The Madoff Chronicles

by Brian Ross

  Investigators believe the “real number” will more likely be around $17.5 billion. That would still be the biggest Wall Street fraud ever.

  There was plenty of anger to go around on the part of the victims, but few lost sight of the root cause of their trouble: Bernard L. Madoff.

  William Foxton had had a distinguished career in the British army. He was decorated by the queen for his service around the time he retired and put his life savings of more than $3 million with Madoff.

  Foxton’s investment was made through one of Madoff’s many salespeople, or fronts, the Bank Medici of Vienna, Austria. A chum told Foxton, “Get into this. It’s great. It’s totally safe.”

  Foxton was unaware that the high rates of return promised by the Austrian bank had anything to do with someone in New York of whom he had never heard before. An article in the British press said, “If you’ve got New York Jewish friends, then you’re bound to know someone who has been hit by the scandal,” recalled Foxton’s son Willard. “And little did I know when I read the article that one person who had been affected by the scandal was actually me.”

  Slowly but surely, Willard’s father became aware of the problem. “I’m having a huge fight with my bank,” the senior Foxton wrote to his son in early February. “I think we might have lost everything. I think I might be bankrupt.”

  The money in the bank was all the family had. After years of service in Afghanistan and Oman, where he lost an arm in combat, the $3 million represented a dignified retirement, a quiet life the senior Foxton had earned after a career in the army. He was badly shaken.

  On February 10, William Foxton took out his service revolver and put a bullet through his head. A second suicide had occurred that was tied to Madoff. Like the French banker, de la Villehuchet, Foxton had felt dishonored, his trust violated. He had let his family down.

  “My father was an immensely proud man, and I think he would have hated the idea that he’d been gulled and fooled,” said his son.

  CHAPTER

  TEN

  The Family

  BERNIE MADOFF DISRUPTED AND DESTROYED many lives but none more than those of his own family. His sons, Andrew and Mark, never saw him again after the day he admitted his crimes to them and they went to the federal authorities.

  On December 10, 2010, the second anniversary of that day, his eldest son, Mark, killed himself. His body was found hanging from a black dog leash in the living room of his Manhattan apartment. Mark’s two-year-old son was asleep in a nearby bedroom.

  Madoff’s younger son, Andrew, died four years later after a battle with cancer. Their lives of privilege had collapsed and the burden of shame overtook them.

  Thanks to their father, they were both multimillionaires. Madoff paid his boys big salaries at the family firm, gave them Platinum American Express cards, loaned them money for expensive homes, helped them through divorces, and provided millions of dollars to their charitable foundations.

  “We gave them everything,” their mother, Ruth, would later lament when Bernie’s crimes split parents and children in an ugly family feud rife with accusations and recriminations.

  “Why don’t you investigate those two boys?” said a person close to Ruth Madoff. “You’ll never find anyone more self-serving.”

  “He was a crook and she was an enabler,” said a person close to the sons, describing the boys’ parents.

  Andy was crushed by his father’s arrest and the aftermath. “Now we’re orphans,” he told someone close to him.

  The boys were raised amid wealth and privilege in the New York suburb of Roslyn, on Long Island. There never seemed to be any question that they would join the family business.

  “They started at the bottom,” recalled Eleanor Squillari. “It was nice to see two brothers who were so close.” Although each had a distinctive personality. “Mark was more vibrant and more noticeable. Andy’s very reserved and polite. He keeps to himself. He observes before he gets to know you.”

  Even before they finished college, Bernie had the boys come to the office. “When Mark first came in,” Eleanor said, “Before he started working full-time, he used to sit out and answer the phones with me. He seemed to know so many of the people, because he grew up around these people.”

  According to federal prosecutors, their father’s huge scam was secretly operating at full steam by the time his sons joined the firm.

  Mark received a bachelor of arts in economics at the University of Michigan and joined the firm at age twenty-two, in 1986. Andy started working for his father in February 1988, at the age of twenty-two, after graduating from the University of Pennsylvania’s Wharton School of Business with a bachelor of science in economics.

