Madoff with the Money

by Jerry Oppenheimer

  Describing the incident more than a half-century later—and after Bernie was in the headlines—Portnoy believed the book report affair, and other similar incidents that he witnessed during their school days, said much about his one-time chum who became the despised and infamous fraudster.

  Bernard Lawrence Madoff was born in Brooklyn, New York, on April 29, 1938, just as the Great Depression that had ravaged the country was ending and as the flames of war were being fanned by Hitler in Europe. Bernie, as he would always be called, was the middle child of Ralph Z. and Sylvia “Susie” Muntner Madoff. Sondra, nicknamed “Sonnie,” was the first of Ralph and Sylvia’s brood, born in 1934, and Peter, considered the brightest of the three, was the last to arrive in 1945.

  Bernie’s family roots go back to Eastern Europe—Poland, Romania, and Austria. They came to the United States in the early twentieth century, part of the great wave of immigration of Jews from the ghettos and shtetls who landed on Ellis Island—the tired, poor, huddled masses seeking a new kind of life in America. Bernie wasn’t introspective and not one to say much about where he came from. However, he once acknowledged that his grandparents, with whom he claimed he had lived for a time as a child, had settled in a “poor and run-down” Lower East Side neighborhood. The master mythmaker also asserted in a magazine article, whether true or not, that “I fought my way out of there. I had to scrape and battle and work really hard.”

  His younger brother, Peter, who was a trustee of the Lower East Side Tenement Museum, which promotes the experience of immigrant life, was quoted on its web site as saying, “My grandparents ran a Turkish bath in the area that served as a focal point for many new immigrants of different nationalities.”

  In the early 1940s, the Madoffs moved from a cramped tenement apartment to a modest three-bedroom, one-and-a-half-bath, brick colonial-style home on a postage-stamp-sized plot of grass that was typical of the houses in the quiet, tree-lined, close-knit, predominately Jewish and Italian, middle-class community of Laurelton, Queens. Laurelton was a neighborhood where kids could bicycle and play stickball in the streets, and where their parents didn’t have to lock the doors at night.

  Compared to the other couples who had settled in Laurelton around the same time, Ralph and Sylvia were older and more mysterious, or so they seemed to Bernie’s childhood friends.

  Bernie’s father, Ralph, told some people he was a plumber, and he certainly fit the stereotype. He was a tough sort of guy, who reminded those who knew him of another Ralph—Ralph Kramden, the blustery New York bus driver played by Jackie Gleason on the popular golden age of television sitcom, The Honeymooners. Like the Kramdens’ dreary Brooklyn apartment, the Madoff home in Laurelton was poorly furnished and depressing. And like Kramden, the bus driver, Madoff, the plumber, was always looking for a big score—a scheme that would make him lots of money.

  “Ralph Madoff was not all sweetness and light. You got the feeling you didn’t want to cross him,” asserts Joe Kavanau, who became part of Bernie’s life during their late teens when Kavanau and his girlfriend and future wife, Jane Silverstein, began double-dating with Bernie and his future wife and Jane’s close friend, Ruthie Alpern.

  Continues Kavanau:

  Ralph was a tough-looking guy. It was like this guy isn’t going to take any shit from anyone. Back then if you had to describe the quintessential tough guy, particularly if he was a Jewish tough guy, he would be Ralph Madoff. You got the impression you didn’t want to screw with him. He wasn’t somebody one would go out of their way to cross.

  He was crude and tough-talking, rough-and-tumble. I could have picked him out of a lineup, and I could probably still pick him out of a lineup.

  Kavanau, who then lived a few miles from Laurelton in Jamaica, Queens, and whose family was in the real estate business, says Bernie back then was far different from his father in looks and demeanor.

  “Bernie was just the opposite of Ralph,” Kavanau points out.“Bernie was pretty smooth, and he was much nicer looking than his father.” When Joe married Jane in December 1960 at the Laurelton Jewish Center, Bernie was given the honor of being best man. Photos of him famously—or infamously—grace the Kavanaus’ wedding album.

