Madoff with the Money

by Jerry Oppenheimer

  In fact, as it would later be revealed by the SEC, the firm of Avellino & Bienes did more than accounting. They had started in business with Ruth’s father, Saul Alpern, and were feeding investors to Bernie early on—and they would become very rich doing it. (In the early 1990s, the SEC would probe their operation, force them to return investors’ money, and put them out of business. But they still continued as a feeder fund. The Avellino & Bienes affair would be the first red flag raised and mishandled by the SEC.)

  In the mid-1990s or thereabouts, Schrager was invited to attend a business meeting in Boca Raton, Florida, just south of Palm Beach, where Bernie by then had a multimillion-dollar home and a yacht and belonged to the best country clubs. It was there that he was actively working his Ponzi scheme with a slew of the posh resort’s wealthy, mostly Jewish elite.

  “There were two guys in my friend’s office and they were laughing and joking and having a great time,” says Schrager. “I was introduced to these two guys, and they had just come off a cruise and they told me that the whole cruise was sponsored by Bernie Madoff, and they were boasting, ‘Oh, we’re making so much money. It’s like crazy.’

  “So I said, ‘Do you think you could get me an introduction? Maybe I could invest some money in Madoff.’” Schrager was only putting them on, interested in how they would respond. “And one of the guys says, ‘Oh, no, no, no! It’s closed. He’s not taking on any new business. ’”

  In September 1957, Bernie enrolled as a sophomore at Hofstra College, in the town of Hempstead, Long Island. He decided to major in political science, which he had heard was an easy way to skim his way to a bachelor of arts degree. Tuition was inexpensive, and he was able to live at home, thus cutting his expenses. Besides, he and Ruth were now a genuine item.

  Back then, before Hofstra expanded and became a full-fledged university in 1963, it was a commuter school. “It was like an extension of high school,” says a classmate of Bernie’s. Although some big names graduated from there—including director Francis Ford Coppola; actors James Caan, Madeline Kahn, and Christopher Walken; singer Lainie Kazan; and New York Governor David Paterson—the school when Bernie attended was considered to be one of the bottom-feeders of New York City area institutions of higher education.

  Just like at P.S. 156, Far Rockaway, and Alabama, Bernie made no impact during his three years at Hofstra. In fact, he didn’t even bother to show up for his class’s yearbook picture. He was virtually invisible, except for the fact that he continued to serve in ROTC and proudly wore the Army green uniform, drilled weekly, and attended summer training encampments—determined to win the two gold bars of a second lieutenant.

  He also knew by this time what he wanted to do with his life. His father and mother, Ralph and Sylvia, who were involved in what was a questionable stock business, and his future father-in-law, Saul Alpern, the creative accountant who would send him some of his earliest investors, had convinced Bernie that Wall Street and the business of trading stocks and managing other people’s money was where it was at—where he could make lots and lots of dough.

  “Starting a stock brokerage was what Bernie always wanted to do,” notes Joe Kavanau. “That was his goal.”

  To make a fast buck during his Hofstra years, Bernie decided to go back into the lawn sprinkler installation business that he first tried in high school. But he needed financial backing. Curiously, he had led some people to believe that his parents were dead and he had no family to give him financial help. Moreover, he had started hustling stocks to friends and fellow classmates at Hofstra, offering them hot tips on penny stocks. He was not a registered stockbroker at the time, and he never told any of his customers with whom he was placing their buys.

  To his rescue for financial backing for his sprinkler business came one Sheldon “Shelley” Lieberbaum, a Far Rockaway and Hofstra alumnus and the older brother of Bernie’s high school chum, Mike Lieberbaum. Their father, Lou Lieberbaum, had struck it rich in the stock market, bought an expensive seat on the New York Stock Exchange, opened a brokerage—and would help put Bernie on the map by sending him lucrative business a few years hence.

  “My husband is the one who put him in the sprinkler system business. Bernie had no money. Shelley loaned him five to ten thousand dollars. I was told he didn’t have parents to help him,” says Carol Ann Lieberbaum, the widow of Shelley Lieberbaum. A Brooklyn girl, the former Carol Ann Martz first met Bernie in 1958 when she began dating her future husband, and would know him and Ruth for a lifetime.

