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Judge Accepts Madoff's Guilty Plea; How to Spend $787 Billion; Iraqi Shoe Thrower Sentenced; Madoff Victim NJ Sen.Loretta Weinberg Speaks Out; Why Did Madoff Do It?; How Regulators Missed Madoff; Protecting Your Investments From Stimulus Scams

Aired March 12, 2009 - 10:59   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

TONY HARRIS, CNN ANCHOR: It is Thursday, March 12th, and here are the top stories we're following for you in the CNN NEWSROOM.

A con man comes clean. Wall Street icon Bernard Madoff admits his fraud, perhaps the biggest in U.S. history.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: We're ordinary people who worked hard and saved our money, and it's gone. Just gone. Bernard Madoff is like some little maggot that crawled out from under a rock.

(END VIDEO CLIP)

HARRIS: OK. His victims range from Hollywood royalty to everyday people. Some sound off in court today.

He threw his shoes at the president of the United States. Now an Iraqi court throws the book at him.

Good morning, everyone. I'm Tony Harris. And you are in the CNN NEWSROOM.

Well, Heidi told you last hour that Bernard Madoff has entered a guilty plea to the 11 charges he was facing. We have just learned that the judge has, in fact, accepted that plea.

OK. So right now, we're talking about this once high-flying Wall Streeter, Bernard Madoff, again in court today, pleading guilty to a multibillion-dollar investor fraud.

Madoff told the judge a short time ago, "I always knew this day would come. I never invested the money. I deposited it into a Chase Manhattan Bank."

Let's be clear. This is not a plea deal, but a guilty plea. That means Madoff will not necessarily have to explain every detail of his crimes, nor will he have to implicate anybody else.

The 11 criminal counts run the gamut from securities fraud to theft to money laundering. Madoff had 4,800 clients when his con was exposed in December. The exact size of this rip-off may never be known, but the government is going after $170 billion.

Madoff could get 150 years in prison. Experts say 20 to 30 years is more realistic. He is scheduled to be sentenced, when? June 16th.

Let's get right to the action. CNN's Steve Kastenbaum is at the federal courthouse in New York where Madoff is appearing right now before the judge.

And many of his victims -- and Steve, let's do this -- let's go back and read folks more of the quotes from Bernie Madoff in court today.

STEVE KASTENBAUM, CNN CORRESPONDENT: OK. Tony, we are getting word from inside the courthouse. We've had CNN's Allan Chernoff inside there all morning long. We're getting word what Bernard Madoff said while he was before the judge.

And one of things we are told is that Bernard Madoff seemed very nervous, that he was wringing his hands, and the judge suggested he take a glass of water, drink some water, which he did. And then we're told that Madoff told the judge that, I did a ponzi scheme. He said, "I'm grateful to speak for my crimes."

Madoff going on to say, "I thought it would end quickly, but it proved impossible," talking about how this Ponzi scheme started. He went on to say, "I'm ashamed for these criminal acts. I cannot express how regretful I am for my crime."

So Madoff remorseful here in court today, in federal court in downtown Manhattan. Whether those words will have any effect on the victims, whether they'll feel any sense of satisfaction that Madoff expressed sorrow, it remains to be seen.

I have to tell you, the victims who are outside the courthouse today didn't really seem satisfied at all, and many of them told us they wanted there to be a trial. They wanted all of this to come out in court. They wanted to hear Madoff say exactly what happened.

HARRIS: Well, Steve, if you would, take us back a little bit. We know that the victims have been arriving since about 8:00, 8:30 a.m. Eastern Time this morning. Set that scene for us, and share with us more of the conversations you had with some of the victims who were trying to get into the court this morning.

KASTENBAUM: It was really incredible out here this morning. Before dawn, there were hundreds of reporters and camera crews out here, they're still out here today. We haven't seen this much activity around the federal court complex here in lower Manhattan since Martha Stewart was here for her investment insider trading case.

HARRIS: Yes. Yes.

KASTENBAUM: It's an incredible army of reporters, and there were also victims lined up hoping to get one of the 50 seats that were being put aside for the victims.

I just have some more information just being handed to me now here.

HARRIS: Oh, terrific.

KASTENBAUM: We have just learned that Madoff's sentencing has been set for June 16th at 1:30 in the afternoon. So Bernard Madoff will be sentenced here on June 16th in the afternoon. What his sentence will be remains to be seen, but, Tony, we know that he could be sentenced to up to 150 years in jail.

HARRIS: Yes.

KASTENBAUM: Bernard Madoff is 70 years old. It's pretty obvious that he's not going to see the light of day again, that he'll spend the rest of his life behind bars.

HARRIS: And what we're hearing is that the sentence is more likely to be in the range of 20 to 30 years.

Steve Kastenbaum for us outside of that federal courthouse building in Manhattan.

Steve, appreciate it. Thank you.

Just want to go through some of these quotes once again. I'll read them to you, you can read them for yourself, quotes from Bernard Madoff in court this morning.

