was marshaled out of the navy. at that time john kennedy thought his career was over. he came back with a reporter inga who realized the tale was heroic and portrayed him as a war hero and not a failure. that was the basis kennedy political biographies for all the years in running for the white house. >> c-span where history unfolds daily. in 1979 c-span was created as a public service by america's television company, it is brought to you today by your satellite provider.

after words is next on book tv, harvard business school professor eugene soltes on book why they do it. he spoke to 50 executives involved with corporate crime. >> professor soltes, good morning. >> good morning. >> pleasure to speak to you about your book why do they do it. how is it that you came upon writing a book about the prospectives and the background and the thinking of white collar criminals? >> i'm a financial economist by training and this book actually began all the way back when i was a graduate student working on large data set like most graduate students are doing at 3:00 in the morning and came across msnbc lock-up.

they were interviewing convicted felons most were violent offenses, murderer, rapists, most violent cases. donating generously and wondered what happened to these guys, the many people really respected and they were convicted for offenses and then they disappeared. and so this project began. it was really a personal interest. this was 2000-2008, that evening out of personal curiosity, this isn't a scholar project at all, i did what a lot of people think when they had in the back of their mind, what were some of the guys thinking.

if i spent time talking to them, i might see a different perspective. >> give us a sampling or a list of who it is that ewe spoke to? >> over the course of last seven years, roughly 50 people. most which were convicted criminally and civilly and cases have been overturned but prominent name executives from enron denise, ceo of tyco, two most well known announced stanford on the poncy schemes. how did you approach them and more importantly how did they agree to talk to you? >> it's a great question as an attorney asking that. i approached them with a -- as an educator. i'm someone that teaches the material to my students at harvard business school and this is not something that a student

would ever think they would face and so i wanted to see how did some of the individuals, some of which are in the school i teach at, what happened along the way, write a short letter, i would like to better understand your perspective, can we spend time together, the first letter when i sent the first ten questions, i received a number of responses, some people actually -- someone from computer associates richards, really quite elegant eight-page cursive letter back describing some of the challenges he faced others like ellen, i'm happy to chat, come visit me. he's in a prison up state new york. what i did was just start taking them up on this offer. what started maybe half an hour here, a letter there, an e-mail if they were federal prison, back and forth through a special system began something that became more apparent to me that it was interesting and actually

quite humbling speaking to some of the quite extraordinary and intelligent individuals that now face consequential sanctions to hear their perspective. as to why they spoke with me, i think one thing that i'm quite privileged of being academic is that i can commit to spend as much time as i really need today try to understand their perspective. i can come and say i am not going to try to write something and teach something to my class at the end of the week, i can spend weeks, months and in some cases spent years to try to really understand how they see -- see the world because the ultimate goal of the project. also i think many of them simply just missed their business world and, you know, i keep finance. we can talk about the financial crisis, we can talk about what is going on in other firms. much of our conversation was not much about their case. much of the revealing aspects of the conversation was talking about everything else.

they were reading. hearing what they had to saver sus colleagues and students was often times just fascinating. >> did you talk to family members, victims, others that were sort of around individuals around crimes committed? >> i did. i think it's very easy and i think approach this like many people externally, when you see this extraordinary crime that caused such devastation to someone is going to get a year in prison, two years in prison, that doesn't seem very much, to see what that does to a family, what it does to some of the kids it's really quite extraordinary and humbling even if the

sanction is, quote, short. it's been interesting that people start to get out of prison, how some people are finding different things to do and in some cases flourishing in different ways and other people are stuck having the sanctions on them for something they can never overcome. in victims, specially in some cases like made-off, some people were just truly devastated by his actions and in part of my goal of speaking to the victims is to go back to someone like say, i just had this conversation, can you help me try to understand why this doesn't seem to be resinating with you and that's where i learned something about the permitties as to how some cases didn't seem to settle in that there was really people on the other side that last everything. >> i guess i would ask the question whether you thought it

was truthful and trying to determine what the truth was and confronting with them; is that right? >> their own cases, and any prosecutor knows that people's memories, it's hard to remember all of the details. but on top of this, most of them are convicted felons so to rely on truthfulness would be naive on my part. we have a lot of emails. they weren't worrying the night after they signed the papers,

