Attorney says there were no winners in Madoff case

Former Madoff Lawyer Ira Lee 'Ike' Sorkin joined Yahoo Finance Live to b reak down his thoughts on the Bernie Madoff case and his death.

Video transcript

- One of the things that we've been watching play out today is the death of Bernie Madoff. He made headlines back in 2008 after it was disclosed that he was operating the largest Ponzi scheme ever in history.

The lawyer who represented Madoff when he pled guilty to 11 felony charges is "Ike" Sorkin. And he joins us now to look back on the life of Bernie Madoff. And if there is an appropriate word-- I don't know if legacy is the right word. But Ike, when you heard that Bernie Madoff, at 82 years old, had died, what was the first thing you thought?

IRA LEE "IKE" SORKIN: Well, it's a thought that I've had in my mind for quite some time. And that is there are no winners in this case. No one, no one, came out as a winner in this case. And the lessons to be learned are-- if I had to put it in one word, it's transparency.

This should be exhibit A for the investing public to seek transparency whenever they make an investment in the market. Ask the questions. Find out what's happening. With the Madoff situation, no one asked questions. Everyone was content with the returns that he was making.

And that's not to fault the victims. But across the board, as you see what's happened to him, his wife, his two sons who died, victims who lost billions of dollars, I said-- I would guess-- speculate-- guess is the wrong word-- with some degree of certainty there when it all broke, Madoff took the position that the government will be able to or the trustees will be able to claw back a substantial portion of what the government said was lost here and there in the neighborhood of $20 billion. And to this day, as we sit here today, the trustee has recovered in excess of $14 billion.

And that-- to me, that's remarkable because in most of these cases, Ponzi schemes and bankruptcies, if you're lucky to walk away with $0.15 on the dollar, that's about the number. And that's a rough guesstimate. I'm not a bankruptcy lawyer.

But in this particular case, $14 billion has been clawed back from the alleged $20 billion loss. And that's what's-- those are the points that I wanted to make. And that's what-- you know, that's what keeps running through my head.

The SEC took a terrible hit on this. They never asked the right questions. Had they asked the right questions, they certainly would have put an end to this many, many, many years before 2008.

The investors never asked the right questions. Madoff kept, to his credit, and it's the only credit I can give him at this point-- kept his sons out of the business because I think, at the end of the day, he knew that this was not going to last. A Ponzi scheme will last only so far as the market is going up. When the market goes down, people are going to want redemptions. And by the time it was the crisis in 2007, 2008, financial crisis, he was faced with redemptions in excess of-- or faced with requests for redemptions of in excess of $7 billion.

- Right.

IRA LEE "IKE" SORKIN: And there's no way-- I'm sorry.

- Well, Ike, I just wanted to jump in here and just give us-- just kind of give us a, from your perspective, just when you realized the extent of the Ponzi scheme, and also when you believe it started because we know we heard from Madoff that it didn't start until the '90s-- investigators traced it back to the end of the '80s. But from your dealings with him, when do you believe it all started?

IRA LEE "IKE" SORKIN: I don't have an answer for you. He has maintained consistently that it started in the early '90s. When-- during the slight recession we had, Clinton, Bush, HW Bush, were running for president. People came to him and said, do you think you can still-- of course, I'm giving you substantially what he has said-- can you still invest in the market and get the returns that you got in the '70s and the '80s, and so on?

And he answered, to his regret-- to his regret-- yes. And money started to pour in in the early '90s, hundreds and hundreds of millions of dollars. And he just said, I'm not going to trade this. It's too much for me to deal with. And I'm not going to trade.

The government has taken the position or took the position then that it started well back into the '60s. Diana Henriques, who wrote a very good book about Madoff and what happened, thinks it happened in the mid to late '80s. We don't have a handle on it. And to reconstruct what happened going back to the '60s is a task that no regulatory agency, no defense lawyer, no one was prepared to go into. So it's very hard to say when it began.

I can tell you that back in the '60s, when he was just starting out, customers were going short. And what he did was he covered the short positions. So if the stock went up and the customer had to cover and was losing money, he would cover. And that created an aura about him that customers don't lose money with Bernie Madoff. And that--

- But Ike, he did that-- he was doing that with pink sheets. And it was a much, much smaller amount of money.

IRA LEE "IKE" SORKIN: Oh, of course.

- It's--

IRA LEE "IKE" SORKIN: Of course.

- He did say he-- you know, I corresponded with him, as you know, as did other reporters, when he was in jail. And he said to me in one of his letters, when it all blew up, he was greatly relieved.

I'm curious because you don't talk about it. But you were one of the victims. You lost money with Madoff. But prior to this, he was a very respected figure on Wall Street. What was he like, you know, just personality?

- He was-- he operated from the shadows. He never sought publicity. He never advertised. I mean, there were situations which I were privy to where he would sit at the Palm Beach Country Club, where he had a small home in Palm Beach, and people would literally come up to him and say, Bernie, take my money. And he would say, no, I don't want it. I got enough. No-- can't handle it.

Please, Bernie, take my money. And they would give him money. He never solicited people, never advertised. He stayed in the background and was very successful based upon what he did in drawing in investors who had lots and lots of money he wanted to invest for them.

- We know the story about, as you've pointed out-- how the SEC missed it. I'm just curious because when you think of how everyone in Bernie Madoff's orbit-- no good came to them-- two sons dead, all the people associated with him, essentially the five from the office where he ran this thing, in jail, one of them dead, some of his investors killing themselves. And yet, as we speak now, there's another one of these Ponzi schemes, just not known. It's operating as we speak. What do people do to protect themselves from a Bernie Madoff?

IRA LEE "IKE" SORKIN: Transparency, Adam, transparency. Ask questions. Bernie Madoff used to say to his investors, if you ask me how I'm getting these returns, you're out. That's it. Don't ask me with his plan, with his investment objectives, with his investment goals. If you ask me, you're out. I'm not taking your money. And I'm going to give you back the money you've given me.

And that's the-- that was the realm in which he operated. There was no transparency. And quite frankly, there were some very, very large investors who invested money with him who knew what he was doing. And he assisted those investors. But the government never went there.

- Yeah. Yeah. Jeffry Picower is the one I'm thinking of. The family returned $7 billion. And Picower, as we all know, was found at the bottom of his swimming pool after a heart attack.

"Ike" Sorkin is the recognized defense attorney here in Manhattan. He is an attorney at Mintz & Gold. He's a partner. And we appreciate your being here.