"I am grateful to speak for my crimes." Let me continue here. "I thought it would end quickly, but it proved impossible."

What does that mean? He's talking about the Ponzi scheme.

"I always knew this day would come. I never invested the money."

"I never invested the money. I deposited it into a Chase Manhattan Bank. I am ashamed for these criminal acts."

Again, from Bernard Madoff, in court this morning, "I cannot express how regretful I am for my crimes. When money was requested, I paid it out from the Chase account."

Quotes from Bernard Madoff, in court this morning.

Let's talk about this legal case, the likely sentence, and what happens in between.

Let's talk to CNN Senior Legal Analyst Jeffrey Toobin. He joins us now from New York.

I don't know which one of these quotes, Jeffrey, is the most stunning here. "I never invested the money."

JEFFREY TOOBIN, CNN SR. LEGAL ANALYST: Well, but that's a Ponzi scheme.

HARRIS: That's a Ponzi scheme.

TOOBIN: That's exactly what he did. That's how Ponzi schemes work.

HARRIS: Yes.

TOOBIN: You tell people you're investing the money, but, in fact, all you do is pay the old investors with the new money that's coming in.

HARRIS: Right.

TOOBIN: The amazing thing about this Ponzi scheme is that it lasted for so long. Usually, they fall apart after months -- a few months. This went on for 20 years.

HARRIS: Yes. He says, "I thought it would end quickly, but it proved impossible" -- to get off the treadmill. Yes. Yes.

TOOBIN: Well, I think what he seems to be saying there is, I hoped that the investments would some day catch up...

HARRIS: I see.

TOOBIN: ... with the money I was paying out illegally, and somehow it would all come out even. It never does. It's an absurd idea to think that it could ever work out, but that's what -- that's what he appears to be saying.

HARRIS: Jeffrey, you're getting these statements from his company as an investor that indicate where your money is going. There is the pie, and you've got, you know, this portion of your investment is going here.

That's all made up. That's all imaginary. That's -- I mean, there have got to be...

TOOBIN: Every month. I mean, the thing that is so incredible about how this worked is that every month, thousands of investors would get statements...

HARRIS: Yes. Yes.

TOOBIN: ... that said, well, you bought IBM, you sold this, you bought that. All of it fictional. All of it raising the very, very big question of how many people were in on this, not just Bernie Madoff, because this is an elaborate business. This is a lot of people working in this famous 17th floor space here in the lipstick building in New York City, producing all of these false statements, writing all these checks, making all these deposits.

HARRIS: Exactly.

TOOBIN: How many of them knew that the whole thing was a complete scam?

HARRIS: Does -- now, Bernard Madoff has entered this guilty plea. Does he have to cooperate with authorities moving forward in this investigation? TOOBIN: No, he does not. That's why this is a plea and not a plea bargain.

He has not agreed to cooperate at all, so the judge will not give him any credit for cooperating when he comes for sentencing. But remember, this hearing is still going on, as we speak, Tony. And there is a very big question that Judge Denny Chin has not resolved, which is, today is March 12th. June 16th is the sentencing. Does Bernie Madoff stay out on bail for those months, or is he locked up today?

That's the big issue to be decided, and the judge hasn't decided it yet.

HARRIS: Well, what is your thought on this as our senior legal analyst? Do you think that Judge Chin will revoke, what is it, $10 million in bail, and remained him and put him in prison today?

TOOBIN: It's really a tough call.

HARRIS: Yes.

TOOBIN: I think I'm going to wimp out on answering you directly.

HARRIS: OK. No worries.

TOOBIN: But let me tell you how a judge thinks about this.

HARRIS: OK.

TOOBIN: There are two questions that a judge always answers about bail. One, is the person a danger to the community? And two, is this person a risk of flight?

Now, Madoff's lawyers will say, look, he's not handling money anymore. He's not a danger to do this again. And plus, he's surrounded by security guards 24 hours a day. He is certainly not going to go anywhere.

And that's not a terrible argument. The problem is, does it create disrespect for the judicial system that a guy who is now a convicted felon in the biggest financial fraud in the history of our country is living in a penthouse off Park Avenue?

HARRIS: Right. Right.

TOOBIN: And that's the question Judge Denny Chin is going to have to resolve. Frankly, I thought he should have locked him up months ago.

HARRIS: Right.

TOOBIN: But he has let him out this long, maybe he'll let him out for the next three months.

HARRIS: And one more quick one here. You mentioned that the hearing is continuing right now. Great point. I'm curious to know whether or not the prosecutors get an opportunity to ask Madoff questions. Is there a possibility here that we will learn more of how this scheme actually worked?

TOOBIN: Not today. Not in a guilty plea.

HARRIS: Not today.

TOOBIN: There is some chance that they could give him immunity, put him in the grand jury, and force him to answer further questions. But today, he is the only one who -- he gets to speak on his own.

Now, remember, also, Judge Chin has said he is going to allow some of the victims to speak on the question...

