Madoff scandal


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Bernard Madoff didn’t even spare his own family.

The Ponzi schemer scammed millions from his sister, who is now desperately selling her Florida home, sources told The Post.

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Sondra Wiener, 74, “has nothing,” said one of her neighbors in the BallenIsles Country Club, a gated Palm Beach enclave where she and her husband, Marvin, live alongside such celebrities as Serena and VenusWilliams.

“She lost millions in this whole thing,” said a source who estimated her loss at $3 million.

In response to questions about their financial straits, Wiener’s son, David, said, “Yes, my family’s a victim. More so than anybody else. It’s very painful.”

Wiener was one of five family members who received packages filled with pricey baubles allegedly mailed by Madoff and his wife, Ruth, on Christmas Eve. The riches were collected by lawyers in recent weeks.

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That was around the time Wiener put her 3,409-square-foot home on the market. She and her husband are asking between $850,000 and $950,000 for the three-bedroom home, according to two separate listings.

“It seems like she was a victim in this,” said the neighbor, who was told Wiener is selling off her property in the hopes of starting over. “It didn’t seem like she saw it coming. What kind of person scams their own sister?”

Although Wiener herself is not connected to Madoff Securities, her son Charles, 50, has worked there since 1978. He was listed as director of administration in 2000.

Wiener’s home is “in perfect condition” and features a pool, spa, granite counters, a golf cart and the “best water view with sunsets every evening,” according to a listing with real-estate firm Illustrated Properties.

Country-club membership – which costs from $35,000 to $115,000 – is a requirement for residency in the community.

The couple purchased the home for $650,000 in 2003, the year it was built, according to Palm Beach County property records.

Wiener appears to be close to her brother, who also owns a home in Palm Beach.

The package she received contained a total of $1 million in valuables, including Cartier and Tiffany watches.

The items were returned after Madoff’s sons alerted prosecutors to the mailings, which violated a federal order.

Authorities also discovered checks totaling $173 million that Madoff had made out to family and friends before his Dec. 11 arrest.

Prosecutors pushed to revoke his bail after the packages were mailed. A judge will decide tomorrow whether Madoff, currently under house arrest in his swanky Park Avenue pad, should go to jail.

Wiener declined comment.

* NYP-January 11, 2009

Man, what a terrible return on your investment. Of the $50 billion Bernard Madoff swindled, investigators have been able to uncover only about $1 billion in remaining assets.

If the number holds, that means the recovery of money from his massive Ponzi scheme may total only 2 percent of what his victims gave him.

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So far, the trustee liquidating Madoff’s firm has found $830 million in liquid assets. When the value of Madoff’s real-estate holdings, boats, jewelry and other property is factored in, the figure rises to approximately $1 billion, according to Bloomberg News.

Madoff coughed up a list of his holdings when prosecutors demanded he be jailed without bail after he tried to send $1 million in jewelry to family and friends.

US Magistrate Judge Ronald Ellis yesterday considered arguments on whether Madoff, 70, should be allowed to remain under house arrest at his swanky East Side penthouse or be thrown in jail.

Ellis is set to deliver his ruling Monday at noon, officials said.

Prosecutors also received a 30-day extension yesterday to indict the alleged scammer after reaching a deal with the defense team.

The list of Madoff’s alleged victims include some of the world’s wealthiest people and the most sophisticated investment funds. One of his most high-profile victims, Hollywood mogul Jeffrey Katzenberg, called the swindle “extremely painful and humiliating for me.”

“It has done extraordinary damage to my philanthropy,” he told CNBC.

Katzenberg, who runs Dreamworks Animation, would not say how much money he lost, but the Los Angeles Times has reported it was at least $20 million.

Katzenberg, 58, had his funds invested with Madoff through his business manager, Gerald Breslauer, the LA Times reported.

“The first time I heard the name Bernie Madoff was about three weeks ago, when I found out that, you know, he had swindled all this money,” Katzenberg said.

In other developments, a Massachusetts-based hedge fund, GMB Capital Management, said it was shutting down a fund that was bilked out of more than $50 million by Madoff.

Also, investigators in Britain were trying to determine whether Madoff embezzled $150 million from his company’s operation there.

