299 revoked Bank Medici’s banking licence: Picard v. Kohn, pp. 35, 110.
299 the SFO would quietly announce that it was closing its examination: Diana B. Henriques and Matthew Saltmarsh, “Two Decisions Reshape Inquiry into Madoff Case,” New York Times, Feb. 2, 2010.
300 those charges would later be dropped: Heather Smith, “Access International’s Littaye Charged in Madoff Case (Update3),” Bloomberg news service, Nov. 4, 2009; and Benjamin Masse-Stamberger and Jean-Marie Pontaut, “Madoff L’heure des comptes,” L’Express, Sept. 29, 2010.
300 the SEC’s assertion simply wasn’t enough to sustain the case: SEC v. Cohmad, Opinion and Order of Judge Louis L. Stanton, Feb. 2, 2010.
300 “Nowhere does the complaint allege any fact”: Ibid., p. 4.
301 roster of important regulatory actions: In February 2009, Halliburton and its subsidiary, Kellogg Brown & Root, paid $177 million to settle the SEC case, without admitting or denying wrongdoing. The KBR subsidiary also paid $402 million to settle related criminal charges filed by the Justice Department. According to the SEC, the combined settlement was the largest ever paid under the Foreign Corrupt Practices Act. See SEC Litigation Release No. 20897A. UBS agreed to pay $200 million to settle the civil charges, without admitting or denying wrongdoing. See SEC Litigation Release No. 20905. The mortgage industry executive was Angelo Mozilo, the former chief executive of Countrywide Financial, who was sued by the SEC on June 4, 2009; without admitting or denying wrongdoing, he paid $67.5 million to settle the case on Oct. 15, 2010. See SEC Litigation Release No. 21068A and Press Release No. 2010-197. The SEC sued Goldman Sachs in April 2010 for allegedly deceiving investors in the sale of complex mortgage derivatives; in July 2010 Goldman paid $550 million to settle the case, neither admitting nor denying wrongdoing but acknowledging that its marketing materials were “incomplete.” See SEC Litigation Release No. 21592.
302 “there will very likely be a subpoena on your desk”: Robert Khuzami, “My First 100 Days as Director of Enforcement,” Aug. 5, 2009, accessible at www.sec.gov/news/speech/2009/spch080509rk.htm.
302 the relationship had not influenced the SEC’s handling of Madoff or his firm: Kotz Report, p. 408.
302 “Yet, at no time did the SEC ever verify Madoff’s trading”: Ibid., p. 23.
303 “When potential investors expressed hesitation”: Ibid., p. 25.
303 Mary Schapiro immediately issued a statement apologizing again: Statement by SEC chairman Mary L. Schapiro, Sept. 2, 2009, accessible at www.sec.gov/news/speech/2009/spch090209mls-2.htm.
303 The lawsuit contended that the SEC was liable: Phyllis Molchatsky and Stephen Schneider, M.D. v. U.S.A. (hereafter Molchatsky v. U.S.A.), filed as Case No. 09-cv-8697 (LTS/AJP) in U.S. District Court for the Southern District of New York. Molchatsky was a disabled retiree who invested her life savings of $1.7 million with a Madoff feeder fund in 2001, and Dr. Schneider had invested more than $750,000 of his retirement savings with Madoff in 1997.
304 “Plaintiffs’ losses are undeniably tragic”: Molchatsky v. U.S.A., “United States of America Memorandum of Law in Support of Its Motion to Dismiss,” pp. 1–2.
304 the final total would be 16,518: See Third Interim Trustee’s Report for the Period Ending March 31, 2010, p. 27, Main Madoff Liquidation. The figures were updated on Feb. 21, 2011, from the trustee’s Web site, www.madofftrustee.com.
306 Judge Burton Lifland took his seat: This passage is based on the author’s observations and notes and a transcript of the hearing.
308 “a thorough and comprehensive analysis”: Main Madoff Liquidation, Memorandum Decision Granting Trustee’s Motion, Judge Burton R. Lifland, Mar. 2, 2010, p. 6.
308 “Given that in Madoff’s fictional world”: Ibid., pp. 10–11.
309 “It would be simply absurd to credit the fraud”: Ibid., p. 30.
309 “at no time was I ever aware that Bernard Madoff was engaged in a Ponzi scheme”: Friehling Plea Transcript, pp. 34–35.
