The Madoff Tape: How Bernie Coached Others to Fool the SEC

SEC apologizes to investors, nation for not 'fulfilling our mission.'

ByBrian Ross <br/> brian Ross Investigative Unit
September 09, 2009, 6:06 PM

Sept. 9, 2009&#151; -- A new audio recording, obtained exclusively by ABC News, reveals Bernie Madoff carefully coaching a witness who was about to be interviewed about the Ponzi scammer's fraudulent investment firm, advising him that he could outsmart lawyers from the SEC.

"They ask you a zillion different questions and we look at them and sometimes we laugh, and we say are you guys writing a book?" Madoff says in a phone call from 2005. "You know, because these guys they work for five years at the commission then they become a compliance manager at a hedge fund now."

Massachusetts Secretary of State William Galvin, whose office released the tape, told ABC News, "You have Madoff, as it were, basically talking about how inept the SEC was because he was talking about how to fool them, and how you do it."

At the beginning of the over one hour call, the now-infamous fraudster makes sure to say "first of all, this conversation never took place." He then goes on to describe how "you don't have to be too brilliant with these guys."

Click here to listen to audio clip #1.

Click here to listen to audio clip #2.

Click here to listen to audio clip #3.

Click here to go behind the scenes of Brian Ross' investigation into Bernie and Ruth Madoff.

The tape is a glimpse into how Madoff was easily able to fool the SEC, which subsequently took responsibility for its failure.

"We apologize to the Madoff investors and to the American public for not fulfilling our mission," SEC Enforcement Director Robert Khuzami said. The SEC inspector general found that Madoff could have – and should have – been stopped 16 years and billions of dollars ago, blaming his ability to slip through the cracks on inexperience, ineptitude and bureaucratic laziness.

Click here for complete Blotter coverage of Madoff and his Ponzi scheme.

Galvin's office reached a deal today with the Fairfield Greenwich Group, one of the hedge funds that invested their clients' money with Madoff, that has the fund returning all of the money their Massachusetts clients put in plus six percent interest.

Other Madoff victims who invested directly with the Ponzi scammer have no such deal and are likely to get about 10 cents back for every dollar they invested.

New Charges Expected in Madoff Scandal

New charges in the Madoff Ponzi scheme are expected soon, and the question is whether members of his family will face criminal charges.

Investigators say that out of all the family members who benefited from the scheme, Madoff's brother Peter is the most likely to face criminal charges in the next round of indictments. In the past, Peter Madoff has said he knew nothing of the scheme until his brother revealed it.

When confronted by ABC News this week, Peter, who served as the chief compliance officer for Madoff's firm and was responsible for certifying to the SEC that everything was legitimate, said, "I have no comment."

And even though her husband's crimes paid for her life of luxury, investigators say there is so far no evidence that Ruth Madoff played an active role in the Ponzi scheme.

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