HARRIS: Yes. Yes.

TOOBIN: ... of whether he should be allowed on bail. That should be pretty dramatic testimony. And certainly the prosecutors will have an opportunity to address that issue, as well as the defense lawyers.

So the big question of, is he going to stay out on bail? That's what's before the court right now. And we should hear any minute what the answer is.

HARRIS: Strategically, do you make this move -- do you take this move if you're Bernard Madoff, because you hope to protect your wife and other loved ones?

TOOBIN: It's really hard to know what his strategy...

HARRIS: Yes. I know I'm asking you a question you don't have answers to.

TOOBIN: I think, you know, if he really wanted to help them, perhaps he would have taken a plea bargain and agreed to cooperate. This way, the way he's trying to help his family, I think, is avoiding a trial.

HARRIS: Yes.

TOOBIN: Because at a trial, there would have been a lot of testimony under oath, other people could have been implicated. This cuts short the legal proceedings.

HARRIS: Got you.

Jeffrey, appreciate it.

TOOBIN: And he accepts that big sentence, but he hopes doesn't implicate his family.

HARRIS: Jeffrey, terrific. Thank you, sir.

TOOBIN: OK, Tony. HARRIS: Got to quickly get to the president now, who is taking part in a session that is designed to speak to states and to managers of states who will have the responsibility of doling out the contracts related to the stimulus money. This is all about how your money will be spent moving forward.

Here's the president.

(JOINED IN PROGRESS)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: And I think all of you, in your respective roles, are hearing stories of people who are going through extraordinary hardship in your respective states. And we passed this American Recovery and Reinvestment Act because we strongly believe that this is an opportunity not only to deal with the immediate crisis, but also to lay the foundations for long-term growth and prosperity in this country. And, you know, the American people are behind what we're doing, and the question then becomes, are we going to be able to deliver for them?

They are going to be watching very carefully. And there are those who believe that government doesn't have a role to play in this recovery. There are those who believe we should be focusing exclusively on Wall Street when it comes to this crisis, and that we don't have time to worry about infrastructure, and we don't have time to worry about our health systems, and we don't have time to think about how we're going to improve our educational systems.

And all of you, what you do in the coming weeks and coming months, over the next couple of years, is going to make a huge difference in whether or not the trust that the American people have placed in us is justified. So my main message to all of you is, I think you're up to the task, I think you guys will do extraordinary work with using these precious tax dollars that the American people have given up in order to deliver on the kind of economic growth, short term and long term, in job creation that's going to be so important. But we're going to need to work really hard and we're going to have to make sure that every single dollar is well spent.

We have got to go above and beyond what I think is the typical ways of doing business in order to make sure that the American people get the help that they need and that our economy gets the boost that it needs. And so I've said before -- I know Joe emphasized this to you earlier -- if we see money being misspent, we're going to put a stop to it. And we will call it out. And we will publicize it.

On the other hand, if the money is being spent as it needs to be spent, to rebuild our roads and our bridges, our schools, and making sure that we are putting in place the kinds of infrastructure foundations that are necessary for economic growth over the long term, then I think all of us will benefit, and our voters and our constituents, the people we work for, are going to be extraordinarily grateful. So you've got this -- this wonderful mission, and, you know, it's rare where you get a chance to put your shoulder to the wheel of history and move it in a better direction. This is such an opportunity, and I hope all of you seize it. I know this is very tough work, because you've got a lot of money coming out quickly, it's got to be spent wisely. You don't always have the infrastructure, the organizational structures to accommodate all this stuff right away, and you're going to have to build that and do so in record time.

But looking around, you guys look like pretty capable people. So I have great confidence in you, and I think you're going to do a wonderful job.

We appreciate you. Good luck. And I'll be seeing you at some ribbon-cuttings, all right?

Thank you.

(APPLAUSE)

HARRIS: All right. There you have the president of the United States speaking to money managers, state and city money managers who have the responsibility now of getting the funding to those so-called shovel-ready projects in their cities and states, getting that money on line and out of the door.

The president is wanting to be kept in the loop, certainly, on how that money will be spent. It is a committee that is essentially being led by the vice president, Joe Biden.

News just into the CNN NEWSROOM. We're learning more from the court in Manhattan, the Bernard Madoff case.

We have just learned that Judge Chin has ordered Bernard Madoff remanded to prison. That means he will be going to prison immediately. Just a few minutes ago, we told you that he had pleaded guilty in the last hour here to the 11 counts against him.

Let's show you again some of the quotes from Bernard Madoff in court this morning, what he had to say when he was given an opportunity to speak to the court.

"I am grateful to speak for my crimes. I thought it would end quickly, but it proved impossible."

Madoff speaking in regards to the Ponzi scheme, "I always knew this day would come. I never invested the money. I deposited it into a Chase Manhattan Bank. I am ashamed for these criminal acts."

Bernard Madoff in court this morning, "I cannot express how regretful I am for my crimes. When money was requested, I paid it out of the Chase account."