they were going out and celebrating and described how they went out with spouses and so that pies of information is more powerful, it's not something that was widely reported or if you know what people are doing after, you can kind of back up what they were thinking or their reaction. that's what i was trying to do piece it together but openly subjective. >> i didn't run to my defense lawyer that night. i went out and had a party and therefore i really wasn't intentionally doing something wrong. >> i don't want to say intentionally. but they weren't worrying about what they were doing, whichic is something different that we all do things that are wrong and this is kind of the themes in the book. we know that's wrong but we still do it. but if we know that something is actually harmful, is going to create some significant personal harm or devastation, we generally have a much deeper

pause before going ahead. could be wrong but particularly too a slap on the wrist, leads to consequence that is we see described in this book that would really offend privilege like in a lot of cases. >> let me ask you, what do you think is a difference if there is one between the white-collar criminal on the wasn't hand and those who commit other types of crimes be a physical crime, burglary or drug crimes, assault, is there a difference between the perpetrator? >> it links to the profile of the perpetrator and the crime itself. the thing that's different about most white-collar offenses is you don't have to get close to the victim. so this occurs in two ways.

the victims themselves are distant, insider trading. it's difficult to actually identify the actual name of the individuals that could say are more broadly more of a systematic and creates a harm to the financial system as a whole. >> anonymous person on the other said of the trade. >> true. so we can think of -- they exist, no doubt. this is not to say it doesn't exist. but you can't pick them out and actually see their picture. in order cases even when there are identifiable victims, the timing which they are going to be identified is actually offset. it's like a poncy scheme. they were trying to give him

more leadership positions. he can come home and most of the day look pretty good. it's only when it's revealed later that all of this starts to unwind and becomes so clear that there was actually people being harmed rather than -- so this is why i always find it interesting that i can spend and i did spend hundreds of hours with individuals in a room. i never once worried about the guy if i turned around going in my back pocket stealing $20 out of my wallet. many of the individuals, funds that i own, retirement account, have actually taken far more than $20 from me. the question is why do i never need to worry about them stealing $20 in my wallet but many without remorse steal a couple hundred from my account. you can actually do pretty devastating things and not have that gut feeling of actually doing something harm.

>> as opposed to putting a knife in somebody's throat and demanding a wallet? >> either a different kind of person or a different kind of desperation or circumstances. >> you point out in the book that in anonymity of the victim and longer period of time it takes for the victim to be revealed, it's the act itself. i think you in the book talked about how the crimes are committed by a the click of a mouse or erasing and putting in a new number on a balance sheet. is the nature of the act also that distinguishes the white collar criminal from the others. >> that's a great point. >> is able to make causations that would cost hundreds of millions of dollars in loss of the firm. that's pretty -- 3 seconds, it

doesn't feel all that harmful at the time. it's really the click of a mouse or a signing a paper. one of the people that was prosecuted after the passage steven, former cfo, he described how he was ultimately prosecuted for signing significant amount of false collateral and he was actually comfortable but didn't feel all that bad about signing many, many documents attesting to a false letter of collateral. you're signing a sheet of a paper, so what? and it was only once he actually -- was actually, a banker who didn't think the numbers made a lot sense and said these numbers don't line up and forced to lie somebody face face to face. it's a lie, this doesn't make sense.

so this is -- the most subtle distinction on lying on paper is easy, lying to someone on their face is harder and keeps escalating from there. >> so does the fact that, does this give you insight potentially onto how one might better deter white-collar crime, does that give you insielgt, -- insight a big challenge -- challenging question. most of the people is going to land you in prison. this isn't a gray. this is something one detected you're going to period for some period of time. still find ways of not seeing that they were ever going to go

to prison and that's pretty, i think, extraordinary thing to realize that even if you do something really wrong that you never see that jute come happening, maybe a different regulatory approach or a way that we need to think about, this isn't a deliberate cost in benefit calculation because if it's explicit cost to benefit calculation there's two ways to increase the cost, we can either increase the probability of being caught or we can increase the sentence. the approach we have taken in the last couple of decades, let's increase the cost once you are caught. potential to one year, it goes to three years and in some cases, in some cases they argue that some actually potential too long when you compare them to personal. >> yes, i think there was one cited in your book that -- about a 12 million-dollar fraud that