  “He made them go to school, earn everything they got,” said the former office messenger Little Rick, who remembers Mark and Andy at some of Bernie’s wilder office parties. “Andy gave the persona of being uptight while Mark was more laid-back, liked the topless bars and stuff like that.”

  They could both be spoiled brats as young men. Little Rick says they infuriated their mother when they “trashed” a motel room in Montauk during one of the summer beach parties held for Madoff employees.

  On another occasion, Little Rick says he had to intervene when Mark’s close friend Jeff Wilpon had a heated argument with “one of our girls” at a Madoff firm Christmas party at a restaurant under the Brooklyn Bridge. Wilpon is the son of one of Madoff’s biggest investors, Fred Wilpon, the real estate developer, and now is a prominent public figure as the chief operating officer of the baseball team owned by his father, the New York Mets.

  “Those kids grew up together, Jeff Wilpon and the Madoffs,” said Little Rick. He said the younger Wilpon had arranged for his girlfriend, Linda, to work at the Madoff firm. And when she tried to break off their relationship, it turned ugly. Little Rick says that when the argument flared up inside the restaurant, he and another employee, known as “Big Rick,” took Wilpon outside, “right by the edge of the river.” The two Ricks, hired from the streets of Brooklyn and the Bronx, are not men to mess with. “And we told him, ‘Listen, you’re done. Don’t ever do that again.’” A spokesman for Jeff Wilpon said Wilpon confirmed the relationship with Linda but did not recall the conversation with Big and Little Rick.

  Mark and Andy’s first assignment was the trading room of Madoff Securities. “I remember Mark said that he would prefer to answer the phones and his father was like, ‘No, it’s time for you to go in there.’ It was a lot of pressure,” explained Eleanor.

  Bernie’s boys soon took over the day-to-day management of the busy trading operation, sitting at a desk on an elevated platform, their father’s office directly behind them. “He was able to look out and see his sons in the front,” said Eleanor.

  Everywhere he looked, a proud Bernie Madoff could see family. Andy and Mark were at the trading desk. Ruth helped to keep the firm’s books and balance the checking account from her office on the eighteenth floor. His younger brother, Peter, served as chief compliance officer and was the executive who oversaw Andy and Mark on the seventeenth floor. Peter’s wife, Marion, was also on the company payroll, at $163,500 a year, although the bankruptcy trustee said there was no evidence that she did any work. Peter’s daughter and Bernie’s niece, Shana, became the firm’s compliance lawyer after graduating from Fordham Law School in 1995. Peter’s son, Roger, worked there briefly until his death from leukemia in 2006. Another Madoff nephew, Charlie Wiener, the son of Bernie and Peter’s sister, Sondra, had started on the seventeenth floor in 1980.

  “It was one big happy family,” recalled a former employee. “They all seemed so clean-cut and close.” Inside the family, however, there were some who feared Madoff, including his niece. “Shana tried to do everything perfect because she was afraid Bernie would yell at her,” said Eleanor. All of the Madoffs, however, respected his power over them and regarded Bernie like the king of a royal family, or, some would say, the capo of a Mafia family. If the kingpin was taken out, al
l the other pins around him would be in jeopardy of falling, too.

  Bernie, Ruth, Andy, and Mark worked together and went on vacation together. “In most families, people get up and go their own way and experience life on their own, but in this family they work together,” recalled Eleanor. The sons could pull out their Platinum corporate American Express cards to pay for the grandest of family trips. The bill would go directly to the office and be paid by the family firm out of the account that held the funds for Madoff’s investors. Every single member of the Madoff family connected to the business also had use of the corporate American Express cards, but the charges by the boys and Ruth were the most extravagant.

