But Bernie didn’t just scam friends; he also scammed family. There was Saul Alpern’s sister-in-law, Minette Alpern—Ruth Madoff’s aunt. In her mid-90s, Minette was comfortably ensconced in an old age home in Florida, paying her expenses with money that years ago had been invested with Bernie and Avellino on the advice of Bernie’s father-in-law. When news of the Ponzi scheme broke, the aged woman was “left bereft,” says Arenson. “She said she could live there for a while more and then she won’t have any money left. Her daughter lost everything, too. There were so many others from the family and Sunny Oaks who lost everything.”
After Bernie was arrested and virtually all branches of the Arenson family tree were feeling the pain of their losses, David Arenson came across a curious letter he had received from Bernard L. Madoff Investment Securities. The letter had been sent to investors in the wake of Hurricane Katrina that had devastated New Orleans in the summer of 2005. The letter stated that everyone should rest assured that in case of some major emergency, such as an act of terrorism, a duplicate set of all investors’ accounting records had been made and were being kept in a safe place offshore.
“The letter said there was no need to worry about anything,” says Arenson. “We had a good laugh over that. It was rich—knowing especially at that point that Madoff was completely a Ponzi scheme.”
Arenson speculates that Bernie “was just simply crazy, that at some point he became rather demented, because it’s incredible to me that somebody could be that callous, that insensitive, to hurt so many people.
“He acted the role of a philanthropist and a friend to the community. It’s possible he had some inner need to screw the system in a grand way that no one had ever done before. It’s entirely possible he knew someday his scheme would come out and he was just waiting for his moment in the sun.
“He will go down in history as the greatest Ponzi schemer and thief. I can’t think of anybody who’s stolen $50 billion from anybody short of one of those dictators in the past—Idi Amin, or the Shah of Iran.”
When in the mid-1960s Saul and Sara Alpern sold their home in Laurelton, Queens, where Ruth grew up, they bought a condo in a predominately Jewish complex, Point East, in North Miami Beach. But for years, and even as senility set in, they spent their summers at Sunny Oaks.
Despite having a lot of money and being able to afford luxurious accommodations, “They moved into this really disgusting bungalow in the summers,” says Cynthia Levinson Arenson. “When they got really old they hired a caregiver to help them.”
Ruth Madoff, according to Cynthia and David Arenson, rarely came to visit her aging parents. Her sister, Joan Roman, and her children were seen there more often, and Cynthia Arenson remembers seeing Bernie at Sunny Oaks no more than twice in all those years.
David Arenson, who helped his mother run Sunny Oaks before it finally closed, notes, “It did become a bit of a chore caring for Saul and Sara as time went on. Sara became a little senile. They weren’t that self-sufficient.”
He said he got the strong impression from Bernie and Ruth that they were happy having the Arensons care for her aging parents during the summer. “Bernie would say, ‘Well, you guys take such good care of Saul and Sara.’”
By all accounts, Saul Alpern was frugal and fiscally conservative even though he became a multimillionaire through his close business ties with his son-in-law. In fact, he was so tightfisted, especially as he grew old, that he rarely bought new clothes for himself. He continued to wear the same suit, which had grown shiny and frayed with age. For his 80th birthday, Cynthia Arenson recalls, “My parents’ friends had to chip in and they bought him a suit of clothes.”
Sara Alpern died in 1996 in Florida, leaving more than $2 million in three trusts at Bernie’s firm, according to her will. She bequeathed the money to her husband, who was then 92 years old. Under the will’s terms, Ruth and her sister, Joan Roman, married to insurance agent Bob Roman, who for a long time handled all of the Madoff firm’s insurance, were to inherit more than $1 million after their father’s death. Saul Alpern died at the age of 95 in December 1999, when his son-in-law’s Ponzi scheme was at full throttle. After Bernie’s arrest, Ruth claimed she had inherited millions from her father’s estate.
