Madoff with the Money
Page 22
“He always wanted to fire him, but Bernie kept him around because of his sister,” says a BLMIS and Madoff family insider. “Charlie was a sweetheart, adorable but not the brightest light in the chandelier.”
Andy Madoff kept Charlie at a distance, but he found himself together with him one summer day as they were headed to the Hamptons in an SUV for the Madoffs’ annual summer party. When they reached Bernie’s Amagansett manor, Andy let loose on his cousin, according to the Madoff insider.
Charlie says to the driver, “Can you wait a minute? I just want to go in and say hello to my uncle.” And Andy turns around, glares at him, and yells, “What the fuck are you doing? It’s bad enough my father has to see your face all week long. The last thing he wants is to see you tonight when he’s got to see you for the rest of the weekend!”
Besides the Ponzi scandal, Andy had a tough period, having had cancer but surviving it, unlike his cousin Roger.
His marriage also fell apart after 14 years.
In January 1993, in a beautiful ceremony presided over by a rabbi at the very WASPy Union League Club in New York, 25-year-old Andy had married 24-year-old Deborah Anne West, daughter of Douglas West, a New York investment broker, and Susan L. West, then the managing editor at the Bantam Doubleday Dell Publishing Group. At the time, the bride, a graduate of Duke University, was a book promotions consultant.
Their wedding announcement in the New York Times described Andy’s mother as the “director of administration” at Bernard L. Madoff Investment Securities.
At the time of their wedding, Debby was working in publishing for a children’s book club, and by coincidence was the assistant to the young woman who would marry Mark Madoff. She was described as “cute and sexy” by a friend of the couple. “Her family didn’t have anywhere near the money the Madoffs had. As my mother would say, Debby ‘stepped in shit’ when she married into the Madoff family—meaning she hit it big in a family with lots of money and a majestic lifestyle.”
The Madoffs had two girls, who were sent to one of the best private schools in New York.
After they separated in 2007, Andy began dating Catherine Hooper—a cute, fresh-faced, outdoorsy, formerly married young woman who stands a foot and half shorter than Andy. One thing the two had in common was fishing, of all things. Hooper had been a cover girl for a magazine called Fish & Fly, which did a profile on her and her love of fishing. A 1994 graduate of Bryn Mawr College, she once wrote an article for the alumni magazine about a trip to Venezuela “to learn to fly-fish for bonefish.” The article was accompanied by a sexy shot of her, all wet in the water holding a big, slimy bluefin trevally. “In the space of two years,” she wrote, “fishing has taken me to places I would never have dreamt of, has introduced me to people whom I am blessed to know, and helped me overcome the barriers of fear that held me back from fully enjoying my life.”
The world of Madoff was one of those places.
Like his father, Andy was an avid fisherman—back in high school Bernie had made up that story about a fictitious book he had read called Hunting and Fishing, and among his prized possessions were his luxurious sportfishing boats. Andy headed an investment group that bought a fishing-related company called Abel Reels, and had also invested in a Manhattan fishing supply store called Urban Angler Fly Shop. Hooper, whom Andy planned to marry just around the time his father was arrested, was reportedly a former co-owner of Urban Angler.
Like Andy and cousin Shana, Mark Madoff also had a first marriage that failed even though he and his wife were considered a “golden couple—a Jewish Barbie and Ken.”
A woman who was in the Madoff boys’ circle growing up in Roslyn on Long Island, where both Madoff boys went to the public high school, recalls how girls swooned over Mark.
He’s always been incredibly handsome—Robert Redford handsome—and was about as straight an arrow as you’re ever going to meet. Andy was the smart one. But they were both very popular in high school, and Mark was certainly very popular at Michigan.
He was sort of a golden boy—a good athlete, a great skier, you know, the sort of privileges that come with being a rich kid. He did everything well, was sophisticated, traveled all over with his family. Every vacation was like a ski trip or summers in the south of France, and this was as he was growing up and it continued into college. Mark was a very likable Jewish prince—but conservative. In college he drove a Honda Accord. He was definitely a mensch.
The woman became a member of the Madoff family circle and bonded with Ruth, who she says was “always perky, warm, lovely. Anytime I did anything with the family they were wonderful to me. Bernie would take us out to dinner when we’d go to Montauk. They just could not have been warmer and more inclusive.”
Noting the stories about Bernie’s obsessive-compulsive problem, and how he wanted everything in his offices to be black and gray, and how he wouldn’t let Ruth sit on their penthouse antique furniture, she says he was the same way at home at the Montauk beach house.
“It’s fairly austere and impeccable, and it’s all grays,” says the woman, who worked in publishing. “Bernie was so strict about how things should look. He gave us strict orders on how to fold the comforters a certain way. If someone tracked sand into the house he went bananas. He demanded that everything be in the proper place. But the only person who stood up to him was Mark’s wife, Susan. She was not afraid of Bernie. She did not take any of his shit. She would just tell him to fuck off.”
It was Bernie and Ruth’s longtime friends the Kavanaus—Joe and Jane—who played Cupid, sort of setting Mark up with the daughter of close friends, pretty Susan Freeman from Rye Brook, New York, who also went to the University of Michigan, as did the Kavanaus’ daughter.
