Madoff with the Money (29 page)

Like their mother, the Madoff boys were big spenders, as verified by their charges on the Madoff corporate American Express card.

For a holiday vacation in Wyoming, Mark and Andy Madoff combined racked up more than $35,000 in expenses and other goodies. Despite their royal standard of living, Bernie and his scions weren't known as big tippers—Andy had one restaurant tab for $1,126.41, but left the waiter a chintzy $60.

In a July 2008 Amex bill, Mark charged a whopping $77,388.21 with a Connecticut aviation company for an apparent airplane charter while vacationing in Nantucket. That same month, his brother had charges for the month of almost $19,000, including $4,464 for a flight to Nice in the south of France, and $2,395.41 for casual wear at Ralph Lauren Polo in New York. The total for the Madoffs' July bill was $137,171.01. Every bill was paid immediately.

But their spending wasn't limited to airplanes, vacations, and clothes.

In the months leading up to the patriarch's arrest, the younger generation of the Madoff dynasty were on a home-buying spree—at a time when the nation's real estate market was in the toilet and thousands were being foreclosed on and made homeless. Bernie's boys were spending big bucks for roofs over their heads: Mark Madoff, with a loan from his father, paid $6.5 million for a Nantucket home on more than three acres after selling another Nantucket house for more than $2 million. Two months before his father's arrest, Mark's brother, Andy, also with his father's financing, paid $4.3 million for a condo on the Upper East Side of Manhattan, in close proximity to the building where his cousin, Shana, had planned to live; but then Uncle Bernie was busted.

As the blogger known as “Mrs. Panstreppon,” who wrote much about the Madoff affair, observed: “Were the Madoffs trying to stash as much cash as they could in the months before their empire collapsed? Sure looks like it.”

Bernie's close associates at BLMIS were also racking up charges.

On the August 2008 Amex bill, Madoff associate 52-year-old Frank DiPascali racked up $10,066.81, mostly for eating out. One charge was for $2,355 at a Shell station, apparently to fuel his boat, the multimillion-dollar 61-foot Viking sportfishing craft
Dorothy-Jo
, named after his daughter and wife. In 2007 aboard the boat he won the South Jersey Mid-Atlantic Tuna Tournament, raking in the prize of $55,070. The captain of the
Dorothy-Jo
was listed as an employee of BLMIS. Besides the boat and a salary estimated at seven figures, DiPascali owned a seven-acre estate in Bridgewater, New Jersey—not bad for a high school graduate from Queens who started with Bernie at the bottom and came to work every day in jeans.

Fortune
reported in late April 2009 that 33-year Madoff veteran DiPascali—“the chief lieutenant” in Bernie's money-management operation on the 17th floor of the Lipstick Building—was trying to work out a deal for himself with federal prosecutors, although he hadn't been charged with any crimes at the time. The magazine stated, “In exchange for a reduced sentence, he would divulge encyclopedic knowledge of Madoff 's scheme. And unlike his boss, DiPascali is willing to name names.”

Like DiPascali, JoAnn Crupi, a Jersey girl, was a Madoff employee for a quarter century, and worked in the 17th-floor asset-management area where the Ponzi scheme originated. Court filings indicated that she received $2.7 million from company funds to buy a waterfront home. Before Bernie pleaded guilty in March 2009, Crupi and two other Madoff employees, including DiPascali's brother-in-law, made deals with the prosecutors to talk about DiPascali's role in the company in exchange for an agreement that what they had to say, as long as it was truthful, would not be used against them.

The family's and friends' credit card charges were just the tip of the iceberg of how and where the Madoff money went. Real estate, yachts, private planes, country club memberships, loans, housekeepers, boat captains—“In Bernard Madoff 's world nearly everyone seemed to be on the payroll,” the
New York Times
observed.

For example, Marion Madoff, Bernie's sister-in-law, was said to have been paid a salary of $163,500, though it was known that she didn't work at the firm. According to a former Madoff executive, Marion's only contact with the company was to have her BlackBerry fixed or replaced, and to partake in the orchids the firm bought.

Big so-called loans that never had to be repaid were another perk of being a Madoff.

In December 2007, for instance, a year before Bernie was arrested, Peter Madoff received $9 million in Madoff largesse. The unsecured promissory note had a maturity date of December 2012, with an interest rate of 4.13 percent per annum, and came out of the Madoff account at the JPMorgan Chase bank, where Bernie had been keeping the funds of his money-management clients—the Ponzi victims—rather than actually investing it.

There was speculation that the loan to Peter was used all or in part as a wedding gift for his daughter, Shana, and her groom, Eric Swanson, the former SEC attorney.

Five months after Peter got the loan, the newlyweds paid $2.8 million for a home in the celebrity-studded town of East Hampton, on Long Island. The Swansons also had planned to plunk down a whopping $4.195 million for an apartment in the Diamond House condominium building on the Upper East Side. Their bid was accepted, but then Shana's uncle was arrested and that same day she and her groom withdrew their offer; they claimed one of the rooms was too small.

