The Madoff Chronicles Page 8

  For the New York apartment, Blumenfeld chose a neutral color palette, with antique Oriental rugs and classic furnishings. As in the office, there were no loud colors—nothing flashy for the Madoffs.

  There was a Steinway grand piano in the living room on the top floor, along with floor-to-ceiling windows and a fireplace. Small statues of bulls were placed on each side of the entrance to the room. Nearby was a formal dining room with its own fireplace, a crystal chandelier, and a $64,000 set of silverware. The large eat-in kitchen adjoined the room where Madoff spent most of his time after the arrest, reading the paper and watching old movies on a large flat-screen television. Visitors said the apartment was spotless. According to investigators, the Madoffs’ housekeeper, Praxides Dirilo, was paid out of the company accounts.

  The bedrooms were on the eleventh floor, accessed by a large spiral staircase. Bernie and Ruth each had a personal walk-in dressing closet for their expensive wardrobes. Bernie arranged his suits, hand-tailored in London, precisely one inch apart. Each shirt had its own pull-out shelf, and his twenty pairs of suede loafers were arrayed as if on retail display. Down the hall, the master bathroom was big enough for an exercise bike and a large flatscreen television. Bernie and Ruth also had their own luxurious dens. His was all mahogany and decorated with a nautical theme and a leather sofa. There was a metal statue of a bull on the floor. Her den featured an equestrian motif, with Chinese lacquer and floral fabric for the sofa. While he was under house arrest, ABC News cameras from across the street saw both Madoffs relaxing in her den, watching television, surfing the Internet on an Apple computer, and then fluffing the thick pillows on the sofa before turning out the lights and going to bed.

  The oceanfront home in Montauk, on New York’s Long Island, was their summer getaway place, purchased in the early 1980s. It is a sprawling estate with its own beach, on Old Montauk Highway. The Madoffs held a yearly summer party for the office in Montauk, but after one particularly raucous weekend, the event was shifted from the family home to nearby motels.

  The office summer party began as a fishing trip in the 1980s, and it grew into a three-day beach extravaganza. Employees and their families were all put up at area beach motels. At the last party, in mid-July 2008, there was a beach bonfire dinner on Friday night. Saturday was spent on the sand, with clowns, games, and face painting for the children. Bernie and Ruth sat in beach chairs under a set of umbrellas, as if they were the king and the queen watching their loyal subjects from their thrones. On Saturday night, the festivities moved to the nearby Montauk Yacht Club for an elegant dinner under a huge tent, with a DJ playing music for dancing.

  It was the social highlight of the year for the office, and it allowed Madoff to be seen as the great benefactor. Former employees remembered that Madoff loved to watch everyone dance as they stopped, started, and jumped up and down on the commands of someone with a loud whistle.

  His messenger, Little Rick, remembers Bernie smoking joints during some of the beach parties, seemingly able to relax and forget for a moment the huge scam he was juggling. Many of those same people he so enjoyed watching on the dance floor, or playing with their children at the beach, invested their savings with Madoff. When they lost everything, they wondered how he could have done it to them when he had always appeared to be such a kind and thoughtful man.

  “You would have liked him,” said one former Madoff trader whose savings were wiped out in the scam.

  “We thought we were working for this wonderful man. We thought we were doing the right thing for our families. And we just thought that we were having a nice life. And we weren’t,” said Eleanor Squillari. “I never could picture him as wanting to hurt innocent people, but clearly he did, and clearly he knew he was doing it,” she said with anger as she recalled all the good times at the Montauk summer parties.

  In the winter, the Madoffs spent their weekends, holidays, and long stretches in Palm Beach. It’s an easy commute from New York when a private jet is standing by. The Madoffs first bought a condominium in the area that some longtime residents in Palm Beach called the “Gaza Strip” because of the perception that most of the newcomers in the high-rise condos were Jewish, intruding on this WASP stronghold.

  In 1994, as business was booming and the threat of an SEC investigation had passed, Madoff paid $8 million for a waterfront home on the very fashionable Lake Way. He was one of the first Jewish homeowners in that part of town.

  The house at 410 N. Lake Way seems to attract the notorious. It was previously owned by Herbert “Peter” and Roxanne Pulitzer, whose sensational divorce trial included testimony about sexual escapades in the house involving three-way partnerships and a long list of other titillating details. One witness testified that Roxanne Pulitzer had séances on her bed with a trumpet nearby, and she was soon described by the New York tabloids as “the Strumpet with the Trumpet.” Bernie and Ruth couldn’t top that for sensationalism, but their infamy may prove to be more enduring.

  The Madoffs joined the Palm Beach Country Club, whose membership was mostly Jewish. All members were major contributors to charities—it was one of the requirements for membership. On their 2007 federal tax return, the Madoffs reported more than $8 million in charitable contributions to a variety of organizations, although much of it was given to foundations established in the name of Bernard L. Madoff and his son Mark Madoff. In 2007, The Madoff Family Foundation had more than $19 million in assets and distributed only $95,000, less than 1 percent.