Pleading guilty this morning to the 11 charges he was facing, and we just learned he is going to prison immediately. More details to come in the CNN NEWSROOM.

You know, he is going to prison. We're not talking about Bernard Madoff in this case, we're talking about that guy, the Iraqi journalist who wanted to make a statement with his shoes. We will tell you how long he will serve.

(COMMERCIAL BREAK)

HARRIS: Looking for comfort and answers, residents of three Alabama towns lean on each other after a shooting spree. Authorities say Michael McLendon killed 10 people in a 24-mile, 50-minute rampage before turning the gun on himself. The dead included McLendon's family members and apparent strangers.

Charles Myers lost a daughter-in-law and his 18-month-old granddaughter.

(BEGIN VIDEO CLIP)

Charles MYERS, VICTIM'S GRANDFATHER: There was no better place for her than to be in grandpa's arms in the morning. Every morning.

(END VIDEO CLIP)

HARRIS: Investigators say they're closer to finding a motive, but they're not revealing what that could be. They are dismissing a direct link between job depression and the killing.

Certainly, you remember this, the Iraqi journalist who threw his shoes at President Bush in December. Remember this? Well, he was sentenced today, three years in prison. Hard to forget this.

Our Nic Robertson is in Baghdad for us.

And Nic, is it true that in some quarters, this guy is considered a hero?

NIC ROBERTSON, CNN SR. INTERNATIONAL CORRESPONDENT: Absolutely. If you look around the region here, there's a lot of people that think what he did was the right thing, to throw a shoe -- which is a big insult in the Middle East -- to throw a shoe at President Bush.

There's a lot of people around here that believe that he is responsible for all of the deaths here of Iraqis, and all of the suffering of Iraqis. And in Iraq, I guess there is pretty much -- a sort of 60/40 split, 60 percent for the journalist, 40 percent against him, because it was an embarrassment for the government here when it happened. But, yes, he went into court a hero, but has come out a convicted man.

HARRIS: Is it true he had 17 defense attorneys?

ROBERTSON: You know, he had 25 when the trial first started a month ago, and then 17 today. And one of them actually put a point to the judge. The judge knocked the point down, and the lawyer said, OK, that's it, I'm out.

But there has been no shortage of judges that want to come and support him, Tony. He is a popular guy right now. HARRIS: Yes. And he got three years. What's been the reaction?

ROBERTSON: Well, you know, his family are really angry. They say kind of, what justice is this? You've got terrorists and murderers here who are being let out of jail. You know, they have been railing on President Bush -- former President Bush, railing on the prime minister here, Nuri al-Maliki.

There hasn't been sort of an uprising of anger on the streets, if you will, but there are a lot of people here who generally feel, as the government appears to feel, that this was an embarrassment for Iraq. You can't have, they think, you know, foreign heads of state coming to Baghdad and then getting throwing shoes at them. It's just not right.

HARRIS: Yes. No, that makes sense.

And I'm just sort of curious as to what these attorneys can do, 15, 17, 25 of them. I mean, what can they do? I don't know what the appeals process is like in Iraq.

ROBERTSON: Well, they are going to base their appeal, they say, on the fact that they believe that this law, what he's been -- what he's been convicted of, which is assaulting a visiting head of state, doesn't apply to him, because he wasn't trying to kill President Bush, just trying to make a point, throwing his shoe. It seems to be a technicality within the law.

But, you know, the courts, the judges, and, it seems, the government have made that position quite clear in this case. They don't want a repeat performance, so it doesn't seem at this stage very likely the lawyers are going to make much headway -- Tony.

HARRIS: All right. Nic Robertson for us in Baghdad.

Nic, as always, great to see you. Good to talk to you. Thank you.

Let's get to our Senior Correspondent Allan Chernoff. He is in New York, and he has done so much work on this entire Bernard Madoff case, the story, the early days, and on to the present day.

And this moment in time, Allan, if you would, so much to talk about with you, but let's start with the guilty plea from Bernard Madoff, and then the judge's decision on bail.

ALLAN CHERNOFF, CNN SR. CORRESPONDENT: Well, Tony, I'll tell you, right now, Bernard Madoff is on his way to prison. The judge remanded the bail, so Mr. Madoff on his way to prison. And when that was announced in court just a few minutes ago, the victims of the Madoff scam who were in there, they just erupted in applause.

Now, let's talk about what happened prior to that in the courtroom.

Mr. Madoff appeared to have been resigned to his fate. Pretty much the only emotion, the only significant emotion I could detect, was when Madoff walked into the courtroom. He grimaced as he walked in.

He stood erect before the judge, and he read a five-minute statement. And he started out by saying, "I am grateful to publicly speak about my crimes for which I am so deeply sorry and ashamed." He then went on to say that the fraud, to the best of his recollection, began in the early 1990s. The government actually maintains it started back in the '80s.

