Self-interest, for Ayn Rand, does not equate to simple monetary gain, or the pleasures of any given moment. Self-interest is defined by achievement of a deeply happy life over as many years as possible. Ayn Rand recognized that it is impossible to build long-term happiness by theft or fraud. One's long-term happiness can only be based on the production of life-sustaining/enhancing values, along with honest dealings with oneself and others.
Do you think Bernie Madoff is happy now, in prison? What about while he was running his scheme? This interview should give you a sense of how much he enjoyed himself while defrauding other people:
Does this sound like a man determined to pursue his own happiness and live his life to the fullest? What must it mean for Madoff to be happier in prison, when he has no freedom and no control over his own life, than during his con? His primary emotion while in the middle of the con scheme was fear, which indicates that he sensed his life was out of control. His lies were constantly threatening to catch up with him, and it was just a matter of time before something slipped and he was caught.
Even under the best case scenario he could have hoped for, where he had escaped to a foreign country that would not extradite him, he still would not have been happy. Everyone would find out about his fraud, and he would never be able to come back to the US. He would be despised by good, honest people everywhere, so if he wanted to have relationships with such people, he would have to manufacture more lies to keep his identity secret. No one could be allowed to know who he was; no one could be allowed to get to know him intimately. If people didn't find out who he was, he would be isolated and lonely, living a lie. If they did find out, he would be isolated from honest people by their contempt for him and fear of his dishonest schemes. Either way, he would end up lonely, or surrounded by scum.
Under this scenario, he would still live with the fear of being identified, or, if he lived openly, with the fear that the country in which he lived would change its extradition policy or make an exception in his case.
A country that would not extradite a fraudster to the US is not friendly to the US, and so is probably not going to be a very free or prosperous country. Also, no honest employer would want to hire him, and the whole alleged point of his scheme was to be able to live without honest work. He wouldn't be able to travel freely and enjoy seeing the world, since every time he traveled, he would have a very well-founded fear of being caught by agents of the US or its allies. So, under this scenario, Madoff would likely be trapped in a poor, statist, corrupt country--far from an ideal place to live--with no ambition, no freedom of travel, no intimate friends, no challenging, satisfying, productive job, and a constant, nagging fear. He would end up a lonely, drunken wastrel, escaping his pain and fear by spending the ill-gotten money on booze. Any sex would be meaningless sex with sluts/prostitutes, or fraudulent sex with some woman he duped (for a while).
Again, I stress: This was the (allegedly) best scenario he could have hoped for; i.e. the scenario where he "got away with it" and wasn't caught.
As Ayn Rand recognized, any man who wages war with reality will lose. Attempting to live without a productive pursuit and without respect for the truth is irrational, and will result in long-term pain, fear and despair, because such an attempt contradicts facts about fundamental human nature. By attempting to perpetrate fraud, someone like Madoff puts himself in conflict with his own basic nature and needs as a human being, and with the rational self-interest of every human being on the planet who comes into contact with him.
To quote Ayn Rand, "There is a fundamental moral difference between a man who sees his self-interest in production and a man who sees it in robbery [or fraud]. The evil of a robber does not lie in the fact that he pursues his own interests, but in what he regards as to his own interest; not in the fact that he pursues his values, but in what he chose to value; not in the fact that he wants to live, but in the fact that he wants to live on a subhuman level."
To live long, fulfilled, happy lives, human beings need to live by their minds, pursuing rational values by means of the virtues of independence, honesty, productiveness, integrity, justice and pride. They also need to respect the individual rights of other people. Without adherence to these principles, any "self-interested" action is a blind, futile flailing in the dark that will lead to self-destructive consequences of one sort or another.
This is why the heroes of Ayn Rand's novels are ruthlessly honest, relentlessly productive, and concerned with earning their own way through life. Unlike Bernie Madoff, they know what is really in their long-term self-interest.
Here is a link to "selfishness" in the Ayn Rand Lexicon: "Selfishness."
For those who don't have backgrounds in philosophy, but want to learn more about Ayn Rand's moral code, I recommend reading The Virtue of Selfishness by Ayn Rand and Loving Life: The Morality of Self-Interest and the Facts that Support It by Craig Biddle. For those who are more philosophically oriented, I also recommend Viable Values and Ayn Rand's Normative Ethics: The Virtuous Egoist by Dr. Tara Smith.
The Morality of Rational Egoism: Short Notes Atlas Shrugged, Altruism and Egoism
What Caused the Financial Crisis: It Wasn't Capitalism or Deregulation
"The Unselfish Bernie Madoff" (Ayn Rand Center for Individual Rights)