impacts shareholders in 1980's was punishable by three years where by 2000 it had increased 13, 14 years. obviously a drastic increase in penalties and sanctions and fines, but your point seems to be that that may not have much of an impact on deterring white-collar crime. i think if many of the people -- we are talking about the most privileged people here. it is a specific type of individual, but whether you go to prison for six months or you go to prison for three years, that idea is not resinating in most of the cases. you still think that that's for someone else. are you how about the fact of prison as opposed to the term? >> this goes to the other ways, and this is much broader set of norms, this stuff is wrong and it's going to have really

serious sanctions associated with it, which could be, you know, very heavily financially but could be prison and people normalize and this is what happens to people if they choose that kind of thing. that's a much more of -- that's not a cost-benefit calculation anymore. that becomes part of our normings -- norms of what's appropriate and what's not appropriate. the regulators in the case, any resources, you can -- in order to detect more cases specially from the more difficult cases need the amount of resources to -- it's challenging. a police call -- political consideration. >> how about if white collar criminals analysis, do you in

your book, do you have any suggestions on how it is that this crime can be better deterred? >> i go back to the individuals at the end, which is my view, this is my view of human nature, are not predisposed or have any inclination to actually want -- want to do something criminal. these are the things that happen because settings, norms, cultures that they grow up within a firm and the pressures that they face. i'm going to go out and become wealthy, improve the industry, you know, speak at a commencement, donate to a lot of wonderful organizations and then maybe near the end of my career i might engage in fraud or insider trading or things like

that. what we can find are cases, a prime example of this. >> why don't you tell us? >> he's an extraordinary career as one can have, more than three decades, one of the most well-respected firms in the world, potentially ceo -- >> yes. >> it became the lead person of one of the most celebrated firms for its culture and what it means and then you look at soon after his retirement, he's on the board of a number of prestigious firms, goldman sachs is one of them. at one point, 23 points after goldman sachs board meeting he's calling a well-known billionaire hedge fund and divulging confidential information. this is against everything that he did in his life to become successful, you don't become the

head of mckenzie by not being thoughtful and protecting client confidences. >> let me stop you there for a moment, i guess, i was going to say the cynic, might suggest that's exactly the kind of approach and conduct that gets you ahead in the business world. it's in the a place where necessarily ethics and morality prevail but it's those persons who operate in the gray area and even cross the gray area to get ahead and maybe what he had done is an extent of how he operated at mckenzie. >> it could be. it's impossible to rule that out. the wasn't thing i do think about roger gupta, the other partner at mckenzie, client confidentiality. this is a where you don't talk in an elevator about your clients. you don't tell your spouses in

many cases. you go to st. louis but you don't tell which firm you're working for. it would be a pretty remarkable to spend decades in that type of culture and on the one hand be able too teach it, lead it and do it successfully around client confidentiality and not respect that and still succeed. at least that's how i look at it in both of the cases in gupta and kamar. strong culture. we protect client confidences, that's what we do. that's an artificial intuition. something we learn to do, we are exposed to that type of culture. and so when they start interacting with people that

differ from that which one may argue as you're saying, perhaps in some cases this could have occurred earlier, but let's say what we know in both cases when the individuals were spending time with someone that very much acted differently. they adopted that different type of culture, that much more aggressive and undermines something -- >> that's a little disturbing because it suggests that culture and even morality is perhaps more temporary than we would like to believe that once you're out from under the environment that encourages and foster moral behavior and -- and good conduct that you become susceptible to crossing the line. >> i agree. exactly. that's the challenges. we generally spend a lot of time. there are aisles and aisles, talk about in business schools about moral character values,

moral compass. that's nice to think about and to believe that we have a set of moral values sitting here today this is how it will be going out in any circumstances or situation. the psychological evidence pushed very heavily back that the situation far dominates the individual person but we have seen a lot of instance that is you spend 40 or 450 hours -- 40 or 50 hours. that's going to be donl -- dominated for four days on the job. presumed by what you've been exposed by day five, that's the culture that you're going to adopt. i think we tend to describe moralities being the value