Mr. Madoff said, "I believed it would end shortly, and I would be able to extricate myself," but he said that he wanted to satisfy his clients at any cost. So what he did was, take their money and simply deposit it at the Chase Manhattan Bank, and then tell the clients that they were earning returns well above the market average.

He said that he operated a Ponzi scheme, taking the new money, giving some of that money to people who were withdrawing their funds. And, indeed, there were many, many victims who depended on their Madoff money, who accepted withdrawals either annually or several times a year. They lived off of their Madoff money, many of these people did.

HARRIS: Yes.

CHERNOFF: Madoff then went on to say that, "I realized my arrest and this day would come. I am deeply aware that I have hurt my family, many friends and business associates." And then he pled guilty to the 11 counts. Each one read by the judge, each time Madoff saying, "Guilty" -- Tony.

HARRIS: All right. So let's deconstruct this a little bit.

The first thing that struck me, you mentioned that there was a five-minute statement. Did he ever explain why he did this?

CHERNOFF: He said that what he wanted to do was satisfy his clients at any cost.

HARRIS: I don't get that. I mean, you've been following this story very closely. He sounds as though he's still trying to present himself as a businessman here, servicing his clients, at the same moment he is clearly ripping them off.

CHERNOFF: Tony, a very astute observation, because during that five-minute speech, Mr. Madoff also continued to maintain that his other businesses, the trading operations run by his two sons, were entirely legitimate businesses. Indeed, he said that the commission, the four cents (ph) of trade commissions that he actually took from these victims, he said he actually took that money and put it into a separate bank account at the Bank of New York, so that the bad money, the fraudulent money, was in one account, and the supposedly legitimate money was in another account.

So, yes, he is still trying to present himself in some ways, you could say, as a guy who was still running legitimate businesses, correct.

HARRIS: So I asked this of Jeffrey Toobin, and he wouldn't venture down this road -- he is probably smart. But you have been clearly following every nook and cranny and every turn in this case.

Can you hazard a guess as to why he entered this guilty plea, and didn't hold out for a plea? Is he trying to protect others in his organization?

CHERNOFF: First of all, Mr. Madoff knew that the gig was up.

HARRIS: Yes.

CHERNOFF: The markets had collapsed, he could no longer continue the Ponzi scheme. Too many people wanted their money, and he didn't have it.

He knew it was all up. He knew when he confessed back in December to two FBI agents, he knew right then that he was going to jail. And he said as much.

Now, in terms of the future of Mr. Madoff, and his victims, I mean, they...

HARRIS: I mean, is he going to come clean?

CHERNOFF: ... are still very furious.

HARRIS: Yes. Yes. So the victims -- I want to get to the victims in a moment, and stay with us, Allan, because this is obviously our story of the morning.

But I'm still curious as to if he is trying to in some way protect the others. There is no way you can look at this scheme and believe for a moment that he was doing this on his own. You're sending out statements to thousands of investors every month, every quarter, whatever it is, and this is all made up.

So is he still going -- is he under any obligation to cooperate with investigators moving forward? I suppose that's the question.

CHERNOFF: That -- and that's a good reason for him to simply plead right now. He is trying to take the bullet.

He clearly does not want to be implicating his wife, Ruth, who had been involved in the business, his two sons, who had been operating the trading business which Mr. Madoff claims was a legitimate business. And, indeed, it was one of the major market- makers on Wall Street, matching buy and sell orders for big brokerage firms, like Fidelity and Charles Schwab. It even took business away from the New York Stock Exchange. That's how big Bernie Madoff was, and that enabled him to perpetrate this fraud.

HARRIS: OK. Did he hear from victims in the courtroom this morning? CHERNOFF: A few victims did speak, but the judge only allowed victims to speak if they were opposed to Mr. Madoff being remanded to jail, to prison. And, of course, the victims were all quite pleased with that.

Only a few victims said that they would prefer to see a trial. And the first one who spoke actually did say to Mr. Madoff, "Will you look at me?"

HARRIS: Yes.

CHERNOFF: And Mr. Madoff briefly did turn and look at him.

But otherwise, not too much from the victims. But they are clearly very pleased that Mr. Madoff is finally heading to jail. That has been infuriating to them, that he has been able to remain at miss luxurious Manhattan penthouse.

HARRIS: I believe there are probably victims out there who are still pretty upset who were in that courtroom this morning that didn't have an opportunity to put their disgust on record. But maybe we'll save that for another discussion that we'll have, unless you want to jump in.

CHERNOFF: Well, Tony, indeed, that will be coming on a future date. Mr. Madoff will actually be sentenced...

HARRIS: Yes.

CHERNOFF: ... on June 16th. And at that date, the victims will be able to speak about the sentencing. Keep in mind, he is facing a potential maximum sentence here of 150 years in prison, effectively life in prison for 70-year-old man, of course.

HARRIS: Yes. Terrific reporting throughout this case.

Allan Chernoff in New York.

CHERNOFF: Thank you.

HARRIS: I'm not going to do that tease.

We're going to talk to one of Bernie Madoff's victims in a couple of moments.