  Jay Portnoy also saw Ralph Madoff as a tough guy. For a time, Bernie’s father aggressively coached an unofficial football team formed by Bernie and his friends in the fall and winter of 1955-1956, their senior year at Far Rockaway High. The team was called the Long Island Spartans—with Bernie playing defensive end and quarterback. The playing field, located near the Aqueduct Racetrack, was on the grassy strip between the heavily traveled and polluted Belt Parkway and Conduit Boulevard.

  Because Portnoy was smaller than the other boys, he was selected to be scorekeeper, and sometimes served as referee and linesman. He used chalk to outline the boundaries of the field, but there were no marked yard lines. Portnoy had poor eyesight, and his parents had not gotten him eyeglasses to correct his myopia; so he was not the best judge of where the pigskin should be placed, which ignited Ralph Madoff ’s fury.

  “In one game Bernie’s father started screaming at me for costing the team several downs,” recalled Portnoy. “I finally assessed an ‘unsportsmanlike behavior’ [penalty] against the Spartans, for his outbursts. My actions were instrumental in the Spartans losing that game.” Instantly, Portnoy regretted what he had done, because he was depending on Bernie’s father to drive him home. On the ride back, Ralph Madoff “cooled off, and was not too nasty to me.” But he did bluntly suggest that Portnoy have his eyes examined posthaste.

  Looking back, Portnoy’s complaint against the senior Madoff was that “he was a rather aggressive, intense individual who put a premium on winning. He was fairly intense, at least during the football games, and he definitely wanted to win. He seemed mildly authoritative—maybe that would be the best word. I don’t know if Bernie was intense, because he tended not to seem that way. But it may be a case where he felt he could accomplish more of what his father accomplished in a different way. They both were very obviously success oriented.”

  Bernie’s mother, Sylvia, was a tough cookie herself. As with her husband, Ralph, she always thought about money—how to make it and how to spend it, even when it came down to the least expensive items of apparel for her children.

  The popular athletic shoe for boys when Bernie was a kid were sneakers called Keds with black canvas tops and white soles. But for a man who one day would proudly boast of dozens of expensive pairs of imported dress and sports shoes that he compulsively lined up in his luxuriously designed walk-in closet in his penthouse, Bernie was the only kid in his Laurelton crowd who didn’t have Keds on his feet. And it embarrassed him no end. As a close friend notes, “His mother would buy his sneakers from a pile at a department store because they were priced cheaper, as opposed to buying him the more expensive Keds, the name brand that everyone wore.”

  Through the years certain friends who were aware of the Keds story would tease Bernie about it, especially as he became rich and powerful, and displayed the symptoms of what his friends and employees believed to be an obsessive-compulsive disorder.

  “Bernie liked things to be done right,” observes the close friend. “He liked to look nice. He liked expensive shoes and suits, cars and boats and houses. He liked his home to look just right; he wanted his office to look perfect—everything had to be perfect and in its place. And we used to kid around that he became compulsive about those things because his mother wouldn’t buy him Keds when he was a kid like everyone else.”

  Later on, though, Bernie was determined to show everyone that he could have all the Keds he ever wanted, and lots more.

  Bernie was clearly embarrassed by the way his parents lived and acted. Therefore, few of his friends were ever invited into the Madoff home. The place was off-limits and the household had an air of secrecy about it. Social gatherings and parties in which Bernie was involved—and he was thought of by most as a popular, friendly, good-looking kid—were always at the homes
of others.

  According to Sheila Olin, Elliott’s widow, the mother of Bernie’s best school friend distrusted and therefore disliked the Madoffs. Sheila Olin, a popular and cute girl who was the president of the social and cliquey sorority Phi Delta Gamma during her junior year of high school, asserts,“My husband’s mother never wanted Elliott to be friends with Bernie, because she thought his parents weren’t honest people. She did not want them to be friends, and she was not happy about it. She thought Bernie’s parents were not owning up to a lot of things they were doing.”

  In fact, there were a lot of things about the Madoffs that didn’t add up. One such source of constant neighborhood speculation was Ralph’s and Sylvia’s occupations. “It was always a mystery what Ralph and Sylvia did,” says longtime Bernie friend Joe Kavanau. “That’s absolutely a fact and it’s kind of weird.”