Jane Kavanau recalls:
I said to Susan, “Oh, you’re going to Michigan, too. I know a very cute guy going there. He’s handsome,” and I said in jest, “He has lots of money.” I told Ruth about Susan, too, and eventually Mark and Susan met, so in a way we were sort of responsible. Mark was so handsome and Susan so adorable.
“They were the golden couple,” says a close friend of the former Mrs. Mark Madoff who was also at Michigan at the same time. “They met freshman year, fell in love, and saw each other through all four years of college. Susan and Mark actually look like brother and sister—both are blond and beautiful—the Jewish Barbie and Ken. Susan was very bright, popular, sharp, a lot of fun, from just a kind of average middle-class family.”
After graduating from college, the two lived together in a spectacular midtown Manhattan doorman-attended apartment building owned by Bernie’s pal Fred Wilpon, who also owned the New York Mets and was one of the victims of Mark’s father’s fraud. In their mid-20s, Susan Freeman became Mrs. Mark Madoff in “a classy and lovely, understated and tasteful” wedding held at the Fresh Meadows Country Club in Great Neck—known as the “Madoff country club” where later a number of wealthy members became Bernie victims.
Mark and Susan had two “adorable” children, and eventually moved, the close friend says, “to a house that was like to die for”—a $6 million mansion in ritzy Greenwich, Connecticut.
Then the marriage went south.
“Susan’s a very feisty girl. As one of our mutual friends said, ‘She’s always full of piss and vinegar.’ She likes to fight, have lots of drama, and I think she just kind of got bored with Mark. It was sort of like a midlife thing. They were in a rut.”
The two got divorced, and both remarried—the former Mrs. Madoff married a man with whom she had gone to high school, the friend says—and both Susan and Mark had children with their new spouses.
Like everyone else, the close friend was dumbfounded when the Madoff scandal broke. She says,“I do not believe Mark had any involvement, because he’s such a straight arrow. He told some friends, mutual friends, that he had no idea what Bernie was doing, and he hasn’t spoken to his parents since it happened. As shocked as I am about Bernie, I would be more shocked if Mark and Andy knew.”
The session was sponsored by the Philoctetes Center for the Multidisciplinary Study of Imagination, and held at the organization’s Manhattan headquarters. The center encouraged discussions on all sorts of subjects, including business.
After Bernie’s arrest it was revealed that the foundation that funded the center’s work was heavily invested in Madoff and was a victim of Bernie’s massive fraud.
The foundation was the brainchild of wealthy New York commercial real estate mogul Norman Levy, who died in 2005 at 93. In a paid death notice in the New York Times he was hailed by a friend who wrote: “Your spirit and love of life have changed all who knew you. You taught me so much. I’ll cherish our friendship forever.”
The friend was Bernie Madoff.
Though Bernie was a quarter century younger than Levy, the two had developed a close bond and immense trust. Levy was like a father figure to Bernie. He had invested heavily in Madoff, though suspicions were later raised that Levy—who once owned the Seagram Building skyscraper in New York—might have had knowledge about some of what Bernie was up to.
In any case, Norman’s son, the novelist Francis Levy, had financed the Philoctetes Center with $950,000 of Levy Foundation money. It was the younger Levy who invited longtime family friend Bernie to appear on the panel at the center and discuss the world of Wall Street and investing.
After Bernie was arrested, Levy quoted his late father as declaring, “If there’s one honorable person, it’s Bernie.”
One would never have guessed in a million years watching Bernie pontificate and boast at that panel session moderated by Justin Fox, Time magazine’s “The Curious Capitalist” columnist, that this hero of Wall Street was nearing the nadir of his secret criminal scheme. Bernie appeared relaxed, confident, articulate, and funny at times. Wearing a black suit, his long hair expensively cut, a crisp white shirt open at the collar, his legs crossed, he seemed to all concerned like the Master of Universe he was—at that moment in time.
In introducing Bernie, the low-key, boyish-looking Fox noted:
That name may not say a lot to you, but go over to Madoff and you talk to Bernie and he mentions, “Oh, by the way, 10 percent of stocks traded in the United States are going through this firm right now.” It’s one of those really important parts of our financial system that doesn’t show up in the headlines.
Later, after Bernie was behind bars awaiting sentencing and with dozens of tentacles of his crime stretching around the world, Fox, a veteran business reporter, acknowledged that he wished he had done some hard research on Bernie beyond a routine googling before moderating the panel discussion and tossing softball questions.
He told the author he was unaware of the earlier Barron’s story and didn’t know anything about the allegations Markopolos had made. “I googled Bernie to see who he was. I had never heard of him before I was asked to moderate.” He acknowledged that “at some level” the session was like a virtual infomercial for Bernie, “but that’s what most of these panel discussions end up being. They’re not the same as journalism. I had no idea he basically had a giant hedge fund on the side.”
Several weeks before the event, Fox says, he was invited by Bernie up to his office in the Lipstick Building to “brainstorm” what would be discussed. “When he called I thought he was offering lunch, but there was no lunch on offer. We talked about the panel, and how to make it work.” He says Bernie asserted no ground rules.
