls. “We were definitely aware of how well he was living.”

When asked if he can understand what happened, what may have motivated or prompted Mr. Madoff to eventually take such risks after building up a seemingly successful business, Mr. Kavanau paused.

“There is no way to. I can’t make it add up. It doesn’t make sense,” he says, growing increasingly frustrated. “I cannot take the Bernie I knew and turn him into the Bernie we’re hearing about 24/7. It doesn’t compute.”

WHEN Mr. Madoff arrived on Wall Street in the 1960s, he was an outsider. His small firm, Bernard L. Madoff Investment Securities, got its start by matching buyers of inexpensive “penny stocks” with sellers in the growing over-the-counter market. This hardscrabble market was made up of stocks that were not listed on the tonier New York Stock Exchange or American Stock Exchange.

In the O.T.C. market, it was common practice — and completely legal — for firms like Mr. Madoff’s to try to attract big trades to their shop by offering to pay clients a penny or two for every share they traded. His firm would make money by pocketing the difference in the “spread,” or the gap between the offering and selling price for the stocks.

During the mid-1970s, when changes in the rules allowed his firm and others like it to trade more expensive and more prestigious blue-chip stocks, Mr. Madoff began gaining market share from the Big Board.

“He was a man with a good idea who was also a terrific salesman,” says Charles V. Doherty, the former president of the Midwest Stock Exchange. “He was ahead of everyone.”

While completely legitimate, the practice of paying for trading orders was entirely distasteful to blue bloods on the established exchanges who saw the actions, ultimately, as a threat to their livelihood. Around this time, Mr. Madoff began cultivating key relationships with regulators.

“He was the darling of the regulators, without question. He was doing everything the regulators wanted him to do,” says Nicholas A. Giordano, the former president of the Philadelphia Stock Exchange. “They wanted him to be a fierce competitor to the New York Stock Exchange, and he was doing it.”

Current and former S.E.C. regulators have come under fire, accused of failing to adequately supervise Mr. Madoff and being too cozy with him.

Arthur Levitt Jr., who served as S.E.C. chairman from 1993 to early 2001, has acknowledged that he occasionally turned to Mr. Madoff for advice about how the market functioned. But Mr. Levitt strongly denies that Mr. Madoff had undue influence at the S.E.C. or that the agency’s enforcement staff deferred to him.

Mr. Levitt said that he was unaware that Mr. Madoff even ran an investment management business, and that Mr. Madoff never had special access to him or other S.E.C. officials. He also noted that he and Mr. Madoff opposed one another on several key industry issues.

“The notion that Madoff came to my office many times is a fiction,” Mr. Levitt says. “And the notion that he did my bidding is so fantastic that it defies belief.”

Mr. Madoff’s firm was an early adopter of new trading technologies. And, during the early 1990s, he served three one-year stints as head of the Nasdaq, an electronic exchange that has competed vigorously and won market share from brick-and-mortar exchanges like the Big Board.

Despite this flair for the experimental, Mr. Madoff routinely told his employees to adopt the mantra “KISS,” or “keep it simple, stupid.” He was, after all, a man of precise and controlled habits. He smoked Davidoff cigars and, in London, tailored his suits at Kilgour on Savile Row and bought many of his watches at Somlo Antiques.

Associates and others acquainted with him said his punctilious ways sometimes veered into obsessive-compulsive behavior. His office, for example, always had to be immaculate.

According to a former employee, who requested anonymity because of continuing litigation and because, he said, regulators have told Madoff employees not to speak to the media, Mr. Madoff scouted the office for potential filth. Once, when he spotted an employee eating a pear at his desk in New York, this person said, Mr. Madoff spied some juice dripping onto the gray carpet.

“What do you think you are doing?” this person recalls Mr. Madoff demanding. Eating a pear, the employee replied. Mr. Madoff ripped the soiled carpet tile from the floor, then rushed to a closet to retrieve a similar swatch to replace it.

Julia Fenwick, who was the office manager for Mr. Madoff’s London operation from 2001 until the unit was shuttered in December, said that “everything had to be perfect” and that “you never left paper on your desk — ever.”

Although he visited the London office only a couple of times a year, usually on the way to his vacation home in France, Mr. Madoff still reveled in micromanaging everything there, including the office décor.