that's above or greater than culture. i see it driven largely and in most people aspire to do well, but when facing tremendous pressure and the wrong incentives, we see people doing things that are different. in the recent wells fargo case that's been obviously in the news. we have a case where wells fargo actually had effective culture doing several thousand people what the firm incentivized but simultaneously that those incentives lead people to do thing that were clearly lead to whole host of regulatory challenges. and so the question is, well, this is where it really becomes a tone from the top, but that's a little catch-phrase, but what's the culture set within a firm, past because they what's gibing to motivate people's

incentives and ultimately their ethics. >> so i get to the fundamental question of why they do it, you kind of have a very interesting portion of the book where you sort of survey the theories as to why white-collar criminals do what they do going back to 1800's. the view that prevailed at some point in time that suggest that you could actually tell who is going to be a white collar criminal by the way they look, their physical appearance, high fore head and pointed nose suggested that you will be an embezzler. can you tell us about that theory? >> taking place in 1939, i would not be the person that was here, it would be a colleague from harvard, ernst, well-respected person in the country when it came to talking about criminality, why crime occurs.

and how he came about this. the shape and size of bodies. what he did was one of the most criminal -- even by to do's standard, lab of graduate students go out and have ten thousand convicted felons around the country and took a couple of hundred measurements, ear lobe, angle of the nose, the breath, eyelashes. 150 years before this. something about the individual's body is related to their propensity. we have to get a lot of careful detailed measurements. in 1939 they publish book describing criminality and they have a wonder place in the book

showing what a white-collar offender looks like. he gives six or seven characteristics, if a person looks like this, they are going to be the white-collar offenders . had this actually turn out to be true, this would have been wonderful for most regulators. >> exactly right. >> search through a database of photos. but turned out that that died out as a theory, a very much in part because he's a leading proponent and people started to see how this was correlated with some of the arguments and turned out that they left -- a lot of faulty correlations. but the theory isn't totally gone away that there's actually a criminallologist from the university of pennsylvania, adrienne, who has done very interesting work which started, he's a neurocriminallologist,

it's their mind. he has done fascinating work mostly looking at violent offenders or murderer, some type of different makeup that make them have a higher propensity to commit offenses. they brought in a number of low-level, white-collar offenders, maybe see differences in brain structure associated with people that are pre-- more likely to engage in white-collar offenses. intelligence which is a humbling conclusion.

whether it's a physical cause, i mean, there are explanations in some of this. i will say, many of the people i spend time with, the difference between them and an executive coming to my class that's prominent ceo or cfo now, if i was not to have their cv's, i can flip around their cv's and most people wouldn't be able to tell the difference. they are cordial, intelligent, everything you'd expect a corporate leader to be. so the idea that there's a physical cause for white-collar criminality is the soul explanation and can contribute but it's probably not the answer. ..

what looks like raising to us as oftentimes not actual genuine reason. it's justified something we previously thought, we think we are going back and forth. with wonderful psychological evidence that suggests that's what we really thought. it comes down to our intuition. i think much of the failure is a failure of tuition rather than reasoning. it's a slightly different you would say it would take a different path approach to address some of these values. >> host: by that you mean managers manage a lot on intuition and instinct, and they just don't get a lot of thought

to the situations when what their instinct is telling them is to do something that they should know better than to do tranthree exactly. if they don't have that initial gut instinct telling them, kind of screening out that this is going to be very harmful or devastating. i think going back to the speeding example. we all know it's wrong but to the extent your speeding you don't really, your gut does a public and suggest are doing something terrible. there could be some serious consequences associated with that. the propensity to -- goes up. that doesn't strike us in our debt as we're doing physical harm. what we need to do is actually think i'm white-collar crimes in some cases tend lik like you mit know you're doing something wrong but are able to rationalize justify it's not so bad. other people are doing it, or in some instances unit even thinking about and some brings it up to you. tell your spouse tells you to

slow down, you're going too fast. this is not -- >> host: if you see an accident or you see a police car, you might slow down because all of a sudden you are reminded. >> guest: those reminders often last. a lot of the situations, doing the right versus wrong thing, these are very easy to solve if we were able to sit down with a sheet of paper and look at them. you don't need an elaborate discussion to get you to call some after a board meeting within 20 seconds and divulge confidential information. that's not really a difficult dilemma. but why do we see people commitments it says, quite brilliant people fall prey to these simple failures? this is where the classroom and training is different than the real world. in training your given a delimiter some points out,