In Saul Alpern’s brief death notice in the New York Times on December 9, 1999, the “Yeshiva University family” mourned his passing, noting that Bernie’s father-in-law was “a well-respected member of the Jewish community.” The university’s president and the chairman of its board of trustees said of his survivors, “May they be comforted among the mourners of Zion and Jerusalem.”
Bernie sat on Yeshiva’s board of trustees, was in fact its treasurer, and was one of the founders and chairman of the university’s Sy Syms School of Business, named in honor of the discount clothing chain founder.
In Bernie’s massive swindle, Yeshiva University was one of many Jewish nonprofits that had invested with him. The day after Bernie was arrested, the university’s media relations director, Hedy Shulman, told the Jewish Journal, “We are shocked at this revelation. Our lawyers and accountants are investigating all aspects of his relationship to the university.”
And Bernie’s name quickly vanished from the university’s web site.
But in 2001, when Madoff and Yeshiva were as close as pastrami on rye, the university had awarded the Hofstra College nobody and Brooklyn Law School dropout an honorary degree, and a year later its trustees made him treasurer.
Initial accounts had stated that Yeshiva, located in Manhattan, with a student body of some 7,000, and home to an Orthodox rabbi seminary, had lost a whopping $110 million, but that estimate was soon lowered to $14.5 million because “fictitious” numbers allegedly had been given to the university by the head of one of Bernie’s biggest feeder funds, J. Ezra Merkin, who had been chairman of Yeshiva’s investment committee. Even though the loss was far less than had been estimated, the university didn’t have the larger sum that its administrators had thought was available.
The school also faced the problem of governance—a question raised by Moody’s Investors Service: How and why was such a thief as Bernard Madoff appointed to such a sensitive position at the university?
There was much to atone for.
Chapter 7
Moving On Up
One of Bernie Madoff ’s first offices—a $50-a-month hole-in-the- wall that he shared on and off with his father—was in the 20-story edifice at 40 Exchange Place known as the Lords Court Building that was built in 1893 and was located about a block from the center of American capitalism, the New York Stock Exchange, at 11 Wall Street.
It was in the Exchange Place office that Bernie scored one of his first lucrative stock underwriting clients in March 1962, a month before he turned 24. Along with the investment clients he was getting through Ruth’s father at Sunny Oaks, a Queens company had retained him to help it go public with 100,000 shares of common stock. He was handling the offering “on a best efforts all or none basis,” according to an SEC News Digest, dated March 30, 1962.
The principals of A.L.S. Steel Corporation, Abe Eisenberg, Herman Loonin, and Gabriel Sobel, may have been connected to either Ralph Madoff or Saul Alpern since Bernie was getting his early business from family and friends.
A.L.S., on Northern Boulevard in the Corona section of Queens—Bernie’s old stomping grounds—was involved in the sale of “processed flat rolled strip steel to a customer’s specifications and requirement,” the SEC announcement stated.
For Bernie, it was an esoteric product that could have been made on Mars, but the fees that were part of his underwriter deal—if he was able to pull it off—were, in fact, out of this world.
On each of the 100,000 shares offered for public sale at $4.50 per share—common, over-the-counter stock—Bernie as the underwriter was set to receive 45 cents, or $45,000 if all shares were sold at the offering price. Beyond that, he was to receive a whopping $15,000 for “expenses,” which were never explained. All told, the full $60,
000 would be equal to more than $420,000 adjusted for inflation in 2009 dollars.
Above and beyond that, the company sold Bernie “6,000 outstanding shares . . . at ten cents per share” and “at one-cent each five-year options to purchase 10,000 shares at $4.50 per share.”
With that deal, if in fact it was ever fulfilled, and along with the business he was scoring from his elderly Borscht Belt clientele, Bernie was generating enough money for him and Ruth to move from their little apartment in Bayside, Queens, to a rental in the more affluent village of Great Neck, on Long Island’s North Shore, a 45-minute train and subway commute to the Wall Street area.
“The new apartment was definitely more upscale,” says Jane Kavanau. “Ruth had been working for somebody on Wall Street doing some sort of bookkeeping and accounting, and then she went to work for Bernie.”
