The Wizard of Lies: Bernie Madoff and the Death of Trust (66 page)

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 com ment about the trustee’s claims at the time this book went into production.

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.

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. 1004216 (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.

amended in February to include Dan Bonventre:
Second Superseding Bonventre Indictment.

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.

the two Madoff auctions raised just under $3 million: The reported total from the first auction was just under $900,000. See Les 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.

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.

On November 24, UBS, the giant Swiss bank:
Picard v. UBS
.

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.

“willfully blind” in its dealings: Diana B. Henriques, “Madoff Trustee Sues JPMorgan for $6. 4 Billion,”
New York Times
, Dec. 2, 2010.

The formidable bank said the accusations were preposterous: Ibid.

a massive lawsuit seeking $9 billion from HSBC:
Picard v. HSBC
.

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.

“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
.

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.

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
.

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
.

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
.

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
.

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.

some important charities, including Hadassah: Press Release, “Madoff Trustee, Charities Negotiating Settlements,” Dec. 10, 2010, accessible at
www.madofftrustee.com
.

an ambitious 161-page complaint:
Picard v. Kohn
.

knowingly pocketing millions of stolen dollars:
Picard v. A&B
.

Bernie Madoff’s grandchildren: Michael Rothfeld, “The Madoff Fraud: Trustee Sues Kin, Banks for Funds,”
Wall Street Journal
, Dec. 9, 2010.

“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
.

“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.

“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.

“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
.

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.

“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.

“recover at least 24 billion in claw backs against 20 billion in valid loss claims”: E-mail to author from BLM, Dec. 17, 2010.

“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.

“I know it’s 100% reliable”: E-mail to the author from BLM, Dec. 21, 2010.

“everyone’s principal will be returned”: E-mail to the author from BLM, Dec. 19, 2010.

Epilogue

“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.

his first on-the-record interview: all quotations in this section are from First BLM Interview.

“Everyone here always asks me why I never ran”: E-mail to the author from BLM, Feb. 23, 2011.

Madoff sits for a second interview: Second BLM Interview.

a recent
People
magazine article: Liz McNeil and Alex Tresniowski, “The Trials of Ruth Madoff,”
People
, Feb. 21, 2011, pp. 78–82.

The index that appeared in the print version of this title does not match the pages in your eBook. Please use the search function on your eReading device to search for terms of interest. For your reference, the terms that appear in the print index are listed below.

A&A and A&B account.
See also
Avellino & Bienes

ABC News

Abu Dhabi

Access International

accredited investors

Ackerman, Gary L.

affinity fraud

Akroyd & Smithers

Alger, Fred

Alpern, Benjamin (wife’s grandfather)

Alpern, Joan (sister-in-law)

Alpern, Sara (mother-in-law)

Alpern, Saul (father-in-law)

family and friend accounts and

loan of 1962

retirement of

A.L.S. Steel

Ambrosino, Dominic

American International Group (AIG)

American Jewish Committee

American Jewish Congress

American Stock Exchange

Amsellem, Jacques

Anchor Holdings LLC

Anheuser-Busch

anti-clawback bills

Anti-Defamation League

anti-Semitism

arbitrage

alleged falsification of trades

riskless

Ariel fund

Arthur D. Little Inc.

Arvedlund, Erin

Ascot Partners

auction model

auction rate securities

Austria

automation (electronic trading)

Avellino, Frank

Avellino & Bienes

devote business to Madoff

“lenders” and

SEC shuts down

Sorkin and

Bacon, Kevin

Baker & Hostetler

Banco Bilbao Vizcaya Argentaria (BBVA)

Banco Santander

Bank Austria

Bank Medici

Bank of America

Bank of New York

bankruptcy court

bankruptcy laws

banks.
See also specific banks

Banque Privée de Gestion Financière (BPGF)