  A January 2008 American Express bill shows that Andy and Mark used their cards to pay for a family ski vacation in Jackson Hole, Wyoming, over the Christmas and New Year’s holiday. There are thousands of dollars in charges for restaurants, clothing, ski tickets, ski lessons, groceries, and rental cars. Bernie and Ruth flew in on one of their private jets to join the family at the Teton Village resort just outside Jackson Hole. Lots of snow, kids on skis, family dinners at the Mangy Moose at the base of the ski lifts—a wonderful time, all expenses paid by the company. What a great grandfather.

  The credit card records now in the hands of the FBI and the bankruptcy trustee show a pattern of vacations and other personal expenditures that, because they were paid for by the company, the IRS would consider taxable income that must be declared by the recipient. Failure to report income is a federal crime.

  Although Mark and Andy’s rise to the top was not unexpected, former employees say they proved their mettle to their father in the fast-paced trading on the nineteenth floor. “Here’s a guy who pushed his kids to learn everything about the stock market that they could,” said Little Rick. “He was very big on them succeeding.” Andy would later pull back from the business after his diagnosis and treatment for lymphoma. He was still employed at his father’s firm but spent more time away from the office and actually took over a business that produced reels for fly-fishing.

  Andy and Mark did not work on the seventeenth floor, where the criminal scheme was being run, but Madoff apparently told one of his biggest investors that his sons gave him trading advice for that part of the business. In testimony before the Securities and Exchange Commission in 2007, Jeff Tucker, the cofounder of Fairfield Greenwich, was asked if he knew any of the people besides Madoff and Frank DiPascali who were involved in making investment decisions.

  “Going back some time,” testified Tucker, “Bernie once or twice said, ‘You know, I may consult with my kids, who run the trading room, because they get a good feel for where the market is.’”

  “So the two kids, was it Andrew Madoff was one of them and—?” asked the SEC lawyer.

  “Andrew and Mark,” replied Tucker.

  Madoff’s statement to Tucker was a lie on at least one level. He never made any trades for his investors, so there would be no reason he would consult with his sons about which trades to make. Nevertheless, by invoking Andy and Mark’s names, Madoff was able to pull the wool over Tucker’s eyes. At another point, Madoff also told Fairfield Greenwich that if he were to die suddenly, his sons or brother would take over the investment advisory business. If nothing else, he used his sons to carry on the deceit, because planting the idea of them by his side picking stocks or ready to succeed him helped bolster his image.

  The sons told the FBI they were completely unaware of their father’s crimes until he confessed to them on December 10.

  Others on Wall Street have said that if Mark and Andy did not know, they should have known. Given Madoff’s sons’ day-to-day involvement in the market, many wondered how they could not have noticed their father’s lack of trades and realized that something was wrong. Madoff did not like titles, but his son Mark was considered the head of trading.

  “That the sons didn’t question the fact that there was no volume in the securities that they were making markets in, which Madoff was supposedly trading,” said Suzanne Murphy, a hedge fund adviser, raised lots of questions. “‘Dad, hey, why aren’t we doing these trades?’ They had to know something funny was going on, because they weren’t doing the trades.”

  According to the bankruptcy trustee, both Mark and Andy had accounts with their father. “So, presumably, they were getting statements,” said Murphy. “And if they had looked at their statements, they would’ve said, ‘Wait a second.’”

  Madoff’s cover story for the lack of trades in the New York office was that all of the trades were being handled through the European markets by the London office, Madoff Securities International, Ltd. His employees in London have since told British and American investigators that, other than a small volume for Madoff’s personal accounts, they never made any such trades. Both Mark and Andy had been directors of the London business since 1998, and in that role they had the ability, and some would say the fiduciary responsibility, to learn the truth.

  Like many others, however, the two sons had plenty of reasons not to push their father on the way he did business. He always took care of them.

  Madoff gave Mark a $5 million loan while he was married to his first wife, Susan, with whom he had two children, Daniel and Katherine. According to records filed in his divorce proceedings in 1999, Mark was then making $770,000 a year working for his father. His “periodic dividends” from his partial ownership of the London office were applied to pay the interest on the $5 million loan from his father.