Then he walked me around the office, but sadly not to the 17th floor. His offices were just very weirdly quiet and uninhabited. I actually asked him about that, and he said that since 9/11 he had a backup facility “so I basically have to have desks for everybody in both places.” That was questionable. My take on him was that he didn’t project this I’m-a-big-deal-CEO thing. He was much more a little bit aw-shucks, but then occasionally hitting you with things about how important he was. He’s good at that, actually—kind of throwing in “I helped set up Nasdaq, but I’m just Bernie Madoff, the boy from Queens.”
However, a careful analysis of some of the things Bernie had to say that day, according to a transcript and video, was quite revelatory in view of what came to be known about him.
Bernie told the gathering, “Wall Street is one big turf war . . . by benefiting one person you’re disadvantaging another person, and the basic concept of Wall Street, which sometimes regulators lose sight of, as do the academics, is it’s a for-profit enterprise,” which got a big laugh from the audience. He noted that Wall Street “is one of the few industries where the cost of doing business had dramatically increased” for firms like Madoff, and “the cost of regulation has dramatically increased. Now, no one is going to run a benefit for Wall Street”—more laughter—“so whenever I go down to Washington and meet with the SEC and complain to them that the industry is either overregulated or the burdens are too great, they all start rolling their eyes.”
He revealed that “the big money on Wall Street is made by taking risks.”
Firms like BLMIS, he noted, were forced into taking risks because they “couldn’t make money charging commissions . . . because of the regulatory infrastructure you had to have dealing with clients,” and he stated that the “great majority” of income came from “risk taking. . . . That’s where the money is made.”
He even gave Mrs. Madoff a big plug, and made her sound much more like a decision maker at the family firm than had been previously known.
When the discussion turned to the types of people who work for a firm like BLMIS, he recalled how he’d hired MBAs as traders, and how that wasn’t the perfect situation. “Then we went through another stage. Actually it was my wife [the math whiz in high school and college] who said, ‘Why don’t you hire math people? Why don’t you go to MIT and hire math people, because everything you’re doing is related to algorithmic trading and they’re probably the best people.’”
Bernie said Ruth’s suggestion didn’t work out because, “They just spend too much time thinking. . . . You could actually watch them; they would deliver an order. My brother and I and my sons would look at them saying, ‘Well?’ And they would say, ‘I’m getting there.’ By that time the price would usually have moved against us.”
He said that BLMIS, like all brokerage firms, was “very carefully enforced and surveilled. It doesn’t mean there are not abuses, for sure, but by and large in today’s regulatory environment, it’s virtually impossible to violate rules. . . . If you read things in the newspaper and you see somebody violate a rule, you say well, they’re always doing this. But it’s impossible for a violation to go undetected, certainly not for a considerable period of time.”
As one participant who was present at the session observed after Bernie’s arrest, “If there had been a bullshit detector present in the room, it would have exploded.”
Another who asked some questions at the session and didn’t feel he got straight answers was Daryl Montgomery, a 49-year-old independent equities trader, who headed a group of people interested in the stock market called New York Investing Meetup.
Montgomery says he was aware of who Bernie was, that he had headed Nasdaq and was helping to run markets, “but not that he was the biggest crook on earth.” After seeing and hearing Bernie for the first time, he states, “He was not a great intellect, and was fairly insubstantial, but that is very common for people that have these big positions—pleasant but don’t seem incredibly bright.”
Montgomery is further convinced that people who invested in Bernie and got big returns didn’t want to hear anything bad about him, whether it came from Barron’s or Markopolos. That’s why they continued to invest. He says:
The people investing with Madoff were for the most part multimillionaires, and those people would nev
er have believed, no matter what anyone would tell them or what could have been explained to them, that Madoff was a crook.
We actually predicted the credit crisis in July 2007. We said the Fed was not going to be able to fix the problem. We said the stock market was going to peak. We said in September 2007 there’s a recession. We pointed out that Bear Stearns was going to go under. We predicted Lehman would go under many months before it did. And every time we did this, people left the group.
They’d tell me the economy is more resilient, America is more resilient, these things can’t happen. People do not like to hear negative news. In fact, there is some psychological research that indicates that even if you explain to people that something is an investment scam, it might make them more likely to invest in it.
Many of Bernie’s victims, as it turned out, felt that way.
Chapter 14
Another Arrest, and Blood Relatives Get Taken to the Cleaners
Despite all the suspicions and investigations and proliferating civil lawsuits, the only other person arrested in the Madoff scandal in the days after Bernie’s guilty plea was his accountant, handsome 49-year-old David G. Friehling, who more resembled the character Carlo Rizzi in The Godfather than a nerdy numbers cruncher. But according to prosecutors, Friehling was quite creative.
Amazingly, virtually none of Bernie’s thousands of hoodwinked investors, or other financial advisers, ever questioned the fact that the financial messiah in whom they had so much trust, the Wall Street guru whom many begged to take their money, had an accountant who worked out of a dumpy 13-by-18-foot storefront office in a drab strip of offices in the hamlet of New City, across the Hudson River and about 45 minutes from Madoff headquarters.