(COMMERCIAL BREAK)

HARRIS: OK. We are still sorting out details on this, but let's give you what we know on this story just in to CNN. From politico.com and our affiliates in Washington, both are reporting on an FBI raid on the office of Washington's chief technology officer. The chief technology officer was Vivek Kundra. He was appointed last week to the Obama administration. While the raid is at his office, no one has indicated it has anything to do with him. The FBI says this is part of an ongoing investigation. And the White House so far has not commented. We will continue to follow developments on this story. Well, Washington, as you know, is trying to stimulate the economy, and it is also stimulating something else: scams, an undesirable side effect when big money gets tossed around. Personal finance Editor Gerri Willis is joining us from New York.

Gerri, good to see you.

GERRIS WILLIS, CNN PERSONAL FINANCER EDITOR: Good to see you, Tony.

HARRIS: Hey, Gerri, what do we need to know about these scam artists and scams that are potentially out there waiting for us?

WILLIS: Well, Tony, the stimulus bill is stimulating crooks, that's according to the Better Business Bureau. Scam artists are using all these headlines, the confusion about the new government programs to try to steal your money. So I want to show you one of these.

Take a look at this website. It promotes easy grant solution kids. What does that do? Well, it claims it can get you thousands of dollars in government grants.

HARRIS: Oh, boy.

WILLIS: Not so much. I've got to tell you, you have to pay for it, obviously. They're going to take your credit card number, and goodness knows what they're going to do with it. But at the end of the day, you have to be careful with this stuff. Especially when it looks so right! There's a picture of the president there, it's sort of convincing. And I have to tell you, Tony, at the top of that web page, guess whose logo is there. CNN.

HARRIS: Get out of here. Really? Really. Wow! All right, well, thanks for throwing that...

WILLIS: Yes, so they use every trick in the book to make things look legitimate.

HARRIS: So these scam artists, I'm curious, are they taking advantage - we're a couple weeks away from the filing deadline for taxes.

WILLIS: Oh, yes, that's a big one. And people get confused here. You know, it's almost tax season. There's an e-mail that's going out that actually went to one of our CNN colleagues.

Take a look at this. It says, "After the annual calculations of your fiscal activity, we determined that you're eligible to receive a tax refund of $189.60."

Now, you look at that, and you think, well, you know, that sounds really persuasive, and I would like to have that money, right? That's a nice dinner out, a new dress, whatever.

Remember, though, Tony, the IRS, they don't send e-mails to taxpayers with requests for personal information. They don't call you up on the telephone. If you're being contacted by the IRS, you are going to know it. But if you have that inbox full of things saying, you know, "we're the IRS, we need you to do this, we need you to do that," do not listen. Delete that e-mail. Let me tell you, it's a bad way to go, because they can't do that. They don't do that.

HARRIS: Is that one of those cases where if it sounds too good to be true, yes...

WILLIS: I was trying to avoid that.

HARRIS: No, I'm walking all over it. We've got this scam, and we've got Bernie Madoff, no, I'm all over if it sounds too good to be true. Gerri, what do you do if you think you're getting scammed?

WILLIS: OK. So you can complain. You can go to the Federal Trade Commission - you want to get these people in trouble. Go to the ftc.gov. The Federal Bureau of Investigation, the FBI looks into this stuff - IC3.gov.

And if you want to check out - Is this a scam? Is this real? What is it? - go to the Better Business Bureau, bbb.org. They will answer your questions. They investigate these things all of the time.

And, of course, Tony, from your house to your job, your savings and your debt, what you should be doing right now to survive in today's rough economy, we're going to have "YOUR BOTTOM LINE" this Saturday at 9:30 Eastern. We're going to have great advice on how to take advantage of the opportunities in this climate, because there really are some.

HARRIS: "YOUR BOTTOM LINE." All right, Gerri, great to see you. Thank you.

WILLIS: My pleasure.

HARRIS: So what's happening at your local store? Retail sales figures are out today. Just log on to CNNmoney.com for our special report, "AMERICA'S MONEY CRISIS." We update this all of the time, I tell you this every day, we do. The address again, CNNmoney.com.

You think people are mad at Bernie Madoff?

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Bernard Madoff is like some little maggot that crawled out from under a rock.

(END VIDEO CLIP)

HARRIS: Wow! The victims of the scheming, Ponzi-master sounding off.

(COMMERCIAL BREAK)

HARRIS: All right. Take a look at this. This is the banner headline, "New York Post," "Jail for Madoff." Boy.

Want to read you some of the quotes from court today, and we'll do that in just a moment. You know, Madoff's victims, as we talked to our next guest, Madoff's victims come from all walks of life. I am joined now by another of his unsuspecting investors. New Jersey Senator Loretta Weinberg is joining us from New York.

Loretta, thank you for your time.

SEN. LORETTA WEINBERG (D-BERGEN), NEW JERSEY STATE SENATE: Thank you.