Bernie and Ruth in those days weren’t all about business all the time. They were young and a bit carefree, and spent time socializing with their young friends, such as the Kavanaus. Several times a month, the two couples went out for fun dinners, mostly to simple restaurants on Long Island, rather than to pricey and extravagant Manhattan eateries. In the winter, they spent weekends together skiing at Bel Air and Hunter Mountain in upstate New York, a far different milieu from the high-flying Aspen lifestyle the Madoffs would later enjoy and profit from as they made the rounds of chic resorts, entertaining and rubbing shoulders with the wealthy who would entrust their money to Madoff.
Recalls Joe Kavanau:
One weekend when we were all married but before we had children, Jane and I, and Bernie and Ruth checked into a motel because we were staying over Saturday night—I think we were skiing that weekend, and Ruth and Bernie had a dog, and they would take that dog everyplace.
Bernie snuck the dog, Muffin, a female schnauzer, a very sweet dog, into the motel, and the motel owner caught him, and so we had to leave.
Bernie gave the place a name, which was not a very nice name. He called it the “Fuck You Motel.”
After they had kids, Muffin was around for quite a few years. She was definitely part of the family. They had one or two cats, and one of them, I think an angora, got sick. Bernie took the cat to the vet, and I remember Bernie told the vet, “I don’t care how much it costs—you gotta take care of it, make it well.”
The man who years later admitted to taking the lifeblood from thousands of investors was once a pussycat who fawned over his pets.
Generating enough income in the early 1960s, Bernie and Ruth fulfilled the American dream by buying a new home in the incorporated village of Roslyn Estates. Their house was in one of the many developments springing up in the 1960s on former Long Island farmland, housing tracts that were bedroom communities for New York City commuters. It was during this time that they also welcomed their first son, Mark, into the world—the beginning of what would become the infamous Madoff dynasty.
The Madoffs’ purchase at such a young age and so early in their marriage tended to raise eyebrows among other young couples in their circle—friends from Laurelton, and pals like Elliott Olin and his wife, from high school and college, many of whom were still struggling to make ends meet.
Recalls Olin’s widow, Sheila, “I said to Elliott, ‘I want to ask you something. How in the world after a year or two of working, how could Bernie buy a house there?’ Elliott, who was finishing law school, just pushed off the question, but I just had bad feelings about what Bernie was doing. I thought he was doing something wrong, because how could he have so much money to buy a new home? Everyone else was still struggling. I was making $115 a week and we were barely paying our rent, and Bernie has suddenly become so successful.”
Jay Portnoy, Bernie’s friend from Laurelton who had gone to college with Ruth, was hearing through the years about his childhood pal’s growing success from his mother, who had remained friends with Sylvia Madoff and Sara Alpern.
He recalled Mrs. Portnoy telling him:
“Mrs. M. says Bernie is doing very well.” “Mrs. A. says Bernie is doing very, very well on Wall Street.” And still later: “Mrs. M. says Bernie is a millionaire.” “Mrs. A says Bernie is a multimillionaire.”
The Madoff home on Diana’s Trail, on the southern border of Roslyn Estates, was typical of the type of suburban development-style houses that were being built at the time on Long Island: It was a raised ranch with four bedrooms, two and a half baths, and an above-ground finished basement. Nothing was extraordinary about the architecture or construction or curb appeal, but Ruth decorated it to the nines and visitors were impressed. Not long after she and Bernie moved in they had their second son and last child, Andy.
The Madoff house was far different from the 480-acre estate once owned by Roslyn philanthropist Clarence Mackey, who inherited a silver mining fortune, and entertained the likes of the Duke of Windsor and the aviator Charles Lindbergh after he returned from his solo Long Island-to-Paris flight.
“The Madoff house was definitely not a mansion,” observes Jane Kavanau. “They stayed in that house for many, many years and raised Mark and Andrew there. They could probably have afforded a mansion after a while, but they just stayed in that house.” They’d later move on up: the stylish East Side penthouse, the chic Hamptons beach house, the gated Palm Beach mansion, and the luxurious getaway in the south of France.
