1 An Earthquake on Wall Street Monday, December 8, 2008 He is ready to stop now, ready to just let his vast fraud tumble down around him. Despite his confident posturing and his apparent imperviousness to the increasing market turmoil, his investors are deserting him. The Spanish banking executives who visited him on Thanksgiving Day still want to withdraw their money. So do the Italians running the Kingate funds in London, and the managers of the fund in Gibraltar and the Dutch-run fund in the Caymans, and even Sonja Kohn in Vienna, one of his biggest boosters. That''s more than $1.5 billion right there, from just a handful of feeder funds. Then there''s the continued hemorrhaging at Fairfield Greenwich Group-$980 million through November and now another $580 million for December. If he writes a check for the December redemptions, it will bounce.

There''s no way he can borrow enough money to cover those withdrawals. Banks aren''t lending to anyone now, certainly not to a midlevel wholesale outfit like his. His brokerage firm may still seem impressive to his trusting investors, but to nervous bankers and harried regulators today, Bernard L. Madoff Investment Securities is definitely not "too big to fail." Last week he called a defense lawyer, Ike Sorkin. There''s probably not much that even a formidable attorney like Sorkin can do for him at this point, but he''s going to need a lawyer. He made an appointment for 11:30 am on Friday, December 12. He''s still unsure of what to do first and when to do what, but a Friday appointment should give him enough time to sort things out.

In his nineteenth-floor office on this cold, blustery Monday, Bernie Madoff starts going through the motions. Around him, the setting is incongruously serene: black lacquer furnishings against silvery carpets and darker gray walls, a graceful staircase in the center. His firm occupies the eighteenth and nineteenth floors of the Lipstick Building, a distinctive oval tower on Third Avenue at East Fifty-third Street. Around the curving walls of windows on each floor, slabs of glass hang from the ceiling to form bright offices and conference rooms. Hidden behind locked doors on the seventeenth floor is a bland set of cluttered offices that Madoff also rents, connected to the rest of the firm only by the building''s main elevators and fire escapes. It is down there, far from Madoff''s light-filled office, that his fraud is invisibly but inexorably falling apart. A little before lunch, he talks on the phone with Jeffrey Tucker at Fair-field Greenwich. They''ve known each other for almost twenty years.

Madoff''s controlled frustration sounds fierce over the phone lines. What the hell is this, $1.2 billion in withdrawals in just over a month? Hadn''t the executives at Fairfield Greenwich been promising since June that they would "defend" against these redemptions? They''re even taking money from their own insider funds! Some defense. He threatens: Fairfield Greenwich has to replace the redemptions already piling up for December 31, or he will close its accounts. He will kill the goose supplying all those golden eggs for Tucker and his wife, for his younger partners, and for the extended family of Tucker''s cofounder Walter Noel Jr. He bluffs: "My traders are tired of dealing with these hedge funds," he says. Plenty of institutions could replace that money, and have been offering to do so for years. But he has "remained loyal" to Fairfield Greenwich, he reminds Tucker.

As calm as a losing litigator, Tucker assures Madoff that he and Noel are working on a brand-new fund, the Greenwich Emerald fund, that will be a little riskier but will produce better returns. It will sell easily, when the markets settle down. Madoff scoffs at the notion that Tucker and Noel will ever raise the $500 million they hope for-even though the partners are putting millions of dollars of their own money into it already. They''d better focus on hanging on to the money they are losing right now, Madoff says, or he is going to cut them off. A shaken Jeffrey Tucker writes an e-mail to his partners a few minutes later. "Just got off the phone with a very angry Bernie," he tells them, repeating the threats. "I think he is sincere." He isn''t.