The London unit recently finished spending about $700,000 for a refurbishment that recreated the black and gray palette of Mr. Madoff’s New York office and his private jet, Ms. Fenwick says. The result was office furniture made from black ash, black trimming on gray walls, black computers, black mouse pads and even a black refrigerator on the trading floor.

But former employees and friends say Mr. Madoff’s obsession with order and control of his environment never led them to believe that deeper problems were afoot.

“He appeared to believe in family, loyalty and honesty,” said one former Madoff employee, who asked to remain anonymous because of the continuing litigation and investigations. “Never in your wildest imagination would you think he was a fraudster.”

Despite all of the easy money that rolled into Mr. Madoff’s firm for much of its existence, financial pressures began to emerge there during the last several years after Wall Street changed the way securities were priced and as new competition emerged.

In his asset management business, however, Mr. Madoff continued to haul in fresh rounds of money from unsuspecting investors hungry for the predictable and handsome returns he booked year after year, without missing a beat.

Employees who were veterans in the New York and London offices were even allowed to invest with Mr. Madoff, according to people who worked at the firm. Some employees are said to have given Mr. Madoff a large portion of their life savings — all of which now appears to be gone.

Like so many others who invested with him, his employees weren’t lured to his funds simply by a promise of outsize returns. Rather, they say, they sought the security of investing with a man they knew and trusted. The Bernie they thought they knew.

Mr. Madoff’s confidence reminds J. Reid Meloy, a forensic psychologist, of criminals he has studied.

“Typically, people with psychopathic personalities don’t fear getting caught,” explains Dr. Meloy, author of a 1988 textbook, “The Psychopathic Mind.” “They tend to be very narcissistic with a strong sense of entitlement.”

All of which has led some forensic psychologists to see some similarities between him and serial killers like Ted Bundy. They say that whereas Mr. Bundy murdered people, Mr. Madoff murdered wallets, bank accounts and people’s sense of financial trust and security.

Like Mr. Bundy, Mr. Madoff used a sharp mind and an affable demeanor to create a persona that didn’t exist, according to this view, and lulled his victims into a false sense of security. And when publicly accused, he seemed to show no remorse.

Television footage of Mr. Madoff entering his apartment building on East 64th Street at Lexington Avenue after federal authorities charged him with fraud in December doesn’t seem to show a man exhibiting any sorrow or regret. With a battery of reporters asking him whether he felt remorse, he declined to respond and pushed his way into his building. (Thus far, his only public apology has apparently been in letters left in his lobby for fellow tenants who suffered through the media circus outside their building.)

To some extent, analysts of criminal behavior say, defining Mr. Madoff is complicated by the wide variety of possible explanations for his scheme: a desire to accumulate vast wealth, a need to dominate others and a need to prove that he was smarter than everyone else. That was shown, they say, in an ability to dupe investors and regulators for years.

Like the former F.B.I. agent Mr. McCrary, Dr. Meloy cautions that he has not met Mr. Madoff and can’t make a clinical diagnosis. Nevertheless, he says individuals with psychopathic personalities tend to strongly believe that they’re special.

“They believe ‘I’m above the law,’ and they believe they cannot be caught,” Mr. Meloy says. “But the Achilles’ heel of the psychopath is his sense of impunity. That is, eventually, what will bring him down.”

He says it makes complete sense that Mr. Madoff would have courted regulators, even if he ran the risk of exposing his own actions by doing so.

“In a scheme like this, it’s very important to keep those who could threaten you very close to you,” Dr. Meloy explains. “You want to develop them as allies and shape how they go about their business and their attitudes toward you.”

INDEED, if it is shown that Mr. Madoff fooled regulators for decades, that would have been a “heady, intoxicating” experience and would have fueled a sense of entitlement and grandiosity, Mr. McCrary says.

And by reeling in people from the Jewish community, from charities, from public institutions and from prominent and relatively sophisticated investor networks worldwide, Mr. Madoff wreaked havoc on many lives.

That’s why Mr. McCrary says it’s not too far-fetched to compare Mr. Madoff to serial killers.

“With serial killers, they have control over the life or death of people,” Mr. McCrary explains. “They’re playing God. That’s the grandiosity coming through. The sense of being superior. Madoff is getting the same thing. He’s playing financial god, ruining these people and taking their money"