And Austria’s Bank Medici, which may have invested as much as $3 billion with Madoff, announced it was restructuring its board of directors and business strategy following the massive swindle. With Post Wire Services

* By LUKAS I. ALPERT and BRUCE GOLDING,January 10, 2009 (NYP)

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There is a teaching in the Talmud that says an individual who comes before God after death will be asked a series of questions, the first one of which is, “Were you honest in your business dealings?” But it is the Ten Commandments that have weighed most heavily on the mind of Rabbi David Wolpe of Sinai Temple in Los Angeles in light of the sins for which Bernard L. Madoff stands accused.
“You shouldn’t steal,” Rabbi Wolpe said. “And this is theft on a global scale.”
The full scope of the misdeeds to which Mr. Madoff has confessed in swindling individuals and charitable groups has yet to be calculated, and he is far from being convicted. But Jews all over the country are already sending up something of a communal cry over a cost they say goes beyond the financial to the theological and the personal.
Here is a Jew accused of cheating Jewish organizations trying to help other Jews, they say, and of betraying the trust of Jews and violating the basic tenets of Jewish law. A Jew, they say, who seemed to exemplify the worst anti-Semitic stereotypes of the thieving Jewish banker.
So in synagogues and community centers, on blogs and in countless conversations, many Jews are beating their chests — not out of contrition, as they do on Yom Kippur, the Day of Atonement, but because they say Mr. Madoff has brought shame on their people in addition to financial ruin and shaken the bonds of trust that bind Jewish communities.
“Jews have these familial ties,” Rabbi Wolpe said. “It’s not solely a shared belief; it’s a sense of close communal bonds, and in the same way that your family can embarrass you as no one else can, when a Jew does this, Jews feel ashamed by proxy. I’d like to believe someone raised in our community, imbued with Jewish values, would be better than this.”
Among the apparent victims of Mr. Madoff were many Jewish educational institutions and charitable causes that lost fortunes in his investments; they include Yeshiva University, Hadassah, the Jewish Community Centers Association of North America and the Elie Wiesel Foundation for Humanity. The Chais Family Foundation, which worked on educational projects in Israel, was recently forced to shut down because of losses in Madoff investments. Many of Mr. Madoff’s individual investors were Jewish and supported Jewish causes, apparently drawn to him precisely because of his own communal involvement and because he radiated the comfortable sense of being one of them.
“The Jewish world is not going to be the same for a while,” said Rabbi Jeremy Kalmanofsky of Congregation Ansche Chesed in New York.
Jews are also grappling with the implications of Mr. Madoff’s deeds for their public image, what one rabbi referred to as the “shanda factor,” using the Yiddish term for an embarrassing shame or disgrace. As Bradley Burston, a columnist for haaretz.com, the English-language Web site of the Israeli newspaper Haaretz, wrote on Dec. 17: “The anti-Semite’s new Santa is Bernard Madoff. The answer to every Jew-hater’s wish list. The Aryan Nation at its most delusional couldn’t have come up with anything to rival this.”
The Anti-Defamation League said in a statement that Mr. Madoff’s arrest had prompted an outpouring of anti-Semitic comments on Web sites around the world, most repeating familiar tropes about Jews and money. Abraham H. Foxman, the group’s national director, said that canard went back hundreds of years, but he noted that anti-Semites did not need facts to be anti-Semitic.
