Bernie Madoff accepted to receive a reporter from the Financial Times in prison. Besides his accusations (e.g. he says that JPMorgan, the primary bank for Bernard L. Madoff Investment Securities, should have known of his illegal activity before his arrest), it is interesting to see what he has to say about his Ponzi scheme. The interview is available here.

Some fragments here:

So in 1992, he says, his slide into the Ponzi scheme began, using money from new deposits to pay some returns. “I thought I could do it. I did! I took the money – let’s say I had $1bn, by then – and I was convinced that when the market straightened out I would be able to cover things.” But it never happened. “The turning point was really about 1992 onwards. From then on, it started getting worse and worse. I spend a lot of time thinking about it – it is almost like a blank to me now. I try to piece it together; why didn’t I say, ‘I cannot do it?’ Why didn’t I return the money to those four or five clients – and the others – and say, ‘I can’t do it.’ Why?”

We ask why he didn’t just hand the money back to investors. After all, he says that in 1992 he was already a fairly wealthy man, since the market-making operation was performing well. “Ego,” he explains. “Put yourself in my place. Your whole career you are outside the ‘club’ but then suddenly you have all the big banks – Deutsche Bank, Credit Suisse – all their chairmen, knocking on your door and asking, ‘Can you do this for me?’

“[I was] under a lot of pressure – a lot,” he mutters. “And I was embarrassed. It was the first time in my life that something hadn’t worked. I was just dumb. Dumb! Starting in the early 1990s there were no trades. It was just paper. But let me tell you,” he adds forcefully. “It looked real.”

Once the Ponzi scheme was under way, it required a constant influx of new cash. Madoff began taking on clients referred to him by existing ones, who were inclined to keep their money parked with him because of the steady returns. At some point – Madoff never makes it clear exactly when – the real trading ceased altogether, and he began forging trade records for clients. And he says Picower, Chais, Levy and Shapiro – his big four clients – knew something was amiss. “They were complicit, all of them,” he says.

Madoff’s accusations cannot be corroborated. None of the four families has been charged with criminal wrongdoing. Picower is dead, and his estate settled for $7.2bn; his lawyers maintain he was not aware of the fraud. Levy is dead and his family settled for $220m. Chais is dead; his family denies any wrongdoing and has not settled. And Shapiro, the only one still alive, settled for $625m but denies any wrongdoing and has not been accused by authorities of being complicit. In the words of his lawyer, “Mr Madoff is a liar. These latest statements are no more believable than all the other lies that Madoff told his investors and the authorities for decades.”

But the regulators did not crack down. “The regulators get calls all the time,” Madoff says. They didn’t investigate “because I had the reputation at the time for being the gold standard. I had all the credibility. Nobody could believe at that time that I would do something like that. Why would I? Stupidity – that is why. But remember that when people asked me about the strategy, it made sense. I was big, credible.”

But how does he feel about ruining all those ordinary people’s lives; all those innocent “Mrs Greens”? Did he feel pleasure – or revenge – in this? He shakes his head. “I was scared to death,” he says. “I took no satisfaction in this. There was no malicious action on my part.” (...) I have spent a lot of time with a psychologist [in prison], which I had never done before in my life, in order to try to figure out how I could have done it,” he says. “There are these mafia people who can kill people all day long, do terrible things, and then go home to their families. I used to wonder how it was that people in wars could shoot people. But the thing is that you can compartmentalise things in your life.”

“My complaint about regulators and the SEC, which dates back as long as I’ve been involved, is I feel they spend too much time going after minor infractions and no time going after the major firms and investment banks,” he says. “Very little, if anything, has been done with this new regulatory reform that is going to correct this.”

By early December 2008 Madoff faced $7bn in redemptions – and he did not have the money. On December 10, the night of the BLMIS office Christmas party, his sons could tell something was wrong. “I was comatose,” he says. “They had never seen me like that.” So Madoff, his sons, his brother and Ruth retired to their plush Upper East Side home, where he told them the family fortune was built on a fraud. “I was crying,” he says. “They were crying.” His sons, on the advice of their lawyer, turned their father in to the police. He was arrested the next morning. Madoff says he never considered fleeing. “In the end I was almost relieved,” he says. “The pressure I was under in the last 16 years was almost unbearable. I wish they caught me sooner.” However, his moment of relief unleashed hell on his family. They were hounded by lawyers and journalists. On the second anniversary of Madoff’s arrest, Mark, his eldest son, committed suicide by hanging himself while his own two-year-old son slept in the next room. His other son, Andrew, has broken off contact. “They don’t speak to me,” he says in a flat voice. “It’s horrible. They feel like I betrayed them. And I did. But I had no choice. By the time I realised, I couldn’t get out.

The distribution of funds to Madoff victims is a complex ordeal that is taking years, and many of the settlements, including the $7.2bn from the Picower estate, are tied up in appeals. Madoff is of the opinion that individuals should not be pursued by the trustee. “I do not think that Picard will be successful in clawing back money from individuals, including the Mets family,” he tells us. “He shouldn’t. If they can claw money back from the average person who was involved, then who will ever invest in a hedge fund ever again? But the banks are different.

Several business schools have approached him, he adds, and asked him to work on ethics courses. He likes that idea; Harvard and Northwestern are in his sights. But from 10am to 7pm, four days a week, he mans the commissary, or prison store. Fittingly, Madoff tells us, it is called the “money management department”.

The last paragraph is eloquent: "As we leave the prison, we are still not sure where the truth ends and his lies begin. What we know is that this is a man who mercilessly ran a Ponzi scheme for at least 16 years, corrupted the financial system, destroyed lives and bankrupted families and charities. Yet, in the flesh, Madoff spins a credible tale of how a renegade entrepreneur conquered Wall Street and was drawn into crime by personalities and forces he could not control. It sounds almost convincing; or at least no more absurd than many of the other stories we hear every day in western finance."