The Madoff Chronicles Read online

  Eleanor was getting a bad feeling. She had tried to be optimistic. She had tried to deny the growing doubts. She still didn’t believe what was being said about Bernie on television. She did not realize the truth until she finally talked with Madoff later that Friday. It was a conversation she still could not recount without breaking down in tears.

  “How are you? How’s Ruth?” was the first thing she asked him. “It was a very short conversation. I didn’t know what to say.” She did not ask him if the allegations were true. “At that point I didn’t believe it and I just felt so horrible for them, and scared.”

  Madoff talked in a low voice, but seemed to be eerily calm. “He even called me ‘sweetie,’ which he never does.”

  But then as he began to speak, the pieces started to fall together for Eleanor.

  “He didn’t say, ‘Eleanor, how are you? What’s going on with the clients? Eleanor, we’re gonna straighten this out,’” she said.

  Instead, Madoff was solely concerned with what the FBI had found in his office.

  “All he said was, ‘Anybody been in my office? Have they gone in my briefcase? Have they gone in my diary?’ That’s all he wanted to know. That was it.”

  Now Eleanor was in tears. She knew her boss and knew what he had done. The briefcase he always took with him was missing. It was a black leather file case with a long handle and wheels, like the kind used by lawyers and pilots. Bernie kept files on the accounts and the “feeder funds” in the case and traveled with it everywhere. In its place that morning, said Eleanor, was a vinyl substitute that looked like, but was not, the original. Other items left in his office seemed conspicuous by their presence.

  “He planted things for them to find,” she said. Eleanor said Madoff was pleased to hear that the agents had gone through his office and his desk.

  Among the discoveries were signed checks for $173 million that Madoff had made out for employees and certain investors. His secretary is convinced that Madoff never intended to send them out and that he just wanted them to be discovered so it would reflect well on him. Madoff told someone later that he wanted “to take care of the poor bastards” who he knew would soon be unemployed. Madoff’s lawyers told the FBI where to find the checks in Madoff’s desk.

  “It was all just part of the setup. He had to convince his sons that he was having a nervous breakdown or that something was not right and he was gonna do a good thing.

  I think he wanted to look better. He needed sympathy, he needed everyone to say, okay, he was gonna try to take care of them.

  “I told the FBI, if he’s trying to convince anybody that he’s losing it, come and talk to me because I know he was [as] calm a cucumber up until the day of the arrest,” she said. “He is so good, we know now, at manipulating everybody. In the entire world.”

  It was during that brief phone conversation that Eleanor says she came to believe her boss was a crook. She is no expert, but her perspective about her boss’s behavior is remarkably similar to the analysis by former FBI agent Brad Garrett.

  “If you are as egocentric as people like Mr. Madoff are, then you’re going to think you can control the court and control the prosecutors and control the whole situation by getting out in front of them and starting to manipulate,” explained Garrett.

  Madoff remained in control, reading the morning papers and watching the news at his nearby penthouse apartment. His visitors over the next few weeks saw “absolutely no sign of emotion” from Madoff. “He was just somebody who had stepped back from his inner soul,” said Nick Casale, a former New York City police detective whose firm was hired to provide security for Madoff and make sure he lived up to the terms of his bail. “He was almost blank, he didn’t show emotion. A serial killer type.” Madoff methodically made a list of the school and charity boards from which he would now have to resign.

  He continued to enjoy his favorite cigars from Davidoff and spent his evenings at his computer or watching old movies with Ruth in one of two dens in the duplex apartment. Madoff and his wife were accustomed to walking around at night naked but they had to adjust once Casale’s firm installed surveillance cameras in the apartment. The arrest was barely mentioned in Casale’s presence and Ruth tried her best to act normally. “I never saw her get angry with him,” said Casale. “She was not only losing her husband to prison, but she was losing her status in the community and her wealth and her position, her lifestyle.”

