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Six years after pleading guilty to charges he ran the biggest investment fraud in U.S. history, Bernie Madoff is insisting that the extent of his crimes is not nearly as bad as the media and the court-appointed trustee in charge of cleaning up the mess are making it out to be.
In fact, Madoff claims, his "typical" client was a "net winner," who began investing with him before the fraud began and enjoyed double-digit returns for years.
The assertion comes in a lengthy exchange of messages from the federal prison where Madoff is serving a 150-year sentence. The exchange began last month after Madoff mailed me a printed copy of an email he had sent to a client who apparently was seeking his help defending a claim by bankruptcy trustee Irving Picard, who apparently is seeking the return of funds the client had withdrawn from her Madoff account.
"I know you are aware of the fact that you have been a client since the mid-1970s and like my other clients have had the advantage of earning and withdrawing arbitrage profits with an average annual return of over 15 percent," Madoff wrote to the client, whose name was removed from the copy of the message he mailed me.
In the message, Madoff also claims that "as early as the late 1990s," he warned clients that the market was making it difficult to obtain the returns they were accustomed to, and that clients should consider closing their accounts or at least withdrawing their profits.
Madoff has previously claimed he only began fabricating trades around the time of the Asian financial crisis in 1998, though Picard and federal authorities have alleged the fraud began decades earlier.
At the bottom of the message, Madoff scrawled a note: "Scott, I thought you might find this interesting. This is a typical Madoff client."
Asked to explain what he means by "typical," given the vast losses experienced by so many investors, Madoff responded in an email to me last week.
"Unfortunately, human nature being as it is, the people that are the most vocal are those that either did lose money and certainly there were some," he wrote. "The facts were that the majority of my individual clients were net winners."
While media reports typically describe the fraud as a $20 billion or even a $60 billion Ponzi scheme, Madoff says the actual net loss is closer to $2 billion.
As evidence, Madoff points to a 2012 Government Accountability Office report that found that overall, 57 percent of Madoff accounts—individual and institutional—were net winners. For individual accounts, the report noted, winners outnumbered losers by roughly two to one.
While the report generally backs Picard's methods for determining losses and pursuing clawback claims, Madoff said in an email to me on Monday that it proves something he claims he told Picard as early as 2009: that some of his customers were adept at hiding their profits.
"When he came to see me I explained that a common practice of my clients was to withdraw their profits and then recycle those profits thru new accounts with different beneficial owners like trusts, foundations and charities all funded with the winnings of the original owner," Madoff wrote. "This would then lead to those new accounts later being claimed as an account that lost their principal."
A spokeswoman for Picard, Amanda Remus, declined to comment on the specifics in Madoff's messages. In a statement e-mailed to CNBC, she repeated Picard's response to previous Madoff messages, saying that "as the perpetrator of the largest financial fraud in history, Mr. Madoff's credibility is highly suspect and his assertions bring neither substantive value nor new information."
Madoff also points with apparent pride to the roughly $15 billion recovered for investors, including more than $10 billion by Picard and more than $4 billion in criminal forfeitures obtained by the Justice Department, not to mention billions more in reported settlements with overseas banks.
"OK, so where are we now?" Madoff writes. "Some 14 billion has in fact been recovered and that does not include the foreign settlements. You ask about my statement that typical individual clients had similar results that appeared in my recent e-mail. Yes that is my view. My typical individual client was a client that invested over the life of my firm and made and has retained legitimate (arbitrage) profits."
While Madoff points out that the recoveries are more than enough to cover the principal lost by investors, he doesn't directly address the billions of dollars in returns his clients thought they were making, only to learn in 2008 that they were largely fictitious. But as he typically does in these email exchanges, Madoff makes a point of expressing remorse for the fraud.
"Please understand that I truly regret being responsible for any loss. I also am fully aware that no clients should expect to be betrayed as I clearly have done," he writes.