309 The next defendants to come before the court: The original case was U.S.A. v. Jerome O’Hara and George Perez, filed as Case No. 09-mj-02484-UA-1 in U.S. District Court for the Southern District of New York. That case was preempted by a subsequent superseding indictment, as noted previously.
310 telling him to “ask Frank”: SEC v. Jerome O’Hara and George Perez, filed as Case No. 09-cv-9425 in U.S. District Court for the Southern District of New York, pp. 23–24.
310 he stood accused of having conspired to sustain and conceal the Ponzi scheme: First Superseding Bonventre Indictment. 310 “I’m saying Dan Bonventre is absolutely innocent”: Diana B. Henriques, “Another Madoff Aide Faces Fraud Charges,” New York Times, Feb. 25, 2010.
311 the senior Picower lawyer, Bill Zabel, balked: Confidential interviews with three people briefed on the negotiations.
312 the worst moment of the entire tortured case: Interview with David J. Sheehan.
16. HOPE, LOST AND FOUND
314 The scene at the firm was like law school finals writ large: Interview with David J. Sheehan.
314 Among the cheques Madoff had prepared: In re: Bernard L. Madoff Investment Securities, Debtor; Irving H. Picard, Trustee for the Liquidation of Bernard L. Madoff Investment Securities v. Irwin Lipkin et al., filed as Adversary Proceeding No. 10-04218 (BRL) in U.S. Bankruptcy Court for the Southern District of New York, p. 16. Gary S. Redish, a lawyer for the elder Lipkins, denied the trustee’s claims. The fact that the Lipkins used their Madoff accounts to make gifts to their grandchildren showed they “had absolutely no knowledge of the Ponzi scheme,” he said. James K. Filan, a lawyer for Eric Lipkin, declined to comment on the trustee’s claims.
314 listed as the firm’s controller: In re: Bernard L. Madoff Investment Securities, Debtor; Irving H. Picard, Trustee for the Liquidation of Bernard L. Madoff Investment Securities v. Enrica Cotellessa-Pitz and Thomas Pitz, filed as Adversary Proceeding No. 10-04213 (BRL) in U.S. Bankruptcy Court for the Southern District of New York. Richard R. Leff, a lawyer for the couple, filed a formal answer in the case, contesting the trustee’s claims and denying that either Cotellessa-Pitz or her husband had any knowledge of the Ponzi scheme.
314 accused by the trustee of helping to falsify arbitrage trades: Picard v. Kugel. Michael V. Blumenthal, a lawyer for the Kugel family, had not responded to requests for comment about the trustee’s claims at the time this book went into production.
314 also sued Daniel Bonventre: In re: Bernard L. Madoff Investment Securities, Debtor; Irving H. Picard, Trustee for the Liquidation of Bernard L. Madoff Investment Securities v. Daniel Bonventre, filed as Adversary Proceeding No. 10-04214 (BRL) in U.S. Bankruptcy Court for the Southern District of New York.
315 lawsuits filed by Sheehan’s team on November 11: In re: Bernard L. Madoff Investment Securities, Debtor; Irving H. Picard, Trustee for the Liquidation of Bernard L. Madoff Investment Securities v. Annette Bongiorno and Rudy Bongiorno, filed as Adversary Proceeding No. 10-04315 (BRL) and In re: Bernard L. Madoff Investment Securities, Debtor; Irving H. Picard, Trustee for the Liquidation of Bernard L. Madoff Investment Securities v. JoAnn Crupi et al., filed as Adversary Proceeding No. 10-04216 (BRL), both in U.S. Bankruptcy Court for the Southern District of New York. Roland Riopelle, the lawyer for the Bongiornos, denied the allegations in the trustee’s lawsuit. Eric R. Breslin, a lawyer for Crupi, said his client would “absolutely” contest the trustee’s allegations and similar accusations made in the civil case filed against Crupi by the SEC.
315 amended in February to include Dan Bonventre: Second Superseding Bonventre Indictment.
316 Film crews from local television stations and news Web sites: This passage is based on the author’s observations and notes, and auction catalogs available online at www.proxibid.com, the Web site for Proxibid, an online auction bidding service used by the U.S. Marshals Service.
318 the two Madoff auctions raised just under $3 million: The reported total from the first auction was just under $900,000. See L
es Christie, “Madoff’s Mets Jacket Sells for $14,500,” CNNMoney.com, Nov. 16, 2009. The author tallied all the winning bids from both auctions, posted on Proxibid; the first auction total was $854,110 and the second was $2.12 million, for a total of $2.97 million.