should you do this or shouldn't you? itit's isolated. you also see that there are people in the room that will think differently than you. a lot of corporate government idea, i just can't we need need independent directors. a lot of that is in some cases checking the box from a regulatory perspective get some of this being independent but is not independent terms of thought. it will not genuinely push back on the ceo when it's a privileged position. >> host: let's talk about that. you have an interesting story about mark whitaker from archer daniels midland and what it is that ultimately convinced him that the conduct he was engaged in was improper. >> guest: he was a rising star. >> host: by the way the focus of the movie the insider. >> guest: matt damon, probably one of the most high profile people to buy some of those convicted of white-collar offense. he was a rising star at adm, and

in the course when he would promoted to a more senior divisional, they basically finally brought him under the ropes and told him this is how business is really done. there was global price-fixing on a number of these chemical products they use. very, very important for the industry. you go to your people, the japanese, people of europe and your premise that around and literally figure out how they should set the prices. this is plainly illegal. >> host: and they also as a roof downfalls names in their expense reports so there would be no evidence of who they met. >> guest: you could say to put a fair amount of effort. this is, this wasn't something again one day. postmark precluded mark whitaker in your was going on was wrong. >> guest: should've been. probably some apprehension, but again this is how one of the most successful firms in the

country has been doing it, this is what the senior people tell you this is what we are doing. if you want to stay in the position of privilege, you feel like you adapt to what that team is telling you. but where it unwind is where he goes home one night and talk to his wife ginger. just describe what he's doing at his wife reacts with just shocked. this isn't who you are, mark. this doesn't represent what you should be doing. you know this is wrong. it took someone quite physically shaken, respected and trusted but someone who also said completely outside of this business and wasn't, i'll say, contaminating in many ways by the stiffer norms and intuitions that were being created within adm. at that point he became a whistleblower. one of the most senior in history. what then started secretly taping many of these reports. mamaybe tragic but also said something in the case, he becomes a whistleblower for the government.

at the point he is a whistleblower, he did something you could argue even more shocking. he actually essentially starts embezzling. normally he doesn't talk to his wife about this we keep doing it. if you're a government informant, while you're in a a format doing a crime, you increase your propensity of being caught by some high degree. ultimately h ends up going to prison for not defense his wife helped him, you could say take the best route out, but he ends up going to prison for doing something else stupid. >> host: this suggests that perhaps one route to decreasing the level of white-collar crime is to populate companies and corporations with persons who are outside the culture but who are there and present during decision-making so that they can offer a voice that's maybe untainted by the groupthink that may occur in some company.

i've heard of this happening in some companies. do you think that's a viable solution tranthree companies can actually endeavor to do that. in genuine way. there's a commence opportunity there. tranthree. the challenge is that so much of this comes down to compliance, things we need to do to follow rules. what many firms do when were trying to avoid responding to some kind of regular problem with institute marbles, bring in more complaints people to create more rules. sometimes are smart people you see more rules and what did you? it requires a bit more thought about a keep doing what it used to do before but now stay within the bounds of the rule, which is really a perverse outcome wheezing and a lot of these cases. what you would much rather have his people come in and sit back and say is this what you're supposed be doing? does this represent why you went to the firm and reflects what you're trying to do in this industry? of course very different approach.

one area where i spent time is talking, the role of attorneys play. i believe a lot of firms, attorneys, they play the role of cocounsel but counsel john referred to in the legal conduct what you're actually giving legal advice about what is appropriate or not when it comes to the laws and regulations. at least i can say from talking, speaking to many senior managers is they are looking to the editor and because that someone who operates, someone who is operating outside that has the ability to see the culture potentially differently. the challenge i think that council placed in this case is you are hired because you are selecting what the client wants. at the same time potential with the client wants in the moment is different from what they really would like in a long-term interest. i think this is something, speaking to colleagues at law school and friends are attorneys commit something i think outside

counsel could play a far greater leadership role and actually knowing you are not just a person that whether people are following rosenberg election but in some cases you are the chief ethics officer in some cases. that's it much more humbling position. i know and i talked to colleagues in law school. they shot away when you bring up the word ethics in this context. i think this is where we see managers sometimes wanting to offset in some sense those obligations to someone else or give them, attorneys, could also be accounts when comes to technical accounting matters. i think a struggling this is not the rule were accounts injuries are generally as a people who are going to jump in the room and actually get a different ethical lens. >> host: look look, i think a lt more that goes on then probably is given credit for. that outside service providers

