Madoff with the Money

by Jerry Oppenheimer

  As a locker-room guard—his only other extracurricular activity—Bernie usually sat around kibbitzing or playing roughneck, macho games such as punch-for-punch, which Bernie felt was idiotic but still participated to avoid being labeled a sissy. The game consisted of one boy slamming his fist into another boy’s fist or shoulder.

  “We would see Bernie with his knuckles bruised,” recalls Jay Portnoy. “He didn’t want the others to think he was chicken, or afraid to do it. But he said it was a stupid game, and referred to the other locker guards as ‘a bunch of dummies.’ He went along because, again, it was a case where [if he didn’t participate] he would stand out as somehow not being sufficiently manly, or having enough testosterone.”

  Bernie was always looking for a way to make a fast buck between semesters.

  When he heard that two classmates, 15-year-old Eddie Heiberger and Sheldon “Shelley” Fogel, had formed a company called Shedwin—for Shelley and Edwin—and were raking in good money installing sprinkler systems for new homeowners moving from the crowded New York City boroughs to the tract house suburbs of Nassau County on Long Island, Bernie tried to shoulder his way in on their action—with the help of his tough-talking father.

  “For kids, we made five or ten grand for the summer,” says Heiberger. “Bernie’s father wanted him to be involved. His father was very aggressive, and he wanted Bernie to go into partners with myself and Shelley.”

  The whole lawn sprinkler business would become part of the Bernie Madoff myth. To impress clients years later, he boasted that he bankrolled his 1960 start-up stock and investment business with money saved from installing lawn sprinklers and working as a lifeguard—all of which made for a good story, but was not exactly true. But it honed his image as the quintessential boy from Queens who pulled himself up by his bootstraps and became a multi millionaire and a financial wizard.

  At one time lawn sprinkler systems were complicated affairs, requiring expensive copper pipe that had to be cut and fitted and welded; installation was difficult, costly, and labor intensive, and few but the very well-off could afford to buy such systems. But by the early 1950s, when Bernie was in high school, inexpensive sprinkler kits made of flexible polyethylene pipe had become available, along with cheap plastic sprinkler heads.

  “As a high school kid I thought installing these things was a good business. Nobody’s doing it. We were entrepreneurial,” says Heiberger, a lawyer’s son, who was in Bernie’s class of 1956, and his future wife in Ruth’s. “Rockaway,” he notes, “had a pretty aggressive group.”

  A lawn sprinkler kit cost as little as $59, but Heiberger and Fogel charged a homeowner as much as $500 for materials and labor.

  “Bernie heard what I was doing installing sprinklers,” says Heiberger, “and his father said, ‘Go in with Eddie and Shelley—they’re raking it in.’ Shelley was an entrepreneur like myself hustling a business that made money.”

  Like the characters in the film Tin Men, who used creative tactics to lure customers into buying aluminum siding for their homes, Heiberger and Fogel sometimes used shrewd ploys themselves in order to make a sale.

  “It was the beginning of tract homes in Nassau County, on Long Island, and people were putting a lot of money into landscaping, and we were able to convince them not to water their lawns by hand with a hose,” says Shelley Fogel. “I’d see a guy watering his lawn, and I’d stop by and start smacking my arms and smacking my legs like mosquitoes were biting me, and I’d show them their shoes were getting all muddy. We’d get them that way. We were getting all these young couples moving to the island from Brooklyn. We gave landscapers stickers with our name and number to hand out to their customers when they mowed lawns, and we’d give them 10 percent of the job.”

  In order to get cheap labor, he says, they recruited help in black neighborhoods. “They would think we were cops when we walked in,” he says. “We used to pay $1.50 an hour when we needed guys.”

  In the end, Heiberger, who became a successful home builder on Long Island, and Fogel, who went into gaming in Las Vegas, decided against a third partner, which would have reduced their profits. As a result, Bernie went off on his own, a venture he would continue through his college years on a much larger and better-financed scale, and use even more creative tactics to lure customers. However, his brother, Peter, when he was in high school and a student at Queens College, worked for Heiberger and Fogel for a few summers.