  As he waited for his lawyers and federal prosecutors to negotiate a plea deal, Madoff remained an arrogant, aloof, heartless man who, to many, seemed to actually take pride in this monumental fraud that had fooled so many on Wall Street. “He did not seem like the most contrite person I ever met,” said Casale, who spent hours with Madoff in the apartment. There was no sense of shame. Bernie might have come from the outer borough of Queens, but he had played with the big boys in Manhattan.

  “One of the key points with him is that he wanted to be king of the mountain. That’s extremely important to people with antisocial personality problems because it’s a control, it’s an ego thing,” said former FBI agent Garrett.

  Similarly, Ruth didn’t seem to be affected by the extraordinary amount of pain Bernie had caused so many people. Instead, she spoke with disdain of “the gentiles” she felt were enjoying her husband’s downfall. She complained to another member of the family that the courts freezing the Madoff family assets on behalf of the victims were unfair because the judges were elected and had a bias for their constituents.

  Some legal system, Ruth said, as if she and Bernie were the aggrieved victims.

  At the same time, Ruth asked Bernie’s secretary, Eleanor, to help her pay a bill for the family yacht, the $7 million Bull, moored at Cap d’Antibes on the French Riviera. Ruth told Eleanor the authorities and the bankruptcy trustees “don’t have to know about this,” Eleanor recalled. She ignored Ruth’s request.

  “I just went to the FBI and I said, I think they’re trying to escape. I told them about the boat thing. I just didn’t get back to her,” Eleanor recalled. She was through being conned by the Madoffs.

  While they didn’t talk much about the people Bernie had hurt, the Madoffs did seem obsessed about the photographers waiting outside their apartment. Until he pleaded guilty, the only apology issued by Bernie Madoff was a note to other residents in the Sixty-fourth Street apartment building, regretting the disruption caused by the photographers, reporters, and satellite trucks that surrounded the building. Bernie thought that people who had paid $5 million to $10 million for an apartment certainly shouldn’t have to put up with that.

  Dear neighbors,

  Please accept my profound apologies for the terrible inconvenience that I have caused over the past weeks. Ruth and I appreciate the support we have received.

  Best regards,

  BERNARD MADOFF

  His investors never received any such written apology from Madoff.

  He ignored all requests for interviews, including one hand-delivered by the doorman from fellow building resident Matt Lauer.

  And Madoff went to great lengths to dodge photographers as he went to and from court, peppering Casale and his security team with thoughts on how to get a van with black windows to block the photographers, “and then they can’t snap my picture in the car,” and also “discouraging them from blocking the entrance to the building.”

  His house arrest had been part of Madoff’s plan as he had orchestrated his confession to his sons back in December. At first, prosecutors thought Madoff would be a fully cooperating witness who would help them understand what happened to the money. To the outrage of his victims, the government did not object to him being released on bond. He was required to pay for twenty-four-hour coverage by Casale’s private security firm.

  On Christmas Eve, at about 5:30 p.m., right after Casale and the court-ordered security guards had left the apartment, Bernie and Ruth had another trick up their sleeves: Ruth went to a nearby post office jammed with last-minute holiday busine
ss. Paying in cash, she mailed five large white envelopes, uninsured, with no return address, to the Madoffs’ two sons, Andy and Mark; Madoff’s brother, Peter; Madoff’s sister-in-law; and one to old friends. Inside the envelopes were some of the family’s precious jewelry, bought and paid for with money stolen from clients. One package contained thirteen watches, one diamond necklace, an emerald ring, and two sets of cuff links, altogether valued at approximately $1 million.

  Bernie enclosed a note to his sons.

  Dear Mark and Andy,

  If you can bear to keep these watches, they are given with my love. If not, give them to someone who might.

  Love, Dad.

  When their sons received the jewelry and the note, they called their lawyers, who called the FBI.

  Ruth and Bernie maintained they were just sending “sentimental personal items” as gifts. Investigators and agents took a different view. Prosecutors began to realize they, like so many others, had made a mistake trusting Madoff. It appeared that the Madoffs had violated court orders and were trying to furtively distribute some of their wealth into the hands of relatives before the victims or the government could get it.