Barclays bank

Bard College

Barnes-Hind

Baroni, Lisa

Barron’s

Bayou Group

BBC

Bear Stearns

Bell, Kevin

Benbassat, Mario

Bennett, Gordon

Benton, Thomas Hart

Bernanke, Ben

Bernard L. Madoff Investment Securities.
See also
feeder funds; Madoff, Bernard L.; Madoff Securities International, Ltd; Madoff victims; Securities and Exchange Commission;
and specific employees, family members, feeder accounts, and investors

appearance of prosperity

arrest of Madoff and takeover of

assets frozen and sold

audits of

automation of

automation of, and Ponzi records

Avellino & Bienes and

back-office manager

Black Monday of 1987 and

bull market of 1980s and

Christmas parties

Cohmad and

early arbitrage by

early investors and feeder funds and

early offices of

employees

employees, after arrest

employees, clawbacks and arrests of

founding and early years of

front-running accusations

hidden investment operation and

legitimate trading of

Lipstick Building offices of

Lipstick Building seventeenth floor

liquidation of

Madoff as sole owner of

Madoff sons join

market-making profits of

NASDAQ bid-rigging scandal and

net worth of, in 1980s

net worth of, in 2004

Primex and

regional brokerage firms and

regulatory compliance and

SEC investigation of 1992

SEC investigation of 2001

SEC investigation of 2005

SEC investigation of late 2005

September 11, 2001, attacks and

SIPC and

third market and

victims fund and

Web site of

Bernfeld, Ellen

Bharara, Preet

Bienes, Emily Picower

Bienes, Michael

lawsuit vs.

marriage of

SEC investigation and

blue-chip stocks

Blumenfeld, Ed

BNP Paribas

Boesky, Ivan

bonds

Bongiorno, Annette

Bonventre, Daniel

Boston Security Analysts Society

Boston Stock Exchange

Braman, Norman

Brazil

Breeden, Richard

Brighton Company

British Petroleum

brokerage firms bankruptcy and

crackdown of 1960s

fixed commissions and

paper crunch and

top, of 1950s

Brown, Matthew C.

Buffett, Warren

bull spread strategy

Bunker Ramo

Butner Federal Correctional Complex

Cacioppi, Ted

Calamari, Andrew

California state pension funds

Cannon Mills

Caribbean

Carnegie Hall

Carolan, Kate

Casale, Nick

Cayman Islands

Cédille, Jean-Michel

Ceretti, Federico

Chais, Pamela

Chais, Stanley

clawback suit

SEC suit vs.

Chais family trust funds

Chais foundation

Chaitman, Helen Davis

Chapman, Peter

charities and endowments

Chase Manhattan Bank

Chavkin, Peter

Chemical Bank

cherry-picking

Cheung, Meaghan

Chicago Board Options Exchange

Chin, Denny

Cincinnati Stock Exchange

Citibank

clawback lawsuits

Club No One Wanted to Join, The
(essay collection)

Cohmad Securities

Cohn, Delaire & Kaufman

Cohn, Marcia Beth

Cohn, Maurice “Sonny,”

Congressional Research Service

Contrafund

convertible securities

Cotellessa-Pitz, Enrica

Cowen & Company

Cox, Christopher

Creditanstalt

credit markets

Credit Suisse

criminal forfeiture laws

Cross & Brown

Crupi, JoAnn “Jodi,”

De Bello, Nicole

de la Villehuchet, René-Thierry Magon

Della Schiava, Yanko

demand notes

Denver, John

Depository Trust & Clearing Corporation (DTCC, or DTC)

deregulation

derivatives

DiPascali, Frank

arrest of

false records and

history of, with firm

income of

Madoff arrest and

Picower and

SEC investigations and

disclosure requirements

Dodger Sporting Goods

Donaldson, William H.

Donghia, Angelo

Donnelly, Shannon

Douglas, Michael

Dow Jones Industrial Average

Dreier, Marc S.

Dreyfus, Jack

Dubai

Dutch

Eaton, Douglas

Ebel, Maureen

Echenique Gordillo, Rodrigo

Echevarria, Manuel

E.F. Hutton & Company

Ellis, Ronald

Engler, Mendel “Mike,”

Engler & Budd

Enron

“Equitable Treatment of Investors Act,”

Erko company

Euro-Dutch Management

Europe

banks

hedge funds

Eurovaleur

Everlast Sporting Goods

Fairfield, Conn., public pension funds

Fairfield Greenwich Group

audits of

crisis of 2008

and

fees of

lawsuits vs.

