Ignorance at Risk: Interaction at the Epistemic Boundary of Bernard Madoff’s Ponzi Scheme

Abstract

Most long-lived organizational deceptions require the cooperation of outsiders who are close enough to the deception to suspect it, yet deliberately limit their knowledge so as to maintain plausible deniability. The interaction of such “proximate outsiders” with insiders—those who are fully “in the know”—can be a delicate affair, yet its careful management is essential to the survival of the deception. I analyze a phone conversation between Ponzi schemer Bernard Madoff and executives at Fairfield Greenwich, the investment firm that funneled him the most money, in which they discussed an impending SEC examination. First I examine Madoff’s attempts to cajole the executives into affirming (to Madoff and eventually to the SEC) that their hands-off approach to his operation was unremarkable. Next I consider two instances in which Madoff floundered in his explanations, repeatedly aborting and restarting sentences as he attempted to explain the inexplicable and reconcile the irreconcilable. Finally, I analyze Madoff’s handling of two of the executives’ more intrusive questions, and the part that each side played in the resulting non-answer. The three parts of the analysis illustrate what I argue are recurring and generalizable challenges of interaction at the epistemic boundary, associated with coaching, reconciling, and answering.

Appendix: Conversation-analytic transcribing conventions

Overlapping speech

Vertically aligned partial brackets indicate overlapping talk.

Vijay: busi⌈ness⌉

Madoff: ⌊yes ⌋

Pauses

Numbers in parentheses indicate pauses in seconds, measured to one decimal point. A lone period (.) indicates a “micro-pause,” audible but too short to be measured reliably (generally <.15 s).

other (.6) seedling

Unintelligible speech

The hash sign in parentheses indicates a period of talk, measured in seconds to one decimal point, which cannot be transcribed for reason of unintelligibility. No hash sign is used when the unintelligible speech overlaps with with other, transcribable talk (because the overlap provides sufficient information as to duration).

when I’m (.6#)

Vijay:down that list ⌈( )⌉

Madoff: ⌊ in ⌋ other words

Self-interruptions

A hyphen indicates self-interruption. Sometimes this is a dental or guttural stop, but often the main purpose of hyphens is to indicate apparently incomplete words.

when y-

Intonation

Arrows at the end of words indicate rising (↑) or falling (↓) pitch, with the number of arrows corresponding to the extent of the rise or fall. An arrow at the beginning of a word, or in the middle of a word, indicates a sudden jump or drop in intonation (with no appreciable change in volume; cf. stress, below), relative to the last intonation level.

↑typically↓

know and a↑gain↓

Stress

Bold face is used to indicate stress, a combination of volume and pitch.

you’d be shocked

Volume

Degree marks enclose talk that is significantly softer than surrounding talk.

or °relationships that you have with these people°

Condensed talk

Inward-pointing more-than and less-than signs indicate talk that is faster than that which surrounds it in the same turn.

you >you know < although

Sound stretching

One or more colons indicate that a sound within a word (that preceding the colon) is “stretched,” or prolonged.

not determining:

uh::

Breathing

Audible breathing is transcribed with one or more hs, with the number of hs roughly reflecting the duration (approximately one h for each .2 s of respiration). Inhaling is indicated with a leading period, and exhaling with the lack of a period.

standpoint .hhh

Transcriber’s comments

Brackets enclose explanatory notes. Double parentheses provide other descriptive information.

they [the regulators] know

(okay) ((faintly))

A Note on Spelling

Spelling is standard, except that the two pronunciations of “the” are distinguished: “thuh” versus “thee.” The reason for this exception is that these often conform with, and thus anticipate, the pronunciation of the word that follows (e.g., thuh problem versus thee assignment), so that a self-correction involving a change in article (as in line 7 of excerpt 2) may indicate the suppression of whatever the speaker originally intended to say (Schegloff 2002), and the pronunciation of the original article may provide a clue as to the speaker’s original intentions.