318 brought the total from forfeited assets to about $27 million: The Manhattan penthouse sold for $8 million, the Montauk home went for $9.4 million, and the Palm Beach home sold for $5.65 million, considerably below the original listing price of $8.49 million. See Oshrat Carmiel, “Madoff’s Home in Palm Beach Sells for $5.65 Million,” Bloomberg news service, Oct. 15, 2010. Three boats and a Mercedes convertible brought about $1 million at auction in 2009. See Katya Kazakina, “Madoff’s Yachts Bring $1 Million at Florida Auction,” Bloomberg news service, Nov. 17, 2009. The French town house had an estimated value of $1.6 million, while the yacht was valued at more than $8 million. See Erica Orden, “Madoff Sell-off,” New York, Sept. 6, 2009. As of December 2010, there had been no report of either being sold.
318 On November 24, UBS, the giant Swiss bank: Picard v. UBS.
318 a second suit involving another set of feeder funds: In re: Bernard L. Madoff Investment Securities, Debtor; Irving H. Picard, Trustee for the Liquidation of Bernard L. Madoff Investment Securities v. UBS et al. and M&B Capital Advisors, filed as Adversary Proceeding No. 10-05311 (BRL) in U.S. Bankruptcy Court for the Southern District of New York.
318 “willfully blind” in its dealings: Diana B. Henriques, “Madoff Trustee Sues JPMorgan for $6.4 Billion,” New York Times, Dec. 2, 2010.
318 The formidable bank said the accusations were preposterous: Ibid.
318 a massive lawsuit seeking $9 billion from HSBC: Picard v. HSBC.
319 One was against Tremont Group Holdings: In re: Bernard L. Madoff Investment Securities, Debtor; Irving H. Picard, Trustee for the Liquidation of Bernard L. Madoff Investment Securities v. Tremont Group Holdings et al., filed under seal as Adversary Proceeding No. 10-05310 (BRL) in U.S. Bankruptcy Court for the Southern District of New York.
319 “currently engaged in good-faith negotiations”: Press Release, “Trustee for Liquidation of Bernard L. Madoff Investment Securities Files Suit Against Sterling Equities, Its Partners and Other Related Entities Seeking Recoveries in Ponzi Scheme,” Dec. 7, 2010, accessible at www.madofftrustee.com.
319 some key details about the sealed lawsuit: Alison Leigh Cowan, Peter Lattman, Serge F. Kovaleski, and David Waldstein, “Trustee Faults Mets Owners over Madoff Fraud,” New York Times, Jan. 29, 2011.
319 a case against the directors of Madoff’s bankrupt British affiliate: Press Release, “Trustee for Liquidation of Bernard L. Madoff Investment Securities and Liquidator of Madoff Securities International File Lawsuit Against Directors, Officers, Related Entities of London-Based Madoff Securities International Limited,” Dec. 8, 2010, accessible at www.madofftrustee.com.
319 a claim for $1 billion against seven major banks: Press Release, “Trustee for Liquidation of Bernard L. Madoff Investment Securities Seeks $1 Billion from Seven Global Financial Institutions in Madoff Ponzi Scheme,” Dec. 8, 2010, accessible at www.madofftrustee.com.
319 lawsuits against smaller but notable hedge fund managers: Press Release, “Trustee for Liquidation of Bernard L. Madoff Investment Securities Files Against Tremont Group and Related Entities Including Oppenheimer and MassMutual,” Dec. 7, 2010, accessible at www.madofftrustee.com.
320 a $500 million settlement with Union Bancaire Privée: Press Release, “Madoff Trustee Announces Approximately $500 Million Recovery Agreement with Swiss Bank Union Bancaire Privée,” Dec. 6, 2010, accessible at www.madofftrustee.com.
320 a sweeping settlement with Carl Shapiro and his family: Press Release, “Madoff Trustee, SIPC Announces $550 Million Recovery Agreement with Carl Shapiro, Robert Jaffe and Related Entities,” Dec. 6, 2010, accessible at www.madofftrustee.com. The deal called for the trustee to get $550 million, and for another $75 million to be paid to the Justice Department under its civil forfeiture program.
320 some important charities, including Hadassah: Press Release, “Madoff Trustee, Charities Negotiating Settlements,” Dec. 10, 2010, accessible at www.madofftrustee.com.
320 an ambitious 161-page complaint: Picard v. Kohn.
321 knowingly pocketing millions of stolen dollars: Picard v. A&B.