  In June, 2008, Mark again used his father’s money to buy a $6.5 million beach house on Nantucket, the exclusive island retreat off Cape Cod. The home is on the ocean in the Tom Nevers section, with five bedrooms, four baths, a hot tub, and separate guest quarters. The money came directly from the firm’s accounts as a “loan” to Mark and his second wife, Stephanie, at 3.2 percent a year. An investigator for the bankruptcy trustee found no “records of any interest or principal” being repaid by Mark and “no apparent benefit” to the firm for offering the loan. In effect, money stolen by his father paid for Mark’s summer beach house.

  Although he was the younger brother, Andy was no less well rewarded for being Bernie’s son. The foundation he set up with his then-estranged wife, the Deborah and Andrew Madoff Foundation, had more than $4 million. Andy had survived a scare with lymphoma in 2003, and his parents “doted on their baby,” according to someone close to Ruth.

  Even as the markets neared collapse in September of 2008 and Madoff was beginning to see trouble on the horizon, he still had enough money to help Andy buy a $4 million apartment in New York City, on East Seventy-fourth Street, overlooking the East River. Andrew closed on the property October 6, three weeks after the bankruptcy of Lehman Brothers, when his father was already in a desperate scramble to raise money from new and old victims and avoid the detection of his crimes. The $4 million came directly from the money investors entrusted to Madoff.

  Mark’s home in Nantucket and Andy’s New York apartment were financed by Madoff at a time the government contends his criminal scheme was well under way. His decision to “confess” to his two sons and arrange for them to call the FBI was designed to divert any suspicion of Andy and Mark. But for many, it seemed too obvious.

  “What would you do if you were a father trying to protect his sons?” asked Suzanne Murphy. “‘I’m going to say you knew nothing about it, because I’m seventy years old, you’re forty, you’ve got children. So I will take the fall for this.’ It’s probably the only menschy Jewish thing he’s done.”

  If nothing else, Mark and Andy faced the almost certain loss of anything they owned that was paid for by their father. The boys refused to see their father in prison or to speak to their mother. All their communications were through lawyers. Bernie wrote to his grandchildren, but Mark would not allow his children from his first or second marriages to visit their grandfather in prison or their grandmother in her apartment. They have exchanged letters with their grandfather in prison, but they want to change their
last name to avoid the shame associated with anything Madoff.

  Ruth was livid with both of her sons. She found their behavior “unconscionable” and “outrageous.” She told someone close to her that she understood how her sons feel but that their behavior toward her was “unforgivable.” She ranted that they didn’t understand what she was going through. They had their families and the outside world. She only had them. Mark and his wife, Stephanie, sent Ruth a birth announcement for the newest Madoff, Nicholas Henry, but there was no invitation for Grandma to visit. Ruth told others in the family that only Mark’s ex-wife, Susan, seemed to have the decency to send her support.

  Other members of the Madoff family had their own problems to worry about as they faced the likelihood of financial ruin and the possibility of criminal prosecution.

  As the chief compliance officer, Madoff’s brother, Peter, had attested to the firm’s legitimacy to the SEC for years. But his significant role in the business did not mean that he enjoyed the best of relationships with his older brother. The firm was in Bernie’s name; it was not Madoff Brothers Securities, and Bernie had never considered making his younger brother his full partner.

  Family friends say Bernie could be cruel to Peter at times. Bernie and Peter and their families did not vacation together or even spend major Jewish holidays together. After the death of his son, Roger, in 2006, Peter became very religious and would go to the Park Avenue Synagogue every morning before heading to the office. According to a family friend, Peter’s wife kept a kosher kitchen, while Bernie used to boast in Peter’s presence that his own favorite food was “pork sausage.”

  Even so, Peter’s role in filling out the SEC documents and forms—regardless of whether he knew about the Ponzi scheme under way on the seventeenth floor—left him in the sights of the FBI and the SEC, as well as the teams of lawyers circling on behalf of cheated customers. “His brother was either involved or is going to have to proffer a defense that he was the stupidest man in America,” said Brad Friedman of the Milberg firm, which represents Madoff victims.