  But there was another theory. Some investigators believe they sent the jewelry to the sons so they could turn it in and further establish their credentials as the “good guys” in the scandal, not at all in league with their father. One veteran investigator likened it to how a spy who knew he had been compromised would arrange for another spy in his cell to turn him in to deflect attention.

  A federal magistrate accepted Madoff’s innocent version of events—that it was just some small trinkets, personal items. The magistrate concluded that Madoff had not acted to hide his wealth, and that his sons had done the right thing by reporting the episode to the FBI. Prosecutors got nowhere when they attempted to cite the Christmas Eve mailings as proof that Madoff should be locked up.

  Prosecutors had already begun to realize that Madoff had no plan to cooperate fully. After the first “confession” in December, Madoff was never again permitted by his lawyers to speak with FBI agents. He was sticking to his story that he did it “alone,” which, given the enormity and complexity of the fraud scheme, the FBI was discovering could not possibly be true.

  “He gave the FBI a sack of shit,” said one investigator familiar with Madoff’s apparent strategy. “It was Bernie saying, ‘I stole fifty billion dollars, now you can go figure out what you want to do.’ This will take years to unravel.”

  When prosecutors moved to have Madoff jailed, his lawyers arranged for Casale’s security firm to come up with a plan to persuade the judge Madoff could be kept safely guarded under house arrest at his apartment.

  Casale was paid $250,000 by Madoff for his efforts, with the prosecutors’ approval. Casale reported directly to Madoff’s lawyer, Ira Sorkin, and Madoff himself. It was a huge conflict of interest that even Casale acknowledged. He said that “if Bernie took off, I would certainly make a phone call, but it would not have been my job to tackle him on the street.”

  Given that prosecutors say that all of Madoff’s money was stolen from his clients, this meant that his clients were, essentially, paying for the guards so Madoff could avoid jail and stay in his $7.5 million penthouse, which also was paid for with their money.

  CHAPTER

  FOUR

  The Office

  FOR THE MOST PART, BERNIE MADOFF learned to live with being a criminal.

  Still, there were times when the tension built and he worried, not so much about the victims, but about getting caught and losing the life of wealth and privilege he had built for his family.

  So when it was time to party, Madoff seemed eager to blow off steam. On those occasions, especially in the early days, a messenger known in the office as Little Rick would be dispatched to Harlem to bring back marijuana for Bernie and others in the office.

  “No executive from Wall Street wanted to go up to Spanish Harlem. They’re not gonna go to a hole-in-the-wall and get a little envelope and put money in it,” recalled Little Rick, a short, muscular man with a Puerto Rican Flag tattooed on his left bicep. “I was the messenger. That was my job.”

  A grateful Madoff gave Little Rick the title of manager.

  “Little Rick knew everyone, and knew everything. Whenever anything shady had to be done, Bernie had Little Rick do it,” recalled one Madoff employee.

  Little Rick said that Ruth Madoff was also appreciative of his drug runs. He recalled fondly how Ruth would sometimes share her grass with a friend going through chemotherapy. “She was a wonder, always trying to help somebody.”

  Other former employees have told investigators that Ruth was at one point a “heavy user” who would sometimes blame her faulty memory on the grass she smoked.

  Little Rick ended up losing his job in 2003 when he couldn’t kick his own problem with cocaine and drugs were discovered in his desk. He says he wasn’t the only one with a problem at the Madoff firm. “There was white powder all over that office. It was like the freaking North Pole,” Little Rick said. “Are you freaking kidding me?”

  Little Rick said Bernie and younger brother Peter called him in to let him go. “Rick, why did you get yourself to this point? You know we tried to get you help,” he recalls Bernie saying.

  “I know,” said Little Rick, looking straight at Bernie. “You tried to push me to go to rehab a long time ago. But the same person who pushed me to go to rehab is still doing drugs. Bernie, maybe I was conditioned.”

  Little Rick said Peter immediately got up. “What are you talking about? What are you trying to say?” he recalled Peter shouting, attempting to defend Bernie’s honor.