“We’re not immune from having thieves and people who engage in fraud,” Mr. Foxman said in an interview, disputing any notion that Mr. Madoff should be seen as emblematic. “Why, because he happens to be Jewish, he should have a conscience?”
He added that Mr. Madoff’s victims extended well beyond the Jewish community.
In addition to theft, the Torah discusses another kind of stealing, geneivat da’at, the Hebrew term for deception or stealing someone’s mind. “In the rabbinic mind-set, he’s guilty of two sins: one is theft, and the other is deception,” said Burton L. Visotzky, a professor at the Jewish Theological Seminary.
“The fact that he stole from Jewish charities puts him in a special circle of hell,” Rabbi Visotzky added. “He really undermined the fabric of the Jewish community, because it’s built on trust. There is a wonderful rabbinic saying — often misapplied — that all Jews are sureties for one another, which means, for instance, that if a Jew takes a loan out, in some ways the whole Jewish community guarantees it.”
Several rabbis said they were reminded of Esau, a figure of mistrust in the Bible. According to a rabbinic interpretation, Esau, upon embracing his brother Jacob after 20 years apart, was actually frisking him to see what he could steal. “The saying goes that, when Esau kisses you,” Rabbi Visotzky said, “check to make sure your teeth are still there.”
Rabbi Kalmanofsky said he was struck by reports that Mr. Madoff had tried to give bonus payments to his employees just before he was arrested, that he was moved to do something right even as he was about to be charged with doing so much wrong. “The small-scale thought for people who work for him amidst this large-scale fraud — what is the dissonance between that sense of responsibility and the gross sense of irresponsibility?” he said.
In a recent sermon, Rabbi Kalmanofsky described Mr. Madoff as the antithesis of true piety.
“I said, what it means to be a religious person is to be terrified of the possibility that you’re going to harm someone else,” he said.
Rabbi Kalmanofsky said Judaism had highly developed mechanisms for not letting people control money without ample checks and balances. When tzedakah, or charity, is collected, it must be done so in pairs. “These things are supposed to be done in the public eye,” Rabbi Kalmanofsky said, “so there is a high degree of confidence that people are behaving in honorable ways.”
While the Madoff affair has resonated powerfully among Jews, some say it actually stands for a broader dysfunction in the business world. “The Bernie Madoff story has become a Jewish story,” said Rabbi Jennifer Krause, the author of “The Answer: Making Sense of Life, One Question at a Time,” “but I do see it in the much greater context of a human drama that is playing out in sensationally terrible ways in America right now.”
“The Talmud teaches that a person who only looks out for himself and his own interests will eventually be brought to poverty,” Rabbi Krause added. “Unfortunately, this is the metadrama of what’s happening in our country right now. When you have too many people who are only looking out for themselves and they forget the other piece, which is to look out for others, we’re brought to poverty.”
According to Jewish tradition, the last question people are asked when they meet God after dying is, “Did you hope for redemption?”
Rabbi Wolpe said he did not believe Mr. Madoff could ever make amends.
“It is not possible for him to atone for all the damage he did,” the rabbi said, “and I don’t even think that there is a punishment that is commensurate with the crime, for the wreckage of lives that he’s left behind. The only thing he could do, for the rest of his life, is work for redemption that he would never achieve.”

