In his jailhouse interview last summer, Bernie Madoff expressed his dismay at some of the folks the SEC sent to investigate him.
Such as an “idiot” called Ostrow, who he described as a “total arsehole” and a “blowhard.”
(In contrast, Bernie said he was “dear friends” with others at the agency, including the current head, Mary Schapiro).
Here’s Bernie on Ostrow:
Madoff recalled that with respect to the 2006 OCIE exam, “two young fellows,” (Lamore and Ostrow) came in “under the guise of doing a routine exam;” He said that during that time period, sweeps were being done of hedge funds that focused on front-running, and that was why he believed Ostrow and Lamore were at BLM.
Madoff recalled that they were there for two months, and that they “spent 90% of their time looking through emails.” He opined that this is “routine for the SEC now, they feel that’s the way they find things.”
Madoff stated that Ostrow and Lamore looked through bank reconciliations, expense accounts, and checks. He stated that he didn’t understand what they were looking for. He said that he had “tons of capital,” and so he “didn’t understand why they were looking at that stuff.”
Madoff stated that Ostrow was “so cryptic” and that he spent a “huge amount of time looking at invoices for expenses.”…
Madoff also noted that during the 2006 exam, Ostrow in particular kept asking for computer runs. He stated that they taxed his computer programmer in that they “kept asking her to do different runs” and to reformat the material.
Madoff recounted a conversation with Ostrow:
Ostrow: “So tell me about this article.” (Ostrow referring to the MarHedge article [that detailed scepticism about Madoff’s returns], leaning back with his hands behind his head “like Lieutenant Colombo.”)
BM: “What about it?”
(Madoff stated that Ostrow was “acting as if I didn’t do this business.”)
BM: “Lori Richards [another investigator] has a whole file I sent her with this info. They have it.”
WO: “Well, it’s a big organisation; we don’t talk to each other.”
Madoff stated that he “really got annoyed” with Ostrow for repeatedly asking BLM to generate computer runs.
Madoff stated that during this exam, they “never looked at fi-ont running.” He stated that two months after they left, he received a letter citing him for “two ridiculous violations,” which they were wrong about; the violations they cited were incorrect. He went on to state that when BLM submitted their response to the SEC letter and copied it to FINRA, FINRA responded like, “What the heck? Are you nuts with this nitpicking?”
Madoff stated, “After two months, they found 2-3 nitpicky things, and they were wrong about those things.”
He stated that Ostrow and Lamore “never really got into books and records as related to stock records or DTC records.” Madoff stated that “they never even looked at my stock records” or did a “box count.” He said he was “astonished” that they didn’t ask for DTC records, and stated that only a regulator could get those records from DTC, and the SEC would “have to go to DTC.” He added that DTC does not have separate
accounts for each customer, but rather, provides a global report, but stated that if they went to DTC, they would’ve seen his market-making position, and that it “would’ve been easy for them to see” the Ponzi scheme.
Madoff stated that the SEC could’ve gone to counterparties, and if they had, they “would’ve seen it,” adding, “they didn’t do any of that.” He stated that “it’s the only thing to do,” and clarified, “If you’re looking at a Ponzi scheme, it’s the first thing you do.”
And what did Madoff really think of Ostrow?
Madoff indicated that Ostrow was an “obnoxious guy,” and noted that Ostrow wore an SEC jacket with the word “Enforcement” emblazoned across the back. Madoff stated that Ostrow wore this jacket in the BLM offices, as well as while going in and out of the building.
Madoff also stated that this jacket “caused an uproar” in the BLM offices, and that it did not look good to have someone walking through the building with a jacket such as that. Madoff asked Ostrow
if he was in the Division of Enforcement with the SEC, which Ostrow indicated he was not.
Madoff stated that Ostrow “was very cryptic.” Madoff stated that Ostrow was “doing things
that made no sense to us at all.” He added that Ostrow was a “total arsehole.”
He said Ostrow “was an idiot,” citing Ostrow’s repeated requests for computer runs, which would
take eight hours to run off. Madoff stated, “I almost came to blows with him.”
Madoff also characterised Ostrow as a “blowhard” who acted aggressively and was not intimidated by Madoff. He noted that Ostrow “talked tough, but didn’t look at anything.”