and advisors prevent companies and individuals are taking certain action but a love that just doesn't show up in the statistics because it never happened. on the other hand, there are circumstances where it appears the attorneys and accountants and others are actually enablers in facilitating the wrongdoing conduct, and that does compromise. a little asymmetry. maybe the solution then is you should have, imagine a boardroom or meeting with all the members of management or board about a table just need to have all their spouses and significant others around the perimeter of the room whispering in their ears when the moral compass goes off. >> guest: that would do probably a lot of good in some of these cases. there is a generally different view. i get the one example, a venture capitalist. i'll be one of the most interesting when i came across it, richard something is going to write about in his new biography. he's a well-known, celebrated venture capitalist. we hired a new cfo for one of

his firms, the cfo came in and look at the arrangements and said i see we're doing one thing that looks nothin not that compe when i look at other firms in silicon valley. it turns out most of our competitors of other firms come in some cases both lawyers and accountants, they adjust the option they can make it the most attractive for senior executives. his initial response was, this looks great. we probably need to do this. it looks like basically a free lunch. a general conversation with no additional risk. he realizes intuitions around when it came to technical finance and accounting matters might not be perfect. he's a strategist at heart. he's an innovative thinker but he's not a technical finance ad accounting guy. he had a routine procedure yields one to go to a council, outside counsel just to bring someone who sat outside this little environment that not just within from but within the silicon valley, pacify him.

friend edito and attorney comes, i looked over this and there's no way that this makes any sense, that this can be legal. i recommend against it. he went back to the cfo and said i knew everyone else is doing, it's true, but it's not for us. fast forward two years, this becomes part of the big options backdating scandal and the cfo was one of people who went to prison for this. and as reflects on this, it isn't because at a better moral compass or better value than other executives in the industry, it's because he had a better, call it compliance system in control. i don't think it's a personal preservation framework where he knew what his weaknesses lie, finance and accounting guy. he also knew getting advice and just a little inner circle might not always be right. so we anticipated this.

i'll say this is a fascinating incident, or think it comes down to humility and self-awareness. he was aware of when he might be compromised and knew how to devise the system which i give them a lot of credit for. >> host: so let's talk about some the individuals you spoke to peer and i guess let's start with bernie made off. tell us about your interactions with bernie made off. you also in the book identify particular episode that i think one might describe as a little chilling, gave elisa going to book i think a little insight into his character. >> guest: bernie madoff is a a name i've been corresponding with four years now. every wednesday night for a couple years we would speak on the phone. hundreds of pages of correspondence back and forth over this time. he was an well-respected leader in the financial industry. many innovations would think

about nasdaq decimal section can be attributed to his firm. but simultaneously bernie madoff also start out with his investment management that grew to become one of the largest ponzi schemes in history. despite the fact he could one of the largest ponzi schemes, i still see him as someone who wasn't ever destined to create this massive failure. but then the question is what happened? how does this in? i spent on with him trying to understand how this problem really and why he could never get out of it. want of the things i thought humbling when i do think of his case, most of us like to believe and -- we would never let something like this girl and get out of control which is what happened. there's no underlying business. it's a ponzi scheme, in the classic sense. there's no way he could've imagined by the late nineties he coulcould've ever gotten out of this. the question though is at what point, a question i've asked

myself, in that if people around you are putting on a pedestal, clamoring to give you more money, you go home on friday night on your dinner with your wife, your two kids, and then you say you know what? this is enough. i should call the sec, the doj because this needs to end. i think most of us what we would do is say, we know this needs to end. i'll do that next week. the next week comes and it's the same repeat. you say i know this is wrong, it needs to stop but i don't want to end it right now and watch everything i've done collapse. i think that's a fairly humbling, difficult question to ask. comment of us would have the character to actually, after that final dinner with our family, decide today we're going to end it, even though it is not enforced. >> host: maybe long sentences are a deterrent to confession.

