Madoff with the Money

by Jerry Oppenheimer

  But that wasn’t what had transpired.

  According to Richard Bucksbaum, owner of Tyrone, Skoller never had an equity stake in the business; he was simply the clothing manager, but “the best” Bucksbaum ever had.

  Bucksbaum says that from his perspective he never got any indication that Skoller’s in-laws were unhappy with him.

  He observes:

  Scott was a charming man and a great salesman, and I think that whatever Peter and Marion’s darling daughter wanted was good enough for them.

  If Shana wanted to marry this guy, Daddy was fine with it because the Madoffs had all the money in the world.

  Marion’s jewelry alone was phenomenal. They were probably the richest family out here, so who Shana married didn’t really matter to them. And Scott was so presentable, and so charming to people that it didn’t matter what he did for a living. It wasn’t like he was a ditchdigger.

  He was always very well dressed, very good-looking, tall, athletic, a very good golfer and tennis player. He fit right in with anybody and everybody. He befriended people very easily. He liked the wealthy, and he definitely was a social climber.

  Skoller had known Shana from high school on the north shore of Long Island, and the two reconnected later through a mutual friend, as Bucksbaum recalls Skoller telling him. “Scott was a bit of an opportunistic kind of person and saw a good thing when he found it—and that was Shana.”

  Bucksbaum was one of the guests at Shana and Scott’s “lovely, beautiful, not over the top, in very good taste” wedding, and he and his wife sometimes socialized with the younger couple, who were living in a fancy condo on East 54th Street in Manhattan. After Shana had her daughter, Rebecca, mother and child would sometimes stop in the store to say hello. Peter Madoff also became a customer. “He wasn’t snobbish, but he wasn’t warmhearted, either,” and he didn’t become a feeder fund of customers for Tyrone. “I wish he had [referred his friends],” says Bucksbaum, “but he wasn’t [a source of new customers].”

  With all of Skoller’s qualities, Bucksbaum was surprised that he wasn’t brought into the royal court of the Madoff family business where Shana was said to be making at least $500,000 a year.

  “I don’t think Scott was asked to join the business,” reckons Bucksbaum. “He wasn’t a college graduate, and he had no financial acumen. I think eventually he wanted to own his own men’s clothing store. That was his passion—clothing was his passion. That was what he knew, and Shana was making the money, so I don’t think money was an object or problem for them.”

  Bucksbaum always had in the back of his mind that if he decided to retire, Skoller, backed by Madoff money, would have bought his store.

  “But it never came to that because it was a short-lived marriage, about three or four years,” he says. “Scott just came in one day and threw up his hands and said, ‘I’ve had enough! I’m separating from Shana. Maybe I’ll go back and maybe I won’t.’”

  He didn’t, and they were divorced.

  Years later, Tyrone was hit hard by the Madoff mess.

  “I had a very upscale clientele until the Madoffs did in a good portion of them,” maintains Bucksbaum. “The area that we are in is very close to Glen Oaks Country Club and Fresh Meadow Country Club, where the brothers recruited people as investors, and a lot of the people in the neighborhood got creamed. A lot of my customers got hit—and hit bad. There have been times we’ve called customers and told them, ‘It’s the beginning of the season—come on in,’ and they’ll say, ‘Look, I lost a lot of money with Madoff, so call me when you’re having a sale.’”

  There was at least one commonality that Shana Madoff and her ex-husband had—both were clotheshorses. Black was the new black to Shana—the color she wore most of the time. Like her Aunt Ruth, Shana dressed chicly, but conservatively, favoring designers such as Narciso Rodriguez, whose dresses and shoes she came to admire when she was a law student and saw a photo of his clothes on the chic wife of John F. Kennedy Jr. She developed a relationship with a boutique in Manhattan’s trendy meatpacking district, and every season the salespeople who dealt with her automatically sent Narciso’s creations, and she was charged for everything that wasn’t sent back.

  Whatever Shana wanted she got.