  Ralph told some people he was a plumber, but no one remembers him ever doing any actual plumbing as a way to make a living. Years later he described himself to Bernie’s personal messenger, Bill Nasi, as “a plumber in a pin-striped suit.”

  Moreover, on the Madoffs’ 1932 certificate of marriage, the groom mysteriously listed “credit” as his occupation, while his bride put down “none.”

  Even Ralph Madoff ’s middle initial—the letter Z—was a fabrication of sorts. He decided it would be classier to have a middle initial, so he just chose to use the last letter of the alphabet.

  Elliott Olin’s mother especially disliked Ralph Madoff. “She used to say she liked Ralph less than Sylvia,” recalls Sheila Olin, whose husband, a lawyer who specialized in workers’ compensation, died of leukemia in his mid-50s. “Elliott’s mother told him many times, ‘I don’t want you being in the Madoff house.’ Bernie was at Elliott’s house much more than Elliott was over at Bernie’s. She didn’t want Elliott to be friends with Bernie.”

  But Elliott, whose father was a lawyer, ignored his mother’s entreaties, and he and Bernie would remain close friends for a number of years.

  To add insult to injury, Bernie and Elliott introduced Sondra Madoff, Bernie’s slender and attractive older sister, to Elliott’s cousin, Marvin Wiener, a good-looking young man whose family owned a drugstore in Springfield Gardens, a community next to Laurelton.

  Sondra and Marvin Wiener, who became a dentist, fell in love and got married.

  “Elliott’s mother wasn’t too happy that her nephew married Sondra, because she didn’t like the Madoff family,” says Sheila Olin.

  Over the years Sondra and Marvin Wiener, like thousands of others, invested their money with Bernie—Sondra having full trust in her brother’s financial acumen, and faith that he would never injure her and her family financially. After all, Bernie was blood, a sibling, and a genius in their eyes when it came to making money for people. One of the Wieners’ sons, Charles, even went to work at Bernard L. Madoff Investment Securities (BLMIS) in the 1970s, and became the firm’s director of administration.

  Apparently this mattered little to Bernie, because all of the Wieners would be among the victims in his monstrous Ponzi scheme.

  But all of that was still to come.

  While Sheila Olin notes that Elliott’s mother, who died in the late 1960s, never went into detail regarding her ill will and suspicions about Ralph and Sylvia Madoff—“she never said why, how, where”—she believes it had to do with, among other possibilities, a shady stock brokerage operation that the Madoffs were running out of their home, which was located across the street and around the corner from the Olins.

  It wasn’t until later, in August 1963—with her son already running Bernard L. Madoff Investment Securities, then an over-the-counter and penny stock trading business, and doing quite well for himself at the age of 25—that Bernie’s mother tangled with the SEC—a precursor of the problems Bernie would have later. The agency forced the closing of a broker-dealer operation called Gibralter Securities, which was registered to Sylvia Madoff and operated out of the Madoff home. She was one of 48 broker-dealers who, according to SEC records, had “failed to file reports of their financial condition.”

  The violation resulted in a September 1963 hearing for Sylvia Madoff and the other firms under investigation. In January 1964, the administrative proceeding against Bernie’s mother was suddenly dropped. It is believed that she agreed to a deal to get out of the stock business as long as no penalties were leveled against her.

  An SEC litigation release stated that the Madoff firm and the others “conceded the violation, but requested withdrawal of their registrations, and in this connection they represented that they are no longer engaged in the securities business and do not owe any cash or securities to customers. The Commission concluded that the public interest would be served by permitting withdrawal, and discontinued its proceedings.”

  However, suspicions about the Madoff operation lingered. There were those who thought she might have been fronting for her husband in Gibralter Securities—using her name instead of his because Ralph Madoff appeared to have ongoing financial problems and tax troubles. One of Bernie’s Far Rockaway High School friends, Edwin Heiberger, who had met Ralph Madoff on a couple of occasions, had gotten the distinct impression from him that he “was a stockbroker.” And another high school friend, Peter Zaphiris, clearly remembers Ralph Madoff working alongside Bernie in 1963, several years after Bernie started his firm.