>> guest: that's a very provocative way that has the sentence -- he didn't have a light since. he is effectively sentenced, he knew it, the second he turned it and he would never have another meal with his family. >> host: that's right. >> guest: that's an interesting way of saying it. bubut i think when it comes to wife did this happen in first place, how did it start growing and how did he potentially clampdown? this is where bernie madoff is different than any other people i spent time with. unlike the other people which i describe as people who engage in crimes who might devastate people but they didn't see those victims. they were distant psychologically. that's not true for bernie madoff. these were really family friends, people in the jewish community. how do, when you are his lose money, how do you still say it's okay to give me your money to family member x, and that something that makes --

>> host: these were not the remote victims we spoke about earlier. >> guest: the extreme opposite. these are some of the most close members that he was spending time around. referring to one instance was trying to understand his personality and how he views the world, we normally would have our talks wednesday evening, both of his sons while he was in imprisoned died. one committed suicide on the anniversary of when he turned himself in, and the other actually died of cancer. i was reading, actually an obituary when his second son died. just popped up on reuters and i was reading it. it literally just came out and i picked up the phone and it turned out that this is a call from the federal prison, to accept the call? surprise because i didn't have a call scheduled at this time with anyone, but, of course, accepted the call. it was bernie madoff. this is one, my stomach just

shrunk when heard his voice because i'm reading the obituary of his son at the exact moment and you are talking to someone father and he said he just on the radio. he asked if i could read the obituary. this is something my been fortunate in my life. i haven't had to deliver come speak to people that is about. you could take the hardest point in one's life, and loss of a child. my researcher had had, i'm just another person. i read the obituary to him. i'm not a loss of what to say after. i'm so sorry. if there's anything i can do. maybe he wants peter passed a note along to someone or a message. i don't know. i'm at a loss. what do you say to someone in the situation? he says i'm fine how my fine. then there is a pause and then he says can we go back and talk about the interest rates we were talking about last wednesday? and for the next 11 minutes we talk about interest rates.

he was talking about interest rates. when i still think about this and it comes back, it's haunting. i went home and my wife saw me i think pale. this was the most, disconcerting conversation i've had in my life. i don't think, the first reaction was maybe he was in shock and you talk about something different because -- i don't it was that. the following wednesday would go back to talking interest rates. this was an issue and i think for four minutes he was focused on it and sad and devastating, but then you can compartmentalize that and then you switch. it's as easy as being able to switch. this is where psychological mixes different. most of us don't have the capacity to compartmentalize, which i think is what helped facilitate, he could see his world operating in different buckets. he could compartmentalize them in a way that -- >> host: so when he was

soliciting money, although was breathless from just a solicitation but the consequences and the ramifications and all that would flow from that wasn't something that entered his mind at that time. >> guest: right. something which i never and i don't think he can differentiate these two things, is that in most cases he would be telling people i can take your money right now. in part on one hand you can say he looks back and i told people not to give me more money, strictly speaking. that seems true in a lot of instances. that marketing pitch was a something we can and teaching business goal, telling people not to give your money makes people want to give you money more. you can't separate whether that was good nature -- does a great marketing pitch. i generally believe that it was probably a great marketing pitch and in the back of his mind he could rationalize that i told them not to give me money. if they give me their money, that's their fault now. which is a pretty sinister

rationalization to blaming the victim. i'm deceiving them but i have given them, it's the classic where you get 8001 contract when you're about to click on something online and the firm can say online 622 6223 we toldu that could happen so it's not our fault that you click on the okay. so that's not a reasonable way -- that doesn't make it not -- >> host: you have some so many interesting stories in the book about individual white-collar criminals. are there others that stick out in your mind? i know, for example, allen stanford who took a different view and blame everyone including use government for his wrongdoing and claim there was no wrongdoing at all. >> guest: that was one of the most i'll say extreme that this was not any fault of my own. this was purely, i mean, goes, goes a link in the book, short

of the pages i could get on it that this is a all of the u.s. government. what's interesting, we can separate the two apart, he is is one of the few cases in which a financial institution, i'll put that in quotes, was shut down prior to its failure. which on one hand -- >> host: which is the goal of law enforcement. stop it before more victims are created. >> guest: most of the time in the financial industry things collapse, go bankrupt, fraud is known. and then receivership kicks in at other things. you can argue the best history is to stop it before the collapse. it's ironic is the looks at, there are other firms that could have failed that didn't have government bailouts. i didn't take a government bailout and they put me in receivership. and so we kind of uses the logic that because i didn't fail, it must be legitimate, as a way of i think providing some comfort