The Fairfield Sentry fund will shut down before December 31, but it won''t be because Tucker and his partners aren''t "defending" against their redemptions. It will be because they have stifled their skepticism for twenty years, determined to believe that their golden nest eggs were safe with Madoff. Sometime today, people down on the seventeenth floor who work for Madoff''s right-hand man, Frank DiPascali, will get the paperwork done so that Stanley Chais, one of Madoff''s backers since the 1970s, can withdraw $35 million from one of his accounts. Chais has been loyal to Madoff a lot longer than the Fairfield Greenwich guys. Around 4:00 pm, friends and clients start to arrive for a meeting of the board of the Gift of Life Bone Marrow Foundation, which helps find bone marrow matches for adults with leukemia. Bernie and his wife, Ruth, support the group because their nephew Roger succumbed to the disease and their son Andrew had a related illness, a form of lymphoma. In ones and twos, the board members show up, climbing the oval stairway from the reception area on the eighteenth floor, where the firm''s administrative staff is housed. At the head of the stairs, they turn right and head for the big glass-walled conference room between Madoff''s office and his brother Peter''s office.

Ruth Madoff arrives and joins them. Eleanor Squillari, Bernie''s secretary, has arranged some soft drinks, bottled water, and snacks on the credenza near one of the doors. Jay Feinberg, the foundation''s executive director and a leukemia survivor himself, sits down at one end of the long stone table with a few of his staff members and his elderly father, a board member. Bernie is at the other end, with Ruth on his right. There are people here who were woven into every decade of Madoff''s life-Ed Blumenfeld, his buddy and the co-owner of his new jet; Fred Wilpon, an owner of the New York Mets baseball team and a friend since their kids were growing up together in Roslyn, Long Island; Maurice "Sonny" Cohn, his partner in Cohmad Securities since the mid-1980s, a friend who has shared so many jokes with him over the years and now shares his office space. Ezra Merkin, the financier and conduit to so many Jewish charities, arrives and settles his bulk into the square black leather chair next to Ruth. The elegant stockbroker Bob Jaffe, the son-in-law of Madoff''s longtime Palm Beach investor Carl Shapiro and a broker with Cohmad, sits nearby. A few other board members or volunteers find seats at the table.

There is a little trouble with the phone, but finally they manage to link in Norman Braman, the genial former owner of the Philadelphia Eagles football team, who presumably is in Florida. At this moment, most of the people around this table are Madoff''s friends, his admirers, his clients. In a few days they, and thousands like them, will become his victims. Their wealth will be diminished and their reputations questioned. Their lives will become a nightmare merry-goround of lawyers, litigation, depositions, bankruptcy claims, and courtroom battles. They will all profoundly regret that they ever trusted the genial silver-haired man seated at the head of the table. With Ruth taking notes, Madoff turns to the agenda-fund-raising efforts and plans for the big annual dinner in the spring. A fund-raising committee is needed.

"Who will take this on?" Madoff asks. Fred Wilpon agrees to do so. The rest of the discussion is routine, except that some members recall Feinberg passing around copies of the foundation''s conflict-of-interest policy and getting a signed copy from each member for the file. By six o''clock, they are done. Madoff escorts his wife and friends through the private nineteenth-floor exit. They head out into the winter night. Tuesday, December 9, 2008 Things are starting to slip. Madoff has planned to meet with the son of his friend J.

Ira Harris, one of the wise lions of Wall Street and now a genial philanthropist in Palm Beach, but the visit is canceled. Instead, Madoff sits down with his older son, Mark, and explains that, despite the recent meltdown in the market, he''s had a very strong year with his private investment advisory business. He''s cleared several hundred million dollars, and he wants to distribute bonuses to some employees a little earlier than usual. Not in February-now, this week. He tells Mark to draw up a list of the trading desk employees who should get checks. Troubled, Mark consults his brother, Andrew. The two men have seen their father tense up a little more every day as the market crisis has wrung them all out. Just a little liquidity strain on the hedge fund side, he told them last month.

But he is clearly more than just worried; they''ve never seen him like this. And now he wants to pay out millions in early bonuses-it doesn''t make sense. Shouldn''t he be conserving cash, with things as rocky as they are? He should wait to see how things look in two months, when bonus season arrives. But Bernie Madoff is an autocrat- he is in charge, and he brooks no opposition. Still, the brothers decide they must talk with their father on Wednesday about their concerns. After the markets close and the firm starts to empty out, Madoff walks across the oval area where the secretaries sit and enters Peter''s office. Peter has aged and pulled inward in the two years since his only son died. He still carries Roger''s photo in his wallet, one taken after leukemia had already left its stamp.