Madoff losses disclosed

redemptions by

Risk Assessment Committee

SEC investigations and

Fairfield International fund

Fairfield Sentry fund

withdrawals by

Fairfield Sigma funds

Fannie Mae

Federal Bureau of Investigation (FBI)

Federal Deposit Insurance Corporation (FDIC)

Federal Reserve

Federal Tort Claims Act

feeder funds

chains of

crisis of 2008 and

derivatives and

early suspicions of Madoff and

European

fees and commissions

investigations of

lawsuits vs.

Madoff liquidation and

Madoff on

rates of return and

withdrawals of 2008

Feinberg, Jay

Fidelity

Fifth Avenue Synagogue

financial crisis of 2008

financial panic of 1907

Financial World

FINRA (Financial Industry Regulatory Authority)

Fiserv Inc.

Fitzmaurice, Thomas

Fix, Charles

Flumenbaum, Martin

Forbes

foreign currency

foreign securities

Fortis

401(k)s

Foxman, Abraham

Foxton, William

France

Frangipane, Noelle

fraudulent conveyances

Freddie Mac

Friehling, David

Friehling & Horowitz

Frisch, Andrew

front-running

funds of funds

Gabelli, Mario

Gabriel fund

Gateway fund

Geffen, David

General Accounting Office (GAO)

Genevalor, Benbassat & Cie

Gibraltar

Gibraltar Securities

Gift of Life Bone Marrow Foundation

Glantz, Richard

Goldman Sachs

Goldstein, Allan

Goodman, Jerry

Gorenstein, Gabriel W.

Great Britain

Serious Fraud Office (SFO)

Serious Organised Crime Agency (SOCA)

Great Depression

Greenberg, Alan C.

Grosso, Carlo

Hadassah

Halio, Robert

Halio, Stephanie

Halliburton

Halpern & Mantovani

Harley fund

Harris, J. Ira

Hebrew University of Jerusalem

hedge funds.
See also
feeder funds;
and specific banks, funds, and managers

Bayou scandal and

crisis of 2008 and

derivatives and

fee structure

growth of

insider trading and

lack of regulation of

lawsuits vs.

Madoff and

offshore

pension funds and

Picard lawsuit vs.

suspicions about Madoff in

hedging

institutional trading and

options trading and

Herald funds

Hirschhorn, Carla

Hofstra University

Hong Kong

Hooper, Catherine

Horowitz, Jerome

Horwitz, Daniel J.

housing bubble.
See also
mortgage default crisis

HSBC

Igoin, Albert

inflation

Infovaleur

insider trading

Institute for Jewish Research

insurance companies

interest rates

Internal Revenue Service (IRS)

International Olympic Committee

IPO market

IRAs

Roth

self-directed

Israel

Israel, Samuel, III

Ivy Asset Management

Jaffe, Robert “Bob,”

Jewish charities

Jewish Community Foundation of Los Angeles

Jewish Journal

Joel, Martin J., Jr.

Joel, Zuchs & Company

Johnson, William F.

Jones, Alfred W.

JPMorgan Chase

derivatives and

lawsuit vs.

Madoff slush fund and

Justice Department

Kaiser Steel

Kang, B. J.

Katzenberg, Jeffrey

Kay Windsor Inc.

Kelly, Keith

Khuzami, Rob

King, Larry

King Arthur Account

Kingate funds

Kohn, Erwin

Kohn, Sonja Blau

Konigsberg, Paul

Konigsberg Wolf

Korea

Kotz, H. David

Koufax, Sandy

Kugel, David

Kurland, Lola

labor union pension funds

Lambeth Company

Lamore, Peter

Lankler, Andrew

Latin America

Lautenberg, Frank

Laventhol & Horwath

Lawson, Ernest

Lax & Nevill

“legitimate expectations,”

Lehman Brothers

Leukemia for Chickens
(Roger Madoff)

Levy, Frank

Levy, Norman F.

Levy family foundations

Lichtenstein, Roy

Lieberbaum, Michael

Lieberbaum, Sheldon

Lifland, Burton R.

Lipkin, Carole

Lipkin, Eric

Lipkin, Irwin

Lissauer, Sharon

Litt, Marc

Littaye, Patrick

Littlestone Associates

Loebs

London, Martin