  “Peter, shut the fuck up and sit down, now,” he recalls Bernie yelling.

  “He sat down and put his tail between his legs, because Peter did not bump heads with Bernie even after all these years. When Bernie told you sit down and shut the fuck up, that’s what you did.”

  Little Rick says Bernie wanted the separation to be as friendly as possible.

  “I cried when I left there. He cried. He hugged me.”

  It was rare for Madoff to fire anyone. There were far too many secrets to be protected. Whatever illegal activities Little Rick was guilty of paled in comparison to the massive criminality his boss was engaged in on a daily basis.

  The Madoff offices were located on three Floors of an architecturally distinguished building known as the Lipstick Building, on Manhattan’s Third Avenue, at Fifty-third Street. With its oval shape and three red-granite layers stacked on top of one another, set off by stainless steel horizontal bands, the thirty-four-story building resembles an extended lipstick tube. Madoff’s close friend and client Fred Wilpon was one of the developers, and Madoff was among the first tenants when he signed a lease in 1986.

  Madoff had come a long way from the folding table in his Queens apartment. One of his first real offices had been in space he shared with an old friend, Marty Joel, at 39 Broadway, near the New York Stock Exchange. (Madoff delivered the eulogy at Joel’s funeral and he hired Joel’s daughter, Amy, to work for him. The Joel family thought it had more than $20 million invested with Madoff, and was wiped out when their loyal friend and Amy’s boss was revealed to be a crook.)

  As the firm grew, Madoff moved to larger quarters at 110 Wall Street, where Little Rick recalls wild times in the 1970s and 1980s.

  “At one Christmas party, Bernie rented out the entire floor of the disco New York New York, and there were topless waitresses and waiters in just G-strings,” said Little Rick. “That was before spouses came to the parties.”

  Office flings were “part of the scene,” and Little Rick said some of the employees took delight in using Bernie’s or Peter’s office to have sex late at night. Little Rick said they especially liked using Peter’s office, because he “could be such a hard-ass.

  “Peter was always complaining about how dirty his sofa was and having it cleaned. It was a thrill to do it there,” he said.

  Th
e offices at 110 Wall Street soon became too small for Madoff’s grand ambitions. As the money from investors rolled in and the millions of dollars turned to hundreds of millions and then billions, Madoff’s prestige grew and his ego demanded an office that reflected his position.

  “The owner’s name is on the door,” boasted Madoff in promotional material posted on the company’s Web site. “Customers know that Bernard Madoff has a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm’s hallmark,” stated the profile Madoff published about himself. The profile said Madoff founded the firm “soon after leaving law school.” It did not specify that he had dropped out of law school after one year.

  The Web site went on to describe how Madoff had been instrumental in developing the NASDAQ stock market and served as chairman of the board of directors in 1990, 1991, and 1993. He and his brother, Peter, “have both been deeply involved in leading the dramatic transformation that has been underway [sic] in U.S. securities trading,” the company boasted.

  “Theses [sic] positions of leadership not only indicate the deep interest Madoff Securities has shown in its industry, they also reflect the respect the firm and its management have achieved in the financial community.”

  The Lipstick Building made the message clear: Bernie Madoff was a major player.

  Although the building was only twelve blocks from his penthouse apartment, Madoff still kept a Fleet of black Cadillacs so he could arrive each morning in style, just like the big boys at Goldman Sachs and Morgan Stanley. He became an investor in a restaurant just up the street, P. J. Clarke’s, and always requested the table up front by the window, where everyone could see him.

  In time, the firm grew to take up three floors of the Lipstick Building. The main entrance and a conference room were on the eighteenth floor. Offices for Madoff, his brother, Peter, and his sons were located on the nineteenth floor. That floor was also the location of the legitimate part of Madoff’s business, where traders actually conducted a huge volume of trades in stocks for institutional customers, all overseen by Madoff’s sons, Mark and Andy, and his brother, Peter. Madoff estimated that the firm handled more than a trillion dollars a year in trades.