  In a profile of her and two other trendy fashion-forward types for the fall 2004 fashion issue of New York magazine, she described how she was leafing through a magazine while tanning on the beach in the Hamptons with friends. She suddenly left the crowd, cell phone pasted to her face, telling her pals she had to make an important call. It wasn’t about Madoff business, however. In the magazine she was reading she was knocked out by an expensive tweed Prada bag, and she just had to order it; thus the emergency call.

  “If I see something I like, I call around,” she stated in the New York magazine piece. “I just don’t have time to shop . . . because I could be doing so many other things that are so much more productive.”

  Co-workers at Madoff recall they got a hoot out of that one.

  They say that Shana, described as “a diva,” was constantly gallivanting off to shop during the workday—or having other Madoff worker bees run personal errands for her.

  Toniann Astuto, hired at BLMIS as Shana’s $40,000-a-year assistant in 2001 after the previous assistant threw her hands up and quit, characterized her as “an absolute princess.”

  Her attitude, and what she did, wasn’t really professional. She’d leave in the middle of the day to go to a doctor’s appointment or to go to yoga. She was very involved all the time with fashion. She wore all Diane von Furstenberg, and she was always ordering clothes and shoes and sending them back and ordering them again. She was very fickle. She’d go and she’d order all these shoes, and then she’d decide she only wanted one pair and send the rest back.

  Though Astuto was hired to assist Shana with her important compliance duties—making certain the BLMIS traders had proper registrations and followed other rules—she seemed to be spending most of her time as Shana’s personal slave.

  She really didn’t do much for herself. I had to make all of her travel arrangements and take care of her personal mail, and I was always sending stuff back to stores for her. She had a housekeeper and a nanny and she had somebody who shopped for her groceries.

  Astuto asserts that Shana spent only half her time on the job—and a lot of that was doing “human resources” work rather than compliance—and the other half dealing with personal stuff. “When she really needed to, she would spend more time on [compliance] work-related things, like if we were being audited. She was always on top of the traders, always monitoring their continuing education.”

  Another veteran female Madoff employee viewed Shana as “a spoiled brat. She’d make the firm’s chauffeur take her dog’s specimens to the vet. She was despicable. She had no sense of money, no sense of responsibility. In one year she spent $50,000 on cell phones. Her dog would break her phone, or her daughter would break her phone, and she’d want new ones, the best and latest, all the time. She’d say, ‘My name is on the door. Do what I want you to do. I’m a Madoff.’ She relied on secretaries whose asses she worked off. Their responsibilities were ridiculous, and she had many secretaries quit on her. She used and abused her employees.”

  Others, however, took a far different view, and maintained that Shana was driven and dedicated at her uncle’s firm, and was well-respected in the financial community.

  The Girl Scouts of America, for instance, honored her as a “woman of distinction” at the organization’s 16th annual Women of Distinction Breakfast a little over a month before her uncle was branded a crook. Deborah Norville, the anchor of the tabloid TV show Inside Edition, was the mistress of ceremonies. One of the Girl Scouts’ benefactors was Uncle Bernie himself, a former Boy Scout. The underwriter of the event at the New York Hilton was the Bank of New York Mellon, where Bernie had assets that were frozen after his arrest.

  Early in her Madoff career, Shana had spent a lot of time in Washington, D.
C., where she rubbed shoulders with regulators. She served on the compliance advisory committee of the Financial Industry Regulatory Authority (FINRA), and in the same capacity at the Securities Industry and Financial Markets Association, the lobbying arm for the industry. After Bernie was arrested, she resigned from those groups. While at sessions involving such organizations, she met her future second husband, Eric Swanson, formerly of the Securities and Exchange Commission.

  The two were married in late September 2007 at the trendy Bowery Hotel attended by more than a hundred guests, many of them soon to be Ponzi victims. At the glam affair, Bernie jokingly stated that his niece was marrying “the enemy.” Also in 2007, while sitting on a business panel discussing the workings of his firm, Bernie talked about SEC regulation and got a chuckle out of the audience when he bragged that he had a “very close” relationship with an SEC lawyer, and “in fact, my niece even married one.”