HARRIS: I am so sorry about what this guy did to you. You know, we've got a guest coming on next hour who was also victimized by Bernie Madoff who is going to call him a sociopath. What are your thoughts about Bernie Madoff?

WEINBERG: Well, actually, that's the first word that came to my mind. This is a man with no sense of values, no moral compass of any kind. And is definitely a sociopath and a thief. So that is accepted and I am glad to have seen that headline. That, in fact, he is going directly to jail. I was actually upset that he has been out all of this time, because the bail was posted through his ill-gotten gains.

HARRIS: Well, let me read to you a couple of - I'm wondering what your response is going to be to some of these quotes from the courtroom. Bernard Madoff was given an opportunity to speak to the court, as you know, and he spoke for about five minutes. Let me read some of this to you and get your overall reaction.

"I am grateful to speak for my crimes. I thought it would end quickly, but it proved to be impossible," talking about the Ponzi scheme. "I always knew this day would come. I never invested the money."

Let me stop there, "I never invested the money."

WEINBERG: OK. What makes me very angry about that is the fact that our government never discussed this. Apparently, from everything I've read, the SEC was in there at least three times over the years.

HARRIS: Yes.

WEINBERG: There were red flags raised by other folks about whether or not this was a Ponzi scheme. So if, in fact, the SEC went in there as late as 2005, and it was suspected to be a Ponzi scheme, I don't think one needs a master's degree in investigation techniques to figure out the first thing you would do is find out...

HARRIS: Yes.

WEINBERG: ... did he make buys, did he make sales, what's going on here? The fact that our own government failed us, especially somebody who is an elected official, makes me almost even angrier than I am at Bernie Madoff. They not only failed us in their investigation, they're failing us right now. We're getting no guidance from the IRS.

HARRIS: Right.

WEINBERG: Many of us don't know how to fail our tax returns. Do you take theft loss? Do you try to go for the taxes you were paying on the phantom income? We're getting no guidance at all. So the government is failing us right now.

HARRIS: OK.

WEINBERG: And I would hope that changes very soon.

HARRIS: Loretta, there seems to be enough blame to go around here. You mentioned the government, in your view, failing you right now. Certainly, the boat-load of blame is out there for Bernard Madoff. But I'm wondering, you know, when you look back on this, how much responsibility for all of this do you take upon yourself? Were you - were you introduced to - how did you meet him? Or, did you meet him at all?

WEINBERG: I never met Bernie Madoff.

HARRIS: You never met him.

WEINBERG: I don't have a piece of paper that says I was invested with Bernie Madoff. I, along with members of my extended family, were invested through a money manager. Who - apparently, his idea of managing money was to put it in an envelope and send it to Bernie Madoff. I had never heard of this man before December 11th, 2008 when we received the call through the accounting firm that handled the forms for our investment group that all of our money was with Bernie Madoff.

So, no, I don't take responsibility. I thought I was being prudent and cautious, that I was with people I trusted. And so to blame the victims is a little bit like blaming the rape victim for having dressed provocatively.

I don't take personal responsibility. I was invested with people I trusted. I thought our investments were going - were going into the appropriate kinds of stocks and Treasury notes and bonds.

So, I never heard of Bernie Madoff, and I was in a - a new term I learned, in a theater fund, which is something else that needs to be investigated. How much due diligence did these feeder fund managers do?

HARRIS: Sounds like a lot of work - yes.

WEINBERG: So there's a lot we need to know. And I hope they don't just send him to prison and decide, OK, now we've done our due diligence. We need an investigation. We who are victims. And, in fact, I think the citizens of our nation need an investigation. How did this happen? Who beside Bernie Madoff was responsible? It had to be more than just one or two accomplices. HARRIS: I know we're going to stay on the case. New Jersey Senator Loretta Weinberg with us from New York. Thank you so much for you time. Thanks for talking to us.

WEINBERG: Thank you for listening to u us.

HARRIS: Yes. No, it's our pleasure. Thank you.

So why don't we do this. Let's drill down on this conman, Madoff, once known as "The Wizard of Wall Street." Our Christine Romans has been doing some digging and she joins us live now from New York.

Once known as "The Wizard of Wall Street." Why? How did he earn that title, Christine?

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDNET: You know, here is a guy who came into the breach with electronic trading, matching buy and sell orders, and this other business that he had, and it was something that really revolutionized Wall Street. And a lot of people to this day say he was a genius about that. About being able to see a hole or something that could be modernized or changed in the way that we trade stocks. And he filled that hole. That's what made him famous.

But then it's this money management business that his - is his ultimate undoing. And, you know, you talk to these - you talk to these investors, and I'm got to tell you, Tony, everybody has kind of a little different story. You know, there are people like her who invested with somebody else, they never even knew his name until December 11th.

HARRIS: She said she didn't have a piece of paper with his name on it.

ROMANS: And I've seen several returns that do not say Madoff anywhere on them. I'm not kidding. They're these feeder funds.