  In fact, as it would turn out, Bernie may have actually used all or part of that loan from Shelley Lieberbaum as capital to fund his start-up brokerage—and he may have been placing his buys for college friends while at Hofstra through Lieberbaum & Company, owned by Shelley and Mike’s father.

  And down the road Bernie’s Ponzi scheme would wipe out Carol Ann and members of her family.

  Bernie had an interesting marketing ploy when he resumed his lawn sprinkler installation business while a student at Hofstra. Knowing that his potential customers were young couples, including desperate housewives who were home alone in the suburbs all day, he hired good-looking laborers: two fellow students, Mike Gandin and Gordon Ondis, who drew women to them like investors to Madoff.

  Gandin had been in Bernie’s class at Far Rockaway High and had previous experience installing sprinkler systems for classmates Ed Heiberger and Sheldon Fogel. Ondis, who was a few years older, had just gotten out of the army as a young sergeant, and was married.

  Ondis used to hang out at the Hofstra cafeteria table frequented by members of the Epsilon Sigma fraternity, and that was where he first ran into Bernie, who also was a regular there.

  Recalls Ondis:

  He came up to me one day, and there I am in my army fatigues, and he says, “Hey, good-lookin’, how about you wanna job?” Bernie had a shrewd marketing approach. Mike and I were both handsome young gentlemen, and Bernie recruited Mike and me simply on the basis of our physical attributes—there’s no doubt about it.

  Bernie was the salesman. Mike and I did the labor. Bernie would take us around when he priced jobs. He’d knock on the door and he’d have Mike and me walk around the property talking loud enough for the homeowner to hear about where sprinkler heads were needed. Typically, the homeowner would come out and invariably he would be with his young wife, and she’s seeing us—two guys over six feet tall, 185 pounds, lots of hair, and good-looking, both tall, dark, and handsome.

  I don’t think there’s any doubt that the wives saw us and that sealed the deals for Bernie. During the course of those jobs, some of those wives flirted with us and absolutely came on to us. They were always coming out to chat and give us ice tea or sodas.

  Agreed the more modest Gandin years later, “The girls liked us.”

  Ondis, who went on to make a killing and become a multimillionaire investing in inner-city housing, says Bernie was paying him and Gandin, a future lawyer—and Madoff Ponzi scheme victim—two to three dollars an hour.

  Typically, Bernie paid $150 for materials and charged $700 or more for an installation. We did this spring, summer, and fall. He was making good money, as much as $2,000 a week. We’d do an installation in a day, and we were working as many as seven days a week.

  Bernie’s target area was the part of Nassau County, on Long Island, that bordered Queens and was known as the Five Towns—the villages of Cedarhurst and Lawrence, the hamlets of Woodmere and Inwood, and a grouping of communities called the Hewletts, where Shelley Lieberbaum’s father, Lou, had a spectacular home on the water in swanky Hewlett Harbor. Years later, Hewlett Harbor was the setting for a fictional television series called Five Towns on the HBO series Entourage. And the village of Lawrence was where Lorraine Bracco’s real-life character, Karen Friedman, lived and became the wife of the real-life mobster Henry Hill in the Mafia movie Goodfellas.

  Bernie’s sprinkler system market area was that kind of place.

  Bernie worked quick and he worked dirty—he
never got the required building or work permits, didn’t always put much thought into his installations, and showed little knowledge about what he was doing. But he still raked in the money.

  On one job, he had his workers in a customer’s yard dig a well for a sprinkler system. An interested neighbor watching them slaving away came over and asked, “Do you guys have any idea about the water table in this area?” When they said no, he told them that they would have to dig down as much as 100 feet. “That attests to how smart Bernie wasn’t,” observes Ondis. “He has sold this guy an elaborate sprinkler system, but didn’t know how deep we had to dig. We’re like two jackasses trying to dig this well. That certainly showed that Bernie was not a whiz when it came to the technical aspects of his business.”