  Curiously, while there was a wedding announcement in the New York Times for Shana Madoff ’s first marriage, none could be found for her fancy nuptials with Swanson, which raised the question: Did the Madoffs feel it was better not to advertise the union because it might raise red flags—a big announcement that the compliance officer and family member of a firm already suspect was betrothed to a former lawyer for the government agency that polices such firms?

  Those who contended that she was a devoted workaholic pointed out that while the newlyweds were on their honeymoon in the Caribbean, according to a source who talked to the Wall Street Journal, Shana spent so much time arranging for speakers for an industry event that her groom “threatened to throw her BlackBerry into the ocean, or lock it in the hotel safe.”

  People close to the Madoff-Swanson merger wondered whether it would last longer than the Madoff-Skoller marriage.

  Meanwhile, back at the office before Bernie’s niece remarried, Astuto says she spent more time dealing with Shana’s social schedule and making arrangements for her personal travel than handling official business.

  “She would change her mind on a whim,” the former assistant states. “She’d say she wanted to go to St. Bart’s and stay at a certain hotel and leave and arrive at a certain time. I’d make the arrangements, and then she’d say, ‘I changed my mind. I don’t want to leave that day. I want to leave the next day.’ And then of course she’d get there and hate the hotel. She’d call me at all hours and say, ‘This hotel isn’t nice enough. Find me a nicer one.’”

  After her divorce from Skoller and before she met Swanson, she got a reputation among her office associates as a partier. Her lifestyle was alluded to by her own brother, Roger, in his memoir. Astuto says that Shana was always asking her and other younger women in the office who were “wild” to go out clubbing with her. (Astuto therefore was relieved when she transferred from running errands for Shana to working for Madoff Energy, headed by Andy Madoff.)

  That wild period of Shana’s life was the source of much chatter around the watercooler at Madoff.

  “She brought some of the guys she dated into the office,” asserts a colleague with close ties to the Madoff family.“They were really the low of the low. She must have met these people in clubs at three in the morning. They were all losers. And then I finally met Eric [Swanson] and I thought, ‘Oh, God, he’s a nice guy.’” This person felt speculation was absurd that Shana had become involved with Swanson because of his SEC connections. “I think she’s cold. I think she’s shallow. I have zero respect for her. But who the hell would really marry someone just to protect her uncle’s business? That’s going too far. I would think that the girl had to have a little more self-respect.”

  Bernie didn’t particularly like his niece, whether or not she got into bed with “the enemy.”

  At Ruth’s suggestion, Bernie always had expensive orchids ordered for the office—“off the charts in terms of cost”—and also delivered to the homes of family members. Since Bernie liked black and gray, Shana took it upon herself to have all the orchids delivered in black porcelain pots to match the office décor.

  A colleague recalls:

  Bernie freaked.

  He says, “What the fuck’s going on? Who did this? The orchids are supposed to be in clay pots like always.” When the person who followed Shana’s instructions explained the situation to Bernie, Bernie called Shana on the carpet. “The only fucking people that decorate this office are me, Ruth, and Susan Blumenfeld. Don’t nobody listen to Shana.” She said, “But Uncle Bernie, everything is black.” It blew up in her face.

  When they got orchids for the office, every Madoff got extras, which the firm’s drivers had to deliver to their respective houses. Shana’s mother, Marion, who was nice, but prissy nice—that’s the way Bernie felt about her, and he put her down a lot behind her back—had a temper tantrum because the stem of one orchid leaned over a little. She called the office and said, “Get these out of my house—and if someone’s not here in an hour . . . ”

  While the relationship between Shana and her husband was under a prosecutorial microscope for any possible conflict of interest, her cousins, Mark and Andy Madoff, also being looked at by investigators, were hit with bombshell lawsuits in mid-June 2009 that alleged they knew about their father’s Ponzi scheme, assertions that had long been denied by them.

  The suits were filed in Manhattan Supreme Court just two weeks before their father was to be sentenced.

  For all of the Madoff principals in BLMIS, it seemed as if the walls were closing in.