The Madoff-Swanson nuptials had raised a lot of questions. In May 2009, as Bernie awaited formal sentencing, the inspector general of the SEC, David Kotz, gave the U.S. Congress an update on his internal investigation begun after Bernie was arrested.

While no names were given in the Kotz report, which a New York congressman quickly complained didn't tell enough, CBS News reported in early June 2009 that “Kotz is looking into a former SEC official who allegedly had a personal relationship with a Madoff family member”—a veiled reference to Shana Madoff's husband. The
Wall Street Journal
had previously reported that the SEC was looking into Eric Swanson's relationship with Shana. Swanson had met her “through her trade association work in the industry,” according to a spokesman for Swanson. He had left the SEC a year before he married into the Madoff dynasty.

For a decade, he had worked as a senior inspections and examination officer, and his duties included trading oversight at stock exchanges and electronic-trading platforms. At least twice, in 1999 and 2004, he was involved in Madoff firm examinations, according to press reports. It was the Office of Compliance Inspections and Examinations that had probed Madoff, turning up zero evidence of any crime. A spokesman for Swanson said that his client “did not participate in any inquiry” of Madoff “while involved” with Bernie's niece.

Still, at least on the surface, the Swanson-Madoff relationship appeared fishy, and sparked much speculation.

The snarky media web site Gawker, noting that Shana was a fashionista, headlined one story, “Ponzi Schemer's Label-Whoring Niece Married SEC Lawyer.”

On April Fools' Day 2009, the government started taking away some of the treasured luxuries Bernie and Ruth had accumulated with his investors' money, as Irving Picard had charged. It was the beginning of the federal court-ordered seizure of the $823 million in assets Bernie was known to have just before his arrest, much of it in Ruth's name.

Around dinnertime, U.S. marshals along with members of Palm Beach's finest descended on the Madoffs' $9.4 million, 8,753-square-foot, five-bedroom mansion at 410 North Lake Way, changed the locks, set an alarm, and conducted an inventory of the contents. Property records showed that the house had been purchased under Ruth's name in 1994 for $3.8 million.

The house had a bullish decorative theme that was discovered when marshals spent several hours photographing items in the house for possible eventual removal. “There were bulls everywhere,” said Deputy U.S. Marshall Barry Golden. “There were large statues of bulls, small statues of bulls, bull bookends, even bulls on clothing. There's a lot of bull in the house. I've never seen so much bull in my life.”

He stated that once the judge signed the seizure order, “It stopped being Bernie Madoff's home.”

A “No Trespassing” sign was posted out front.

Further south on Florida's Gold Coast, in Fort Lauderdale, the marshals made another big catch. Just after dawn they swarmed into the Roscioli Yachting Center on the Marina Mile and permanently anchored one of Bernie's prized possessions, his 55-foot, custom-built classic 1969 Rybovich motor yacht that he had named
Bull
. Not long before he was arrested, the $2.2 million boat had been given a complete renovation at a cost of $130,000—from the paint to the keel.

A former close friend who was burned by Bernie in the Ponzi scheme asserts, “Bernie loved that boat more than he loved Ruth. Believe me when I say that Bernie and the
Bull
were married to one another. He talked about her all the time—
Bull
, not Ruth.”

As Robert Roscioli, the marina's owner, said, “The boat is immaculate. It's an antique that has been well taken care of and maintained.”

Much like the boat owner's mate.

Golden, the marshall, observed, “A lot of money was put into maintaining that boat. [It] was extremely well kept, extremely clean. The engine compartment was spotless. It looked like somebody took a bottle of 409 and scrubbed it every day.”

Shades of Bernie's OCD.

The same day the house and yacht were seized, the marshals also nabbed another of Bernie's fishing boats, a 24-foot Pathfinder—
Little Bull
—that was docked in Palm City, Florida.

A week later, across the pond, French authorities seized the other
Bull
that Bernie treasured—an ultraluxurious $7 million ocean-going yacht, the one he bragged about to David Neff, his clothier in Palm Beach. She was docked at a marina in the chic Mediterranean hideaway of Cap d'Antibes where the Madoffs also owned—in Ruth's name—a million-dollar Riviera getaway located at Villa 2, Chateau des Pins.

The seizure of the yacht—owned by a Madoff company registered in the Cayman Islands—had been demanded by Meeschaert, a French investment manager that was attempting to retrieve losses to clients who had bought shares in a Swiss bank's feeder fund that had invested in Madoff.

“We decided to act quickly to prevent the yacht leaving French waters,” said Chairman Cedric Meeschaert.

A heavy chain was thrown around the boat's propeller, and bailiffs posted a warning on the boat, cautioning that “major judicial problems” would result if anyone attempted to sneak off with the vessel.

With Bernie's yachts in tow, a battle ensued between authorities in France and in the United States over the Madoffs' chic French retreat. Both governments wanted to seize the chateau that was purchased under Ruth's name in 2000. Valued at $1 million, it was said to have furnishings worth an estimated $900,000, according to court records.