  Ondis continues, “When the guy came home and Bernie told him that it would cost more money to do the installation than he had estimated, the customer didn’t go for it. As a result, Bernie had us abandon all the work and the materials and we just walked away from the job.”

  Years later Bernie’s many dissatisfied sprinkler system customers were still confronting him.

  “There’d be times we’d be out having dinner—Jane and I and Bernie and Ruth,” recalls Joe Kavanau, “and some guy would come over to Bernie and say, ‘You put in my sprinkler system three years ago and I’ve been trying to find you. It needs to be fixed!’ People would come over and shake their fists at him. And that happened on more than one occasion, which was kind of funny.”

  While Bernie was raking in money making suburbanites’ lawns wet and pretty, and using questionable tactics to do it, he also was starting to hawk stock tips, and even went so far as to boast to gullible classmates that he had actually bought a seat on the New York Stock Exchange, according to friends from that time.

  “I don’t think there was any doubt that Bernie was headed for Wall Street,” asserts Gordon Ondis. “I don’t think there was any doubt that becoming a stockbroker was his focus. I never heard him say, ‘That’s my life ambition,’ but there’s no doubt in my mind, or anyone else’s mind, that that’s where his interest lay at that time. He was always talking securities and stocks.”

  During a sprinkler installation job, Ondis remembers Bernie pitching a stock to co-worker Mike Gandin, who agreed to buy 100 shares. Years later Gandin doesn’t actually recall the purchase, but notes, “My whole life I bought crummy stocks, so it’s not impossible that I would have spent $300 on a stock tip from Bernie.” Ondis recalls that when Gandin agreed on the spot to buy the stock, “Bernie right away went off to make a phone call and place the order.”

  On another occasion, according to Ondis, they were working on a lawn sprinkler job with a third laborer who was in some way part of the Madoff family. “Bernie was pushing a stock and the guy says ‘I’ll buy it’ right then and there. So Bernie jumped in his car and took off and placed the order. He was selling stock to students at Hofstra because there were a lot of kids there who had money.”

  Bernie was certainly earning commissions on those trades, or he wouldn’t have bothered.

  Yet, the question remains with whom Bernie was placing those trades. He never revealed that to anyone taking him up on his tips, but those who knew him well back then believe he was doing business with either his father’s Laurelton home-based Gibralter Securities that came under SEC scrutiny, or with the company of his friends’ father, Lou Lieberbaum. In any case, Bernie was proving that he had the chutzpah, the drive, the ambition, and the talent to successfully snag investors and make money doing it.

  With his business enterprises taking up much of his time, Bernie had little interest in his studies and had a reputation for skipping and missing classes.

  To his college pals like Gordon Ondis, Bernie was an enigma.

  He was quiet, but he had an assured, authoritarian, unspoken confidence about him. He was not prone to being part of the gang. He was more of a loner. He didn’t socialize to the extent that Mike and I did. The thing about Bernie was it was elusive to try to know him. You just couldn’t know him.

  Sharp at business, Bernie couldn’t have cared less about being Joe College.

  “He was just there at Hofstra to get through it somehow,” asserts Ondis. “He was always hustling. Always. When he saw me he used to say, ‘Hey, macher, come to macher.’We used to call each other macher.”

  In Yiddish, the word has a number of connotations but essentially the same meaning: A macher is a big shot, a mover and shaker, an ambitious schemer.

  Mike Gandin had lost personal touch with Bernie over the years, but he was aware that friends on Long Island, including “a whole crowd” from the posh Cold Springs Country Club in the North Shore community of Glen Head, had been investing with him.

  “I used to joke,” says Gandin, “that Bernie was running a scheme.”

  But when Gandin, a successful lawyer, was struggling and getting nowhere in the stock market of the early to mid-2000s, he decided to give Bernie a shot. Gandin figured it was a no-brainer since his law partner, Arnold Schotsky, was getting returns from Madoff “of 9 percent, 10 percent, 11 percent.”