  “Peter was a good kid,” says Fogel. “He had more of a personality than Bernie, and was smarter. Bernie wasn’t that bright.”

  Heiberger had had little or no contact with Bernie after high school.

  In November 2008, however, his wife attended the 50th reunion of her Far Rockaway class of 1958, and ran into Ruth Alpern Madoff—who had been voted “Josie College” by her classmates a half-century earlier because of her preppy, peppy, popular persona. She was listed in the Dolphin yearbook as one of the “senior personalities.” Another classmate, Barbara Aronson Curreri, also ran into her at the reunion before “all the crap hit the fan,” as she put it, referring to Bernie’s arrest just weeks after his appearance at the Fort Lee, New Jersey, hotel where the reunion was held. “Ruth looked absolutely stunning,” Curreri observes. “She looked in high school exactly the way she looks now, very pretty.”

  Another member of the class, also a Laureltonian, says Ruth sat at a table at the reunion “with a group she’s friendly with because some of her friends from school invested with Bernie. Ruth was a smart girl, not a shrinking violet that follows blindly. Take it from there.”

  However, Bernie’s pal Elliott Olin considered Ruth to be “an air-head,” recalls Jay Portnoy, who developed a friendship of sorts with Ruth when the two were students at Queens College. He suggests that possibly “Elliott was a bit envious [because] of being displaced in Bernie’s attentions” by the petite, cute blonde who would become Mrs. Madoff in just a few years.

  Ruth had been far more popular and involved in extracurricular activities at Far Rockaway than had been Bernie, although her main yearbook photo has her looking rather glum compared to the other graduates, who are pictured smiling. Ruth had been on the staff of the school newspaper, was a member of the Forum Club, was secretary to one of the teachers, and was a representative of the G.O. Council, a link between the students and faculty that sponsored the Kick Off Hop and Barn Dance.

  Volunteers from the class of 1958 had turned out a two-inch-thick, colorful, sentimental, and nostalgic book for the reunion that the Heibergers had sitting on a coffee table. In early December 2008 they invited some friends over who were skimming through the book, which featured a color photo of Bernie and Ruth smiling at the camera and looking richly tanned in expensive, preppy sports outfits and chic sunglasses.

  Says Heiberger:

  When the wife looks at their picture, she says, “Oh, my God, there’s Bernie Madoff. He’s the hottest broker. So and so invested a lot of money with him! They’ve been with him for years. He doesn’t take all accounts. Bernie’s like the guru of investing.”

  That’s how they portrayed him.

  A week later Bernie was arrested.

  Shelley Fogel jokingly asserts that Bernie “started his own Social Security. Social Security is like a Ponzi scheme,” he maintains. “The last ones in pay for the first guys that were in. That’s what Bernie did.”

  After the Madoff scandal broke, Fogel was offered $250 for his Far Rockaway yearbook that had a photo of the internationally infamous fraudster along with his autograph. Bernie had simply written: “To Fogue, Lots of luck in college, Bernie.”

  In September 1956, Bernie, too, was about to begin his own college career, in the segregated Deep South of all places.

  Chapter 4

  From Queens to Alabama, Scamming Homeowners and Hustling Stock

  When 18-year-old Bernie Madoff arrived at the University of Alabama, on the banks of the Black Warrior River in Tuscaloosa, in September 1956, the school was embroiled in racial ferment.<
br />
  While the U.S. Supreme Court had ruled in 1954 against segregated schools in the landmark Brown v. Board of Education case, Bernie’s college of choice was still all-white—and would stridently remain so for some years to come.

  Just seven months before his arrival, a 26-year-old black woman by the name of Autherine Juanita Lucy, who had earned a bachelor of arts degree in English at an all-black college in Alabama, was reluctantly accepted by the University of Alabama administration, and with racist hostility from students and the community.