321 Bernie Madoff’s grandchildren: Michael Rothfeld, “The Madoff Fraud: Trustee Sues Kin, Banks for Funds,” Wall Street Journal, Dec. 9, 2010.
321 “That’s why I never believed he knew about the fraud”: Confidential interview. The author is also indebted to reporting on the Madoff suicide contributed by colleagues Peter Lattman, Elissa Gootman, and Al Baker of the New York Times.
322 “He had always been so proud of his name”: Diana B. Henriques and Peter Lattman, “Reopened Wounds: ‘Just More Than He Could Bear,’ ” New York Times, Dec. 17, 2010.
323 “When all of this happened, we decided that we weren’t going to sit around”: Steve Eder and Mary Pilon, “A Madoff Son Looks Forward,” Wall Street Journal, Dec. 21, 2010.
324 “combined with our extensive lobbying efforts”: Press Release, “NIAP Update on HR 5032,” Network for Investor Action and Protection, June 17, 2010, on the Web site of the Network for Investor Action and Protection, www.investoraction.org.
324 promised to introduce a stronger replacement: Press Release, “NIAP President Ron Stein Statement Welcoming Legislation to Protect Investors Defrauded by Bernie Madoff,” Network for Investor Action and Protection, Dec. 20, 2010.
325 “Equitable Treatment of Investors Act”: Congressman Scott Garrett, a Republican from New Jersey, introduced the bill on Feb. 17, 2011, as H.R. 757, 1st Session, 112th Congress.
330 “recover at least 24 billion in claw backs against 20 billion in valid loss claims”: E-mail to author from BLM, Dec. 17, 2010.
331 “banks and hedge funds had reached confidential settlements”: Raphael Minder and Diana B. Henriques, “Overseas Madoff Investors Settle with Banks,” New York Times, May 24, 2010.
331 “I know it’s 100% reliable”: E-mail to the author from BLM, Dec. 21, 2010.
331 “everyone’s principal will be returned”: E-mail to the author from BLM, Dec. 19, 2010.
EPILOGUE
333 “treated well by the inmates and staff here”: Letter from BLM, dated Oct. 3, 2010; the letter was sent to the author through Madoff’s lawyer and was thus not subject to review by prison authorities, lending some credibility to his report of his prison treatment.
333 his first on-the-record interview: all quotations in this section are from First BLM Interview.
339 “Everyone here always asks me why I never ran”: E-mail to the author from BLM, Feb. 23, 2011.
344 Madoff sits for a second interview: Second BLM Interview.
345 a recent People magazine article: Liz McNeil and Alex Tresniowski, “The Trials of Ruth Madoff,” People, Feb. 21, 2011, pp. 78–82.
ACKNOWLEDGEMENTS
There are three people without whom this book could not possibly have been written.
The first is my agent, Fredrica “Fredi” Friedman. In the frantic weeks after Bernie Madoff’s arrest, Fredi stamped her well-shod foot and waved her bejewelled hands until she finally got my frazzled attention. Then she said, “You were born to write this book.” She would not take “I’m too tired” or “I’m too busy” or “I’m too scared” for an answer. The minute a publisher hinted that we should do a “quickie” book, Fredi stood up, smiled, and marched me right out of the building for a fortifying drink. I never would have begun this journey if she hadn’t persuaded me I could.
The second is my extraordinary editor at Times Books, Paul Golob. We didn’t always agree about the route to follow on this trip. We hit a few rocks in the road, made a few detours, and broke the speed limit repeatedly in the final weeks. But when we finally reached the destination, it was far, far above any elevation I could have reached on my own. And somehow, Paul got us there with mos
t of my original luggage intact—just more neatly, attractively, and logically packed. When I felt I was driving blind, Paul kept us on course. I could not have reached this destination without his help.
The third is my empowering husband, Larry Henriques. Throughout this expedition, he kept gas in the car. He made sure I stopped for coffee. He fixed every flat tire and replaced every dead battery. He kept the road map handy and the windshield clean. He rolled down the windows and told jokes to keep me awake when I was nodding off. He has been my tireless and cheerful companion for every mile of the way, uphill and down, and I will never, ever be able to thank him enough.
Many others made priceless contributions to this project, starting with my researchers: the incomparable Barbara Oliver, from whom no fact or document can hide; the talented Tim Stenovec, who was as deft at hand-holding interviews as he was at finding addresses in phone book archives; and our backstop in Europe, Bernadette Murphy, who was my own French connection.
Bernie Madoff, The Wizard of Lies Page 53