And I'm thinking of a public figure, a famous person right now who told me there was no problem for him to be an investor, but his brother wasn't allowed to get in. Then there are other people who are just from all walks of life. You know, working people who knew somebody who knew somebody who knew somebody, and all of their money is gone, too. So everyone is a little bit different.

And then someone like Steven Spielberg, some of the big foundations, they didn't know they were invested with Madoff. Mort Zuckerman and his foundation, famous people who...

HARRIS: Who didn't even know they were in invested?

ROMANS: Didn't even know they were invested. They were investing with somebody else who then just handled the money over with no due diligence to Bernie Madoff.

HARRIS: Christine, one more quick question, because you're going to join me maybe later - no, we don't have time later in the hour, but next hour certainly. But I'm sort of curious. At the time, I read something - maybe it was some reporting from Allan Chernoff, that suggested, at the time he started to develop this scheme, this was a guy who was already making tens of millions of dollars. So it begs the question, what did he need this for?

ROMANS: It's the motive, Tony. And I heard you talking to Allan about this, and I'm as fascinated as you are about the motive.

So, he says he did this because he didn't want to disappoint his investors?

HARRIS: What does that mean?

ROMANS: What do you mean, they aren't investors? You're not investing anything.

HARRIS: Yes!

ROMANS: I mean, I don't understand what the motive is. Is it narcissism? Is it, he doesn't have to play the rules? That's the part of the puzzle that I don't quite get yet. You're going to talk to a victim I know in the next hour. Someone who I've talked to many times, Alexandra Penney, she says he's a sociopath. I mean, she just despises this man.

But what is it that drove him to do - you don't just accidentally have a $50 million Ponzi scheme because you don't to disappoint your involvement investors. What happened here?

HARRIS: All right. Let's do this - let's - you mentioned a moment ago, Alexandra Penney, who you've spoken to before is going to be joining us. She is the best-selling author and former editor for "Self" magazine. She says she lost her life savings to Madoff and has a few choice words for him. Christine will join us again for that interview.

Christine, appreciate it. Thank you.

They were warned but federal regulators still missed the Bernie Madoff scheme. How did that happen?

(COMMERCIAL BREAK)

HARRIS: We want to update a story from just moments ago because we've got some new video we want to show you just in to CNN on a story we're checking on right now from politico.com and our affiliates in Washington. Both are reporting on an FBI raid on the office of Washington's chief technology officer.

The chief technology officer was Vivek Kundra. He was appointed last week to the Obama administration. While the raid is at his old office, no one has indicated it has anything to do with him. Office workers were told to go home for the rest of the day.

The FBI says this is part of an ongoing investigation. The White House so far has not commented. We will continue to update this story and bring you the very latest as we get it in the CNN NEWSROOM.

Let's talk about the red flags. The whistle-blower warnings and federal regulators still missing the Bernard Madoff scheme. How did that happen and what is the Securities and Exchange Commission doing to keep it from happening once again? Abbie Boudreau with our "Special Investigations Unit" is here with that part of the story.

How in the world did the SEC miss this thing?

ABBIE BOUDREAU, CNN SPECIAL INVESTIGATIONS UNIT: That's obviously the big question. I mean, it's not like they didn't get the tips. It's not like tips went under the radar. They actually received tips that there were problems with Madoff's operations and they investigated. There were four examinations dating back to 1999. There were two full-blown investigations.

HARRIS: Wait a minute, four investigations?

BOUDREAU: Four examinations; two full-blown investigations, one in 1992, the other in 2006. And remember, that came as a result of the whistle-blower who gave them the 19-page road map saying, this is exactly what went wrong and how it went wrong, go look into it.

HARRIS: So the whistle-blower gives the SEC A road map?

BOUDREAU: Yes. Yes.

HARRIS: And that leads to a full-blown investigation, or one of these "examinations"?

BOUDREAU: Well, the full-blown investigation happened in 2006. But as everyone already knows, you know, they didn't find any major fraud and that's obviously the problem here. How didn't they find the fraud? That's the big question. That's what the inspector general is looking into.

HARRIS: So, the investigations obviously continue. And we're asking the question, the net has to get wider than Bernard Madoff. And I know that there is some talk of Madoff's niece and her husband in all of this. Maybe you can explain these threads.

BOUDREAU: Well, my sources tell me that Madoff's niece, her husband, Eric Swanson, was a former SEC Regulator at the time when Madoff's operations were being examined. And so, of course, the investigators are going to look into this and say, OK, is there more here? Did something happen that was improper? We just don't know that. We just don't know. But we do know, through our sources, that that is part of the investigation. And just because he's going to jail does not mean that's slowing down the investigative part of this.

HARRIS: OK, we've got to run. But maybe we can get you back next hour and we can talk about the experience level of some of these SEC regulators.

BOUDREAU: Absolutely.

HARRIS: Abbie Boudreau with us. Abbie, appreciate it. Thank you.

A day of reckoning for Bernard Madoff. Some of his victims live next hour.