  A number of court cases eventually upheld by the Supreme Court, and with the support of civil rights attorney and future Supreme Court Justice Thurgood Marshall, along with activism by the National Association for the Advancement of Colored People (NAACP), resulted in Lucy being admitted on February 3, 1956, as a graduate student in library science. She was “the first Negro” ever permitted to attend a white public school or university in Alabama’s long and scandalous history of segregation and racial violence. Though allowed in classrooms, she was barred from dining halls and dormitories; the hope was she would quickly drop out.

  But three days into her matriculation, an angry, stick-wielding, confederate flag-waving mob of students and outsiders riled up by the Ku Klux Klan and other hatemongers blocked her from attending classes. A news photograph of the riot scene showed university students standing around a bonfire burning desegregation literature.

  If Bernie, who had announced his plan to attend the University of Alabama in his Far Rockaway yearbook, had read the February 7 front page of the New York Times—doubtful since he wasn’t a reader and cared little about current events—he would have seen the two-column, above-the-fold headline that read: “Negro Co-ed Is Suspended to Curb Alabama Clashes.”

  According to the report, she was spirited off the campus and Tuscaloosa policemen had to fire tear gas to break up “a midnight anti-Negro demonstration.” At one point demonstrators had been “pelting eggs on an elderly Negro” who had driven Autherine Lucy to the campus from Birmingham, the Times reported. University officials said she was suspended “for her own safety.”

  That was the bigoted and rabble-rousing atmosphere that permeated the campus when Bernie arrived in Alabama in the fall of 1956.

  The issues of racism and segregation were not of concern to Bernie—Laurelton and Far Rockaway High School had few, if any, blacks, and blacks were sequestered in ghetto neighborhoods in the New York boroughs and on Long Island. Segregation was simply an accepted way of life to him, de facto as it was up North. Bernie was no liberal activist.

  After registering, he immediately began pledging for a fraternity. It was called Sigma Alpha Mu, known as “Sammy,” and had only Jewish members.

  Curiously, while blacks were blocked from the campus, Jews—another group discriminated against in the South back then—were welcomed. Jewish friends of Bernie’s, such as Joe Kavanau, then starting at the Ivy League’s Columbia College in New York City, were surprised that he would go to school in the South “where they thought Jews had horns and tails.”

  But as far back as the 1920s the University of Alabama actually encouraged Jewish students to come on down, especially those from the Northeast where many colleges had quotas restricting Jewish enrollment.

  George Denny, a university president, had started the cheerleading for the Jewish recruitment—not because he was a flaming liberal, but mainly because the school was financially struggling during his tenure and he needed to fill the coffers with out-of-state tuition money.

  William Bradford Huie, the writer, who had attended the University of Alabama in the late 1920s during Denny’s tenure, wrote in his autobiographical novel Mud on the Stars that those early Jewish students brought a competitive and academic focus to the university. At the same time, those outsiders sparked clashes with the slow-paced, Old South school culture. As a result, the Jews from up North were not welcomed in the traditional fraternities, so they started their own.

  By the mid-1950s, when Bernie arrived, there were almost a thousand Jewish students attending Alabama; there were four Jewish fraternities like Sammy, and three Jewish sororities. Most of the members were from the New York City area.

  In any case, the Jewish question at Alabama, good or bad, wasn’t of concern to Bernie. He decided to matriculate there because he wanted to get away from home, the school had easy entrance requirements, he couldn’t get accepted elsewhere, and the tuition was especially low. Moreover, he is believed to have received either a swimming scholarship or a partial U.S. Army Reserve Officer Training Corps (ROTC) scholarship, friends recall, with his pledge that he would stay in the cadet corps for all four years of college, and then serve his country on active duty.

  Along with joining Sammy, Bernie became a proud member of Alabama’s rifle-toting Crimson Tide Battalion.

  “Bernie liked the spit-and-polish. He liked the uniform that had to be crisp and pressed. He even wore it sometimes when he wasn’t required to wear it. I guess it sated his obsession with neatness,” observes a classmate who had trained with Bernie on campus.

  The lineage of the Alabama Corps of Cadets began in 1860, and boasts of having produced half a dozen Alabama governors, hundreds of CEOs and presidents of major companies, a couple of dozen judges, a Congressional Medal of Honor winner, the founder of Habitat for Humanity, and the author of the book that was made into the film Forrest Gump, among others.

