Mort Zuckerman on the Madoff Scandal

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But you put your faith in Merkin.
This is somebody whom I had known who had managed money, particularly for philanthropic funds. I wasn't looking for this charitable fund to make a lot of money. I wanted it to make some money, of course, but most of all, to preserve the principal. It wasn't to be a high-risk investment.

What is the nature of your charity, and who directed its good works? Was Merkin involved?
No, no. He doesn't do the charity. He has nothing to do with the allocation of the funds from the charity. I am involved with it, but longtime friends of mine from Boston are the two principal trustees. And we invest in things that interest us—cancer care, education, archaeology, college debating.

You're a prominent businessman. You have deep ties to the Jewish community in New York, and Madoff was a legend in the city and in that community. How is it possible you didn't know Madoff?
I'm not really involved in the financial world or fund management world. The whole thing is astounding to me, astonishing beyond words and very dismaying. In fact, I'd met with [Merkin] about 30 days ago. And when he talked about [my charity's investments]…you would never be able to infer from what he described to me that he had put the entire amount of funds in Madoff's hands.

You thought he was diversifying?
Yes.

What can you do, sue him?
Of course.

What else can you do to get back some money?
I don't think there is anything other than using litigation. I mean, clearly, Madoff doesn't have any funds left or it would be pennies on the thousands of dollars.

A lot of people are worried that this is going to have big repercussions on Wall Street.
Wall Street? I saw in the Financial Times that over $10 billion from major European banks [was invested with Madoff]. The repercussions on the people who manage funds is going to be enormous, in my judgment. And this shadow banking system of money-market funds, investment funds, private equity funds, and hedge funds that has been largely unregulated—that is no longer going to be possible.

Is there a pattern here? Why do you think so many successful people like you got burned? I mean we're talking about Steven Spielberg, Jeffrey Katzenberg…very successful people.
I don't know that there's a pattern. I mean when you have a [successful] principal occupation, and my principal occupation is not the management of money…what you do is you try to find somebody who will manage the money for you. And I'm sure that was true of Spielberg, without question, and Katzenberg, and a lot of other prominent people. You do a certain amount of due diligence, you think you have the ability to rely on somebody based on his general community reputation, and you find out you can't.

Even someone with your access?
It's not that I didn't check [Merkin] out, but look at all the people at philanthropic organizations that used him as the chairman of their investment committees, and they were all wrong.

Maria Bartiromo is the anchor of CNBC's Closing Bell.