By ROBIN POGREBIN

The revelation that Bernard Madoff — brilliant investor (or so almost everyone thought), philanthropist, pillar of the community — was a phony has shocked the world, and understandably so. The scale of his alleged $50 billion Ponzi scheme is hard to comprehend.

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Yet surely I’m not the only person to ask the obvious question: How different, really, is Mr. Madoff’s tale from the story of the investment industry as a whole?
The financial services industry has claimed an ever-growing share of the nation’s income over the past generation, making the people who run the industry incredibly rich. Yet, at this point, it looks as if much of the industry has been destroying value, not creating it. And it’s not just a matter of money: the vast riches achieved by those who managed other people’s money have had a corrupting effect on our society as a whole.
Let’s start with those paychecks. Last year, the average salary of employees in “securities, commodity contracts, and investments” was more than four times the average salary in the rest of the economy. Earning a million dollars was nothing special, and even incomes of $20 million or more were fairly common. The incomes of the richest Americans have exploded over the past generation, even as wages of ordinary workers have stagnated; high pay on Wall Street was a major cause of that divergence.

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But surely those financial superstars must have been earning their millions, right? No, not necessarily. The pay system on Wall Street lavishly rewards the appearance of profit, even if that appearance later turns out to have been an illusion.
Consider the hypothetical example of a money manager who leverages up his clients’ money with lots of debt, then invests the bulked-up total in high-yielding but risky assets, such as dubious mortgage-backed securities. For a while — say, as long as a housing bubble continues to inflate — he (it’s almost always a he) will make big profits and receive big bonuses. Then, when the bubble bursts and his investments turn into toxic waste, his investors will lose big — but he’ll keep those bonuses.
O.K., maybe my example wasn’t hypothetical after all.
So, how different is what Wall Street in general did from the Madoff affair? Well, Mr. Madoff allegedly skipped a few steps, simply stealing his clients’ money rather than collecting big fees while exposing investors to risks they didn’t understand. And while Mr. Madoff was apparently a self-conscious fraud, many people on Wall Street believed their own hype. Still, the end result was the same (except for the house arrest): the money managers got rich; the investors saw their money disappear.
We’re talking about a lot of money here. In recent years the finance sector accounted for 8 percent of America’s G.D.P., up from less than 5 percent a generation earlier. If that extra 3 percent was money for nothing — and it probably was — we’re talking about $400 billion a year in waste, fraud and abuse.
But the costs of America’s Ponzi era surely went beyond the direct waste of dollars and cents.
At the crudest level, Wall Street’s ill-gotten gains corrupted and continue to corrupt politics, in a nicely bipartisan way. From Bush administration officials like Christopher Cox, chairman of the Securities and Exchange Commission, who looked the other way as evidence of financial fraud mounted, to Democrats who still haven’t closed the outrageous tax loophole that benefits executives at hedge funds and private equity firms (hello, Senator Schumer), politicians have walked when money talked.
Meanwhile, how much has our nation’s future been damaged by the magnetic pull of quick personal wealth, which for years has drawn many of our best and brightest young people into investment banking, at the expense of science, public service and just about everything else?
Most of all, the vast riches being earned — or maybe that should be “earned” — in our bloated financial industry undermined our sense of reality and degraded our judgment.
Think of the way almost everyone important missed the warning signs of an impending crisis. How was that possible? How, for example, could Alan Greenspan have declared, just a few years ago, that “the financial system as a whole has become more resilient” — thanks to derivatives, no less? The answer, I believe, is that there’s an innate tendency on the part of even the elite to idolize men who are making a lot of money, and assume that they know what they’re doing.
After all, that’s why so many people trusted Mr. Madoff.
Now, as we survey the wreckage and try to understand how things can have gone so wrong, so fast, the answer is actually quite simple: What we’re looking at now are the consequences of a world gone Madoff.

* By PAUL KRUGMAN (December 19, 2008)

Almost no segment of New York City’s real estate industry was spared in the Madoff scandal, which may be history’s largest Ponzi scheme: commercial brokers large and small, little-known developers and prominent families like the Wilpons and Rechlers all lost money to Bernard L. Madoff, industry executives say.

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The outsize impact on the industry may have resulted largely because Mr. Madoff (pronounced MAY-doff) managed his funds much the way that real estate leaders have operated successfully for decades: He provided little information and demanded a lot of trust.

“You have a lot of wealthy people who made a lot of money on handshakes,” said Mark S. Weiss, a commercial real estate broker at Newmark Knight Frank, where several brokers had invested heavily with Mr. Madoff. There was “something about this person, pedigree and reputation that inspired trust,” he said.
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Across the city, industry executives said deals had been scuttled or jeopardized because of the scandal. Residential brokers are taking calls from Madoff investors who have had to put their apartments on the market. Many developers had pledged their investments with Mr. Madoff as collateral for projects, and are now worried that their banks will call in their loans.

“The level of devastation, both financial and on a human level, is astounding,” said Robert J. Ivanhoe, a lawyer who is representing 10 developers and investors who lost $5 million to $50 million each with Mr. Madoff.

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Indeed, at an industry fund-raiser at the Grand Hyatt hotel in Manhattan last weekend, much of the chatter over sushi and crudités was about money feared lost with Mr. Madoff, according to people who attended. And a Manhattan psychotherapist who counsels real estate leaders and bankers said most of the patients he has seen this week have close friends and relatives who lost money with Mr. Madoff.

The victims include executives at the global commercial brokerage CB Richard Ellis, most prominently Stephen Siegel, a major Bronx landlord who is chairman of worldwide operations at the brokerage and whose wife, Wendy, helped organize Saturday’s fund-raising dinner.

Brian S. Waterman, a principal at Newmark, also invested with Mr. Madoff. So did the Rechler family, which has been a major owner of office buildings in the region. Scott Rechler, the head of RexCorp, one of the family’s largest firms, called the family’s exposure “limited.”

Jerry Reisman, a lawyer based in Garden City, N.Y., said he was representing six commercial real estate investors and developers in the area who lost a total of $150 million to Mr. Madoff. They met Mr. Madoff through contacts at country clubs in the tristate area, he said.
“They knew him from golfing in the Hamptons. They knew him from the locker rooms,” Mr. Reisman said. “He was considered a wizard.”