  Cadet Bernie Madoff was in good company.

  Like his classmates at Far Rockaway, his roommate in the Sammy House, Marty Schrager, from Long Island—another future Madoff investor—was unimpressed with him. The two roomed together not by choice but by chance—a drawing was held to team up the new pledges.

  “There was nothing outstanding about Bernie, nothing that would lead anyone to believe that he was a genius or a financial whiz. There was nothing sinister about him. There was nothing about him whatsoever,” observes Schrager. “Bernie was just an ordinary guy from Queens. This was not a guy I would ever think could, or would, be involved with billions of dollars.”

  As roommates, Bernie and Schrager “studied together, hung out, went to parties, and pledged Sammy together. It was typical hazing,” he recalls. “We were forced to stay up all night, had to wear a burlap sack to class, had our heads shaved, wore beanies, silly things like that.”

  Asked how it felt to be a Jew in racist Alabama in the mid-1950s, with all that was happening, he claims, “If there was [segregation or anti-Semitism], I never saw anything like that. In terms of blacks, we had black help in the house and they were treated like family. Half of the guys in our fraternity were Southern boys, and the others were Northern boys, not only from New York.”

  Aside from Schrager, none of the 30 or so Sammy fraternity brothers remembered Bernie being there. Others had vague memories of him: “Nice enough,” “low-key,” “lacked any personality trait,” and “stayed out of trouble” were the typical comments.

  One event does stand out, though.

  When the fraternity had a big party and dance, Schrager and a few others recall, “a cute little blonde from New York flew down to spend a weekend with Bernie.”

  His date presumably was Ruth, who would have been a 16-year-old junior at Far Rockaway at the time.

  Bernie stayed for just his freshman year. Presumably wanting to be closer to Ruth, who was about to become a senior at Far Rockaway, he left Alabama for the last time in June 1957, and headed home to Laurelton, and his roots.

  Marty Schrager graduated from Alabama and went into business. But the two former Sammy roommates’ paths crossed again in a very curious manner in the late 1970s. By chance, they wound up having the same accountant, Michael Bienes, a man who along with his partner, Frank Avellino, would be a prominent figure in the rise and fall of Bernie Madoff.

  “Mike was a jovial guy who didn’t seem overly bright, either,” says Schrager. “He kept telling me that he had a client who was making all sorts of money for everyone. He was alwa
ys talking about him, and I never asked for details. But one day I said, ‘So, who’s this client of yours?’ And he said, ‘It’s Bernard Madoff.’ I said, ‘You mean you’re talking about Bernie Madoff?’ And he said, ‘No, it’s Bernard L. Madoff Investment Securities.’ And I said, ‘Tell Bernie that he still owes me a pair of socks from college.’ And Mike laughed at me.

  Schrager continues,

  Well, the next week I saw him and he was like, “Oh, you really do know Bernie. He was your roommate.” Mike, who did the books for me and did the books for Bernie, then impressed upon me to invest money with Bernie’s firm. Obviously, Mike made a commission, but I never could understand what was going on. I didn’t understand the statements I was getting, so after about a year or so I decided to get out my money.

  This was the late 1970s, Jimmy Carter was the president, and banks [because of soaring inflation] were paying interest rates of about 18 percent, and they even gave you a toaster. Then I read later that Bernie was chairman of Nasdaq. I said, “Oh my God, I can’t believe this. This is Bernie Madoff? It’s like a non sequitur. This is the guy I used to bop around with. Nobody thought he could rise to those heights.” My wife said, “You schmuck. You shoulda kept our money in there for 15 more years.”

  It never dawned on me that Madoff and Company was doing all this business and Bernie had Mike Bienes as his accountant. I guess I was stupid. But everyone was stupid. No one ever questioned that Bernie was doing billions of dollars of business and he’s got a two-man accounting firm. It’s just like it slipped through the cracks. No one ever bothered to ask about it.