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Bernie Madoff, Whose Ponzi Scheme Bilked Thousands, Dies In Prison

NOEL KING, HOST:

Bernie Madoff, who carried out one of the most notorious Ponzi schemes in history, died on Wednesday while serving a prison sentence in North Carolina. Madoff was a legendary figure on Wall Street who robbed thousands of investors of their savings. NPR's Jim Zarroli looks back at Madoff's life.

JIM ZARROLI, BYLINE: It was December 2008, the height of the financial crisis, when the unbelievable news came out.

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UNIDENTIFIED REPORTER: A fixture on Wall Street, Bernie Madoff, 70 years old, arrested by the FBI.

ZARROLI: The public didn't yet know Madoff's name, but Wall Street sure did. He had chaired the Nasdaq stock exchange. And from a swank Manhattan office building, he ran an investment fund said to be worth $50 billion. It boasted impressive returns in good times and bad. No one understood how he did it, but everyone wanted in. Diana Henriques wrote a book about the Madoff case.

DIANA HENRIQUES: He lets a sort of velvet rope syndrome develop, that it was very hard to get into the funds, very hard to get Bernie to manage your money. And if you could, then you were so grateful to him that you didn't ask a lot of questions.

ZARROLI: And Madoff was very rich with a yacht and fancy houses in Palm Beach, France and the Hamptons. It only added to his credibility. As it turned out, Madoff was violating the rules on an epic scale. He was running a classic Ponzi scheme, paying off old investors with money from new ones. Ron Stein ran a nonprofit group that represented Madoff victims.

RON STEIN: Madoff was taking that money and basically using it as a checking account. None of it got invested or a very, very small amount of it got invested. The reality is what people were looking at when they got their account statements every month was a fiction.

ZARROLI: The scheme worked for years. Then came the 2008 financial crisis, when too many people wanted their money at once. Faced with ruin, Madoff confessed to the FBI. But first, he told his wife and sons. The moment was dramatized in the HBO movie "The Wizard Of Lies," in which Madoff was played by Robert De Niro.

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ROBERT DE NIRO: (As Bernie Madoff) It's a fraud. There are no investments.

UNIDENTIFIED ACTOR: (As character) What are you talking about? Of course, there are investments.

DE NIRO: (As Bernie Madoff) I made them up - basically just a big Ponzi scheme.

ZARROLI: Almost overnight, thousands of investors were wiped out - college endowment funds, municipal governments, charities. Famous people such as Kevin Bacon and Elie Wiesel lost money. Many of the victims were Madoff's friends and relatives in the Jewish community, and they felt deeply betrayed. But lots of people who never heard of Madoff discovered they were victims, too. They'd put money in firms that had invested with Bernie. The idea that so much paper wealth could suddenly be vaporized seemed absurd. And victims such as the late Sharon Lissauer thought the Madoffs must have squirreled away money somewhere.

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SHARON LISSAUER: I put all my savings in stupidly and because I trusted him so much. And, I mean, I just wish that he would divulge where some of his hidden assets were to make things a little better for the victims.

ZARROLI: Madoff's name would become a watchword for all that had gone wrong on Wall Street, says Diana Henriques.

HENRIQUES: All the damage that the crisis did, all the trust that it destroyed, somehow came to be wrapped up in this Madoff scandal. And so the reaction to his arrest was like lighter fluid on a backyard fire. It just exploded with outrage and fury.

ZARROLI: A lot of the anger was directed at Madoff's relatives, some of whom worked at his firm. Though they claim to be in the dark about the fraud, many victims presumed they were lying. And the family would suffer greatly. One son committed suicide. Madoff's wife, once a popular society figure, became a pariah. Henriques later interviewed Madoff in federal prison in North Carolina to find out what had motivated him. Madoff, she says, was a working-class kid from Queens who rose to great heights, and he grew addicted to the adoration of the crowd.

HENRIQUES: My conclusion is that he just could not admit failure. He wanted to preserve that reputation as a Wall Street wizard. He wanted to be seen as a success, as an extraordinary success.

ZARROLI: In an interview from prison with New York Magazine, Madoff said he always hoped he could somehow recoup the losses that were piling up.

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BERNIE MADOFF: You know, I was sort of telling myself, you know, that some - you know, some miracle was going to happen or that I was going to be able to work my way out of it, OK? I just didn't know - I just didn't know what that - what that was.

ZARROLI: But by 2008, the truth had caught up with him. He would lose everything - his family, his money, the yacht and the beach house and especially his good name. In the end, Madoff would become even more famous than he'd ever dreamed of but for all the wrong reasons. Jim Zarroli, NPR News, New York.

(SOUNDBITE OF PENSEES' "LAGUNA") Transcript provided by NPR, Copyright NPR.