Mr. Reisman said his clients were especially concerned because they counted on Madoff investments to complete some of their real estate projects, pledging their investments as collateral for projects. Those developers fear that when their banks realize that their investments with Mr. Madoff have disappeared, they will demand new collateral from other sources, Mr. Reisman said.

Finding those alternative lenders will be difficult given the financial crisis — and given that many other real estate investors have been hurt by the Madoff case.
“Many of these developers, their resources are all with Madoff,” Mr. Reisman said.

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There are widespread concerns that some developers will have trouble completing projects currently under construction. Edward Blumenfeld, who runs Blumenfeld Development Group, had invested heavily with Mr. Madoff and considered him a friend. Gary Lewi, a spokesman for Mr. Blumenfeld, said he still planned to complete a shopping complex in East Harlem that is to include a Target and a Costco, as well as several other projects where construction is “in the ground.”

Beyond that, though, Mr. Blumenfeld is uncertain of what his development plans hold. His friendship with Mr. Madoff is even more uncertain, Mr. Lewi said.
“Any long-term plans are being reviewed as we conduct a far larger analysis of this scandal and the impact it could have on us and the development community as a whole,” Mr. Lewi said. “Mr. Blumenfeld was friend to a man who apparently didn’t exist.”

The Wilpon family, the major owners of the Mets, has acknowledged investing millions with Mr. Madoff. The family controls a real estate firm, Sterling Equities, whose Web site says it owns 3,000 residential units and 600,000 square feet of office space. It is unclear whether the firm’s real estate holdings are affected by the Madoff investments.
“We are shocked by recent events and, like all investors, will continue to monitor the situation,” said Richard Auletta, a spokesman for Sterling.

Other real estate developers are finding that their charitable giving has been wiped out by Mr. Madoff. Leonard Litwin, one of the city’s largest apartment landlords and head of Glenwood Management, had nearly all of his charitable foundation’s investments managed by Mr. Madoff.
Gary Jacob, executive vice president of Glenwood, said Mr. Litwin had never met Mr. Madoff but had invested with him on the advice of a friend. The Litwin Foundation had donated money to research for cancer and Alzheimer’s disease and charities, many of them supported by the real estate industry.

“It would have no impact to us as a real estate company,” Mr. Jacob said. “But it affects the charitable giving.”
Some members of the real estate industry are receiving the news with a mix of schadenfreude and sadness for their peers. Jeffrey R. Gural, chairman of Newmark Knight Frank, the brokerage firm, said Mr. Madoff had turned his family down as investors about eight years ago because they would not invest at least $20 million. For years, he said, colleagues introduced to Mr. Madoff through relatives or country club friends had sung his praises.
“People used to brag how they were getting these great returns when everybody else was struggling,” he said. “They thought Bernie Madoff was a genius, and anybody who didn’t give them their money was a fool.”
The impact is already spreading to the residential real estate business. Brad Friedman, a lawyer representing about 100 investors primarily in New York and Florida, said several clients have already said they plan to put their apartments on the market. They depended on their Madoff investments to pay their mortgages and co-op fees.
“With that source of money frozen, they’ve got no cash,” Mr. Friedman said. “They can’t pay the electric bill. They can’t pay the mortgage.”
Other buyers have already backed out of deals because they had invested with Mr. Madoff and can no longer finance their purchases. Michele Kleier, a prominent Upper East Side broker, had buyers pull out of purchases on two $2 million apartments because they had lost money to Mr. Madoff. The first buyer put in an offer at 3 p.m. last Thursday, the day of Mr. Madoff’s arrest, only to withdraw it by 5:30 p.m.
The second set of buyers had visited an apartment three times, requested the financial information about the co-op and had the broker notify Ms. Kleier that they would be making an offer on Monday morning. On Monday, she learned that the buyers had backed out because their money was tied up with Madoff funds.
“It’s now two deals in the last four days,” Ms. Kleier said. “It’s amazing.”
Kenneth Mueller, a Manhattan psychotherapist who counsels many real estate and financial executives, said those who lost money to Mr. Madoff called his indictment “the nail in the coffin for the commercial real estate industry,” which had already been hurt by the recession.
Dr. Mueller said many patients were re-evaluating whether they can trust their business partners after Mr. Madoff’s betrayal.
“Madoff was considered a member of the family,” he said.

 

 

* By CHRISTINE HAUGHNEY, 18 December 2008