  (Years later, the other most important woman in Bernie’s life besides his mother—his wife Ruth—would have her name on homes and other assets that sparked suspicion after Bernie was arrested.)

  In addition, the Madoff house where Bernie grew up had liens against it for unpaid federal income taxes amounting to $13,245.28—equal to about $100,000 in 2009 dollars. Once again Sylvia Madoff’s name, rather than Ralph’s, was on all the official paperwork. She was listed as the “grantor/mortgager” for the property, according to Queens borough property records. The taxes were assessed in 1956, the year Bernie graduated from high school, and it wasn’t until 1965, when Bernard L. Madoff Investment Securities celebrated its fifth anniversary in business, that the lien was finally paid off and the Madoff house was sold, with Ralph and Sylvia moving to the town of Lynbrook (an anagram for Brooklyn) on Long Island, a short distance from Laurelton.

  It was in that sort of troubled and seemingly ethically and morally bankrupt household that Bernie’s values, principles, behavior, sense of right and wrong, ideals, and standards were established.

  Bernie bonded with Elliott Olin—and fell head over heels for Ruthie Alpern—at Public School 156 in Laurelton, where he got his elementary and middle school education.

  Located about five blocks from the Madoff home on 228th Street, P.S. 156 was typical of the New York City public schools that were built around the time of the Great Depression—a three-story brick building with a high chain-link-style fence surrounding a playground. Inside the classrooms were too hot in the summer, and too cold in the winter. Mostly everyone wanted to walk home for lunch because of the yucky food served in the cafeteria.

  The school, which went from kindergarten through the eighth grade, was located between the Long Island Railroad station and Merrick Road, Laurelton’s main drag and commercial center.

  Even though it was part of the urban landscape of New York and less than 30 minutes from bustling Times Square, there was a simple, small-town feel to Laurelton in those days—the wartime 1940s and the postwar Ozzie and Harriet 1950s when Bernie Madoff was coming of age. The kids called the local movie theater “the itch” and paid 25 cents on Saturday afternoons for a show of 25 cartoons. They went for ice cream at Raab’s, a drugstore with a genuine soda fountain, browsed for yo-yos and gliders and rubber balls for stickball games at Woolworth’s, and gathered with their families for Sunday dinners of chow mein and egg rolls at Chung’s Chinese restaurant.

  Because it was on the train line, Laurelton was a commuter town. Women were homemakers, and most husbands took the train into the city every day. The breadwinners rang
ed from small, struggling businessmen and New York City cops to accountants and doctors. Like the city itself, Laurelton was a melting pot.

  “It was a magical place to grow up,” as one former Laureletonian observed a half-century later.

  At school Bernie became Elliott Olin’s shadow. Elliott was the most popular boy at P.S. 156, handsome with curly blond hair, and was considered a hunk by the girls. Everywhere Elliott went and everything Elliott did, Bernie followed suit. “They were like Martin and Lewis, always together,” observes Olin’s widow, who from the time she first met Bernie thought of him as “a smooth talker” and “devious.”

  Jay Portnoy observes that Bernie “was never really that much of a leader, but he was always with the leader—Olin.” He continues, “Elliott was good-looking, highly intelligent, willing to convince people to do things. Bernie was a follower, and the two of them seemed to work very well together.”

  So the two became partners in a social enterprise.

  In seventh grade, Bernie and Olin started a club called the Ravens, and even had sweaters made with a Raven on them. One had to be considered among the school’s elite to be in the club. Jay Portnoy, who became a member, recalls that the club had a “reverse quota system.” Because the boys met at the Laurelton Jewish Center, the Ravens “always had to have one more Jew than non-Jew,” he said. “If a popular gentile was wanted as a member, they had to search for a usually less popular Jew to invite.”

  Bernie liked sports, but he wasn’t much of a player on the eighth-grade softball team. Portnoy, who kept statistics, recalled that in the season’s first three games, Bernie had a batting average of .143, the lowest on the team. When Bernie saw the number, he angrily confronted Portnoy and demanded to know how well Portnoy himself had done at the plate. Portnoy acknowledged he was 0 for 5. When Bernie demanded to know why Portnoy hadn’t listed himself as low man, he explained that the statistics covered only those with 10 at-bats.