that this was not his fault, fat this was someone else. it's a challenging question. if there's a 99 point 9% chance a firm is going to fail, you say it makes a lot of sense for it to be taken over. so 1% chance that my be shutting legitimate business. i think with receivership and other documents possible put together suggest that this is closer to the 99% psychic feces up more of the 1% side which -- >> host: the allegations on the call wasn't that the were misrepresentation but what is doing with the money. so that's hard to argue he would've succeeded at the government not stepped in. >> guest: if you look at the management and it did spend time trying to say, i mean, to the extent is business let's say was legitimate, he should be one of the greatest investors. worn buffett should be calling him for advice if you look at the rate of return is able to generate.

the one example he provided that there was one at one door if produced 30% something in return, to generate the transmitted over decades that should've been hundreds and hundreds of deals. it should look like berkshire hathaway and warren buffett. it doesn't. as a cfo to the firm, a college buddy of his, a cfo was into some pretty nasty things. he essentially stole the money in a trust when his wife died it was meant for his kids. and then ultimately if you look at all the other major executives of the firm, ultimately they turn either government witnesses or a century was supposed of them are in but none of the new with the business action was. you can see the content you can see the internal emails going back and forth, we don't ask questions, we just tell the stuff. it makes it much harder to think those are legitimate business that he only knew about and know what else inside.

he's able to appeal but the receivership continues to document more and more evidence suggesting that there was no, to the extent, you could say there was, but buying a golf course or someone for a couple hundred million dollars and then moving around and marking up to $3 billion, that's not investment generating that legitimate return. >> host: anyone else take out in your mind? i recall the story of marc dreier and his impersonating an attorney i believe. >> guest: extraordinary. harvard and yale trained attorney. smart, probably one of the most reflective and just, i can see him as an academic. just in terms of his death. self aware now when you're the time to step back and think about his action.

not at the time. this is a case of where he wanted to build this world-class law for and didn't have the money to do that. and in some creating a false -- basically a billionaire client. what's pretty amazing i think both sides, both that he was able to create first, tens of millions of dollars but able to create documentation. he didn't have a finance background. he was able to create all the financial from scratch. and then very significant well-respected hedge funds purchasing these notes. after the first one worked he thought the firm might start taking off but as you said, the business the cost cap going up faster than revenues. another note, another note until the point where it just becomes crazy. he ends up finally someone was willing to take the note. so we want actual person representing the note. so we has to in-depth

impersonating someone pick tickets to the level of absurdity. >> host: he walks into a a conference room pretending to be an attorney for a pension fund in front of a hedge fund, some as i recall actually knows this pension fund and doesn't recognize mr. dry as an employee. >> guest: and he tries, i just need to walk out of room and calls, he hops out. this is a point where he has a private jet waiting at the airport, i believe in toronto. he could've taken off but this is just shows how delusional someone can become. the lack of self-awareness when you're in the situation, you could say that smart thing would've been to divert that jet to some country with a pile of money that was not going to extradite him in which several people in the book that did exactly that. but he actually still thought he could get out of it. he could explain his way out of it at this point in time. which just shows how crazy you can get into situations.

>> host: let me ask you one of the question which is, again coming back to this notion of what's the effective deterrent and how do we minimize a reduce the level of white-collar crime. you point to sort of the concepts of low bit like public shaming or in the orthodox jewish community there sort of individuals who are shunned by the community, the whole community is involved in the process. can you describe that and perhaps is there a way we can embrace the concept, at least to try and prevent or deter white-collar crime on a broader scale? >> guest: a great, an idea that, but different about how i think what currently happens, many times we see these prominent executives face a significant cases of wrongdoing, and they don't, people back up as needed i will say politically so to speak but they are not genuinely shunned. in orthodox jewish community when someone engaged in

something, sanctioned place upon them, then able to take leadership positions at temple but it's even more than that. people in the community are told not only do not socialize with this person but do not even visit the place of business. in some sense this form of shaming is a deep it's hurting the person on every dimension. not because they're going to be thrown necessarily in prison, this is being dealt with internally within the community. ..