  Gandin recalls,

  Since I had worked for Bernie back in college, I felt comfortable enough to call and say, “Hey, Bernie, here’s the story. I’m not making any money on my own in the market, and if I keep this up I’m going to lose all my money.” I said, “Bernie, you gotta take my investment.” At that time he required a minimum of $2 million. I said I only had a million dollars, and I told him, “You gotta help me.” He said, “All right, all right, I’ll let you in.”

  Gandin gladly sent him a check with seven numbers on it for deposit.

  A while later he called Bernie again and told him he had another $500,000 or so, and Bernie told him, “Just send it.”

  Gandin was thrilled that Bernie had let his old high school and college pal who had installed sprinklers for him into his very exclusive money club.

  I wanted to go in and see him and say hello to Ruth, who was a cute, adorable little blonde, and she and Bernie were an item from the get-go in high school, together forever. I called once, and Bernie was hard to get hold of, but it wasn’t like he was hiding, and I never got around to seeing them.

  Gandin notes that before he turned over his money to Bernie he had done some due diligence in his own “modest way”—talking to friends who had gotten nice returns and who reported getting all their money back when they requested it. “Bernie was,” he concluded, “a respected part of the Establishment.”

  Gandin himself was able without any problem to withdraw $250,000 of his investment in order to purchase a Florida condominium some years before Bernie went bust.

  “I felt fortunate. I felt on top of the world. I was gleeful. Every month I’d get 8 percent, 9 percent, sometimes 11 percent on my money, and it was terrific, and other people were struggling with the market.”

  And then the sky fell in.

  A friend called Mike Gandin and told him to turn on CNBC, “and there it was—it was all a Ponzi scheme. My wife and I were shattered, absolutely in shock. Fortunately, we didn’t have everything with him, but we’ve been forced to regroup. From what would have been a very nice retirement, we’re hunkering down. All of a sudden I had to come down from this reality where I thought I had $3 million to where it’s worth nothing. It’s mind-boggling what Bernie got away with.

  “The only thing that really bothered me was that I promised my son I would help buy him a house, and then I had to say I couldn’t do it, and that hurt. He said to me, ‘Dad, if things get tough, come live with me,’ and that meant a lot.”

  Chapter 5

  Tying the Knot and Giving Uncle Sam the Business

  Bernie Madoff took Ruth Alpern to be his lawfully wedded wife on the eve of a new decade—the Swinging Sixties, one of the most turbulent and radical eras in contemporary American history. But for Bernie the 1960s would be a time of growing success, little turbulence, and no radicalism. It would all be about making money, an
d whatever it took to make it.

  On the Saturday after Thanksgiving 1959—just a few weeks after the Russians sent an unmanned rocket on mankind’s first trip to the moon, and a few weeks before John F. Kennedy announced his run for the Democratic presidential nomination—21-year-old Bernie, a senior at Hofstra College, and 19-year-old Ruth, a sophomore at Queens College, were married at the Laurelton Jewish Center.

  While it was a Conservative Judaism synagogue, Bernie and Ruth considered themselves “lox and bagel Jews”—neither was religious or observant.

  It was a small, quietly elegant, traditional service with the two marrying under a chuppah, and with Bernie smashing a wine glass with the sole of his rented patent leather shoe that went with his rented tuxedo. Ruth wore a simple white wedding dress. There were no special vows. It was Ruth’s idea, though, to serve the guests wine and champagne placed on a table in the synagogue’s foyer before the ceremony. That night there was a wedding dinner—brisket and all the trimmings—at the Jewish Center.

  “There were no special trappings,” recalls Jane Kavanau, a guest along with her future husband, Joe, except for the champagne and wine when everyone was mingling before the service. “That was gracious and maybe a little fancier.”

  There had never been another man, or any serious romance other than Bernie, in Ruth’s life. However, Bernie would later seek out female companionship in and out of the office, and Ruth would have to keep him on a tight leash. But that was all still to come.

  “From the time they started dating when they were in high school, Ruth’s life revolved around Bernie,” maintains Kavanau, who was a senior at Vassar College at the time of the Madoff-Alpern nuptials. “Ruth would probably have gone away to college as I did [having attended the University of Michigan before Vassar], but she was involved with Bernie, so she wanted to stay close to him. They were definitely head over heels in love.”