Charles Lubitz, Bernie’s Brooklyn Law School classmate, who would later represent Palm Beach clients ripped off by Bernie, also moved into a home nearby, in an area known as Roslyn Heights. He and his wife saw the Madoffs on and off back in those days, and were part of a circle of young couples that included the Kavanaus—Lubitz’s wife had gone to Vassar with Jane Kavanau. Lubitz remembers Bernie and Ruth back then as “a lovely couple. Bernie was a nice guy. We spent social evenings together. Bernie was, of course, much more successful early on than most people of our age.” But he recalls that the Madoff house was nothing fancy, “although it was a step above that which others of us had.”
In that same time frame, Bernie and Ruth joined the first of many fancy country clubs with well-to-do, predominately Jewish members who would put their money in Madoff, and subsequently get Ponzied by Bernie—clubs from Long Island’s Gold Coast to the platinum links of Palm Beach.
Chuck Lubitz recalls how Bernie boasted about being one of the youngest members of the prestigious Fresh Meadow Country Club in Great Neck, which had rich members and a spectacular golf course designed in the early 1920s by A. W. Tillinghast. “From the beginning, Fresh Meadow traveled first class,” according to its history. “The members wanted their course to be one of the country’s great examinations of golf.”
Now, in the early 1960s, its membership included the hustler from Queens.
“He was basically a kid like I was, and he told me that one time at Fresh Meadow he was standing outside waiting for his car and he had on a pair of jeans and a leather jacket, and one of the ladies from the club came up to him and handed him her ticket to retrieve her car, and asked him would he please hurry,” says Lubitz, recalling Bernie’s glib recitation of the event. “Bernie said, ‘Oh, absolutely, Madam.’ And he went through the whole routine—went running for her car and got it. He even pocketed her tip.
“He was so young to be a member that she thought he was the valet. He was very amused by it and got a good chuckle out of telling the story. Most of the members were wealthy, graying, Jewish overachievers of a senior age. Bernie would have stuck out like a sore thumb.”
Bernie and Ruth remained members of Fresh Meadow for years. Some people have long referred to it as “the Madoff country club” because they had such close ties to the club. Major family events took place there such as the “small, understated, not particularly religious” wedding of son Mark Madoff and the first of his two wives.
Later, Fresh Meadow’s membership, like so many other elite clubs to which Bernie belonged, was hit by the nuclear blast of his fraud. One such member and victim was a longtime Madoff acquaintance, Sherry Fabrikant
, and her son, Andrew. From a wealthy family in the New York City diamond trade, Sherry, who became a noted collector of contemporary art, had gotten to know Bernie and Ruth when they lived in Roslyn Estates and she in Great Neck, and as members of the club. Beyond that, her niece was friendly with Mark and Andy, whom Fabrikant considered “morons.” In any case, the two families had a comfortable comradeship.
Looking back, Fabrikant found the Madoffs an interesting study.
Bernie never showed up for any of the events, and anytime I saw him there he was very low-key, very reserved.
Ruth used to come in the spring and in the fall by herself. They did not lead the life of those crazy socialite people. He wasn’t a social climber, not at all. I thought it was sincere. He never went to any of the stupid things that all the other totally dumb people went to—all those parties. He didn’t have Ruth dressed up in some stupid gown. I didn’t find him good-looking, and that smirk that he has—that’s not a smirk, that’s how his face is formed. He has funny-looking cheeks.
Despite how he looked and how he and Ruth acted, or at least as she perceived it, one thing was clear to Fabrikant: Bernie was making money for her friends. A doctor and his wife whom she’d known for more than four decades had invested millions with Madoff. “Year in and year out she always said to me, ‘You’d better invest with Bernie.’ For all of those years they talked about him and how they had done very, very, very well with him.”
Finally, Fabrikant decided around 2004—when the Ponzi operation was going full blast—to join the ecstatic and beholden. “My guys in the stock market were doing lousy,” she says, “and I thought, okay, go with Madoff.”
Madoff with the Money Page 10