  The suits, seeking $1.77 million—miniscule in comparison to other lawsuits in the overall Madoff scandal—were brought by Reed Abend and Richard Stahl, both of whom worked in BLMIS’s proprietary trading business. The brokerage, the legitimate arm of the Madoff empire, was sold for as much as $25.5 million—to be distributed to Madoff victims—to a Boston firm formerly known as Castor Pollux Securities. The principals, Frank Petrilli, former chief of TD Waterhouse, and Robert Mazzarella, former president of Fidelity Brokerage Services in Boston, renamed the new acquisition Surge Trading Company. Pending approval by the Financial Industry Regulatory Authority, Surge Trading was scheduled to be operating by late summer 2009 in the same space in the Lipstick Building that Bernie’s firm utilized before he was arrested.

  In the court papers, the former Madoff traders, Abend and Stahl, alleged that the Madoff brothers “perpetuated a fraud of their own on their employees,” and charged that Mark and Andy “had long known that their father’s advisory business was an illegal enterprise” but failed to disclose it “to induce plaintiff (and others) to continue to earn legitimate profits.”

  The Madoffs had claimed no knowledge of their father’s crimes, and were the ones who had turned him in to authorities after he was said to have admitted to them that he was a fraud.

  Stahl, who demanded $1.3 million, and Abend, who sought $474,000 in his suit, charged that they were promised $75,000 salaries plus 25 percent of the profits from their trades. Stahl said he made $5 million in profits and Abend $2 million before the firm was liquidated “and did so during the worst market sell-off in recent memory.” They asserted they were not paid the money Madoff owed them for 2008.

  They both stated in the court papers:

  It is universally recognized that while most of Madoff Securities was a giant Ponzi scheme, the trading business managed by the Madoff sons was a legitimate enterprise that earned legitimate profits. . . . It is now clear that the Madoff sons had long known that their father’s advisory business was an illegal enterprise, and that criminal conduct threatened the trading business and each of its employees. Nevertheless, in order to perpetuate their father’s lawless conduct, the Madoff sons made false statements to plaintiff (and other employees) and failed to disclose Madoff Securities’ criminal actions in order to induce plaintiff (and others) to continue to earn legitimate profits.

  The 10-page complaints brought up the Barron’s red-flag-raising article in 2001, and revealed how the Madoff brothers allegedly brushed it off.
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  . . . the Madoff sons told the employees of the trading business . . . that suspicions raised by the article were not true. The Madoff sons went on to state falsely that Madoff ’s investment advisory business was completely legitimate. The Madoff sons knew that these statements were false when they made them, as evidenced by, among other things, that the Madoff sons were Madoff ’s children and assisted in the management of the business.

  About a month and a half after Bernie was arrested and his firm became a crime scene, the out-of-work Abend saw the 42-year-old Andy Madoff buying take-out chicken on Manhattan’s Upper East Side and confronted him, demanding to know, “Where’s my money?” Andy is said to have responded, “What about me?” The two sparred back and forth as Abend followed Andy to his car, where the divorced Madoff son’s fiancée, Catherine Hooper, waited. According to a report in Vanity Fair, Abend shouted, “Is that your new whore girlfriend?” With that, Andy slugged him, got in his car, and sped off.

  In many ways Andy and Mark were mirror images of the first-generation brothers of the Madoff dynasty, Bernie and Peter. Like his uncle Peter, Andy was thought by friends and associates to be the smarter of the two brothers. He was Ivy League, and had studied in an undergraduate Wharton School program at the University of Pennsylvania. He was the brother who knew the technical side of the business, the computer-savvy guy, while Mark was a chip off the old man’s block—he even pledged Sammy, Sigma Alpha Mu, when he was at Michigan, the same party-boy Jewish fraternity that Bernie had joined during his one year at the University of Alabama.

  Mark was the outside guy, so to speak—the gregarious one whom everyone at BLMIS seemed to like. He was hailed for running the firm’s trading arm with an even hand, whereas Andy was considered tough, standoffish, and outright rude at times.

  For one thing, Andy didn’t particularly like Charles Wiener, the director of administration for BLMIS, who was the son of Bernie’s sister, Sondra. Charlie, as he was known, had started on the trading desk in the 1970s. The general feeling was that he was there only because he was Bernie’s nephew, and a relative to whom Bernie didn’t particularly take a liking.