  The Madoffs met their country club’s definition of being charitable, although in their case they were giving away other people’s money. Ruth Madoff often used the Corporate Platinum American Express card to make charitable contributions in smaller amounts.

  Members of the Palm Beach Country Club remember Madoff acting like royalty at the clubhouse. To know him, and be accepted by him as an investor, was to be in the elite of the elite. Multimillionaires in the club said they were hesitant to approach him directly for fear of causing offense. Someone had to recommend you.

  “It’s almost like you’ve got to grovel. ‘Come to me, I’m the king,’” said former FBI agent Brad Garrett. “That’s extremely important to people with antisocial personality problems. ‘You’re going to have to do what I say and maybe I’ll help you and maybe I won’t.’”

  The Madoffs were members of several other golf country clubs, including the Atlantic Golf Club in Bridgehampton, New York. Investigators discovered that Bernie used clients’ money to pay $947,703 in country club dues for himself, his brother, Peter, and their wives between 1996 and 2008.

  Bernie was considered an above-average golfer, with a nine handicap, according to people who played with him regularly. Ruth was also above average and often played with Bernie, defying the belief of many golfers that love and golf don’t mix.

  They enjoyed each other’s company. Some of Ruth’s most treasured memories are of weekends spent alone with Bernie in their New York apartment. This was not a couple who sought separate vacations or a little breathing room from each other.

  “They were incredibly close,” said Eleanor. “I think they genuinely loved and liked each other. Which is huge, when you’re together for so long. They did everything together. He wanted to be with her. The movies, and dinners, even a quiet dinner at home.”

  Still, according to former employees, Ruth was well aware that Bernie had a wandering eye.

  She surprised him once at an industry cocktail party, where Bernie was “getting a little frisky” with another woman, recalls Little Rick. “Bernie’s there and Peter’s there and they’ve both got blondes next to them, and who walks into the place—in dungarees and a T-shirt no less—but Ruth Madoff.

  “She takes one look and she was out. There was no scene. She was a very sophisticated, very classy lady. Needless to say, after that day, everybody went to the industry dinner, all the wives, everybody.”

  Little Rick says Ruth kept a very close eye on Bernie after that. As he served as a chauffeur on
e day, he heard Bernie ask Ruth, “So, honey, when you coming back?”

  “She goes, ‘You think I’m gonna tell you when I’m coming back?’

  “I wanted to turn around, tell him, ‘She knows your ass real good,’” Little Rick said.

  Madoff also had a loyal team of attractive female masseuses. His “little black book,” a $415 goatskin version from the French leather goods store Hermès, contained nine women, under M, who provided massages, in New York, Montauk, Florida, and France.

  “I did tell Bernie if he loses that book that somebody’s gonna think he’s a pervert,” said Eleanor, who kept a separate copy of the address book and provided it to the FBI.

  In the book, the Madoff number for “Lena” traces to a sexually explicit Web site, where “Lena” is also called “Lilly.” On the site, customers say they paid $150 for a “nude” massage. “The massage was very good and she used her tits and hair to add to the sensual feel. I loved it,” wrote one satisfied client.

  Other female masseuses have Web sites that state they are “non-sexual.” Bernie’s former messenger, Little Rick, said Madoff told him he often liked to watch “one woman massage another.”

  The stories of Madoff with other escort service women, hotel masseuses, and certain attractive female employees were well known around the office. According to former employees, this was especially true in the 1980s. Ruth learned to live with it.

  She could find her consolation in her status as Mrs. Madoff, the wife of one of Wall Street’s most successful investment strategists. Their presence was sought after by hostesses in Manhattan, the Hamptons, and Palm Beach. Her Corporate Platinum Amex card allowed her to buy whatever she wanted, whenever she wanted. In January 2008, company documents show that Ruth spent $3,792 on a one-day Paris stroll from Giorgio Armani to Jil Sander to Marni.

  And she made sure to send word back to the old neighborhood about just how wealthy she and Bernie were getting.

  Bernie’s childhood friend Jay Portnoy says his mother received regular updates from Ruth’s mother, Sara Alpern, and Bernie’s mother, Sylvia. “I was often told, ‘Mrs. Alpern says Bernie’s doing very well in the stock market,’ ‘Mrs. Madoff says Bernie’s now doing extremely well,’ ‘Mrs. Alpern says Bernie’s now a millionaire,’ and then a multimillionaire.”

  By 2006, at the age of sixty-eight, Madoff had enough money and free time to enjoy a fourth home, this time on the French Riviera. The Chase Bank corporate account had several billion dollars in it, enough to handle the continued 12- to 20-percent returns and the occasional client withdrawal. Under Frank and Annette’s supervision, the seventeenth floor was operating like a well-oiled machine. Madoff could take time away from the office without fear of the scheme collapsing. He and Ruth loved France—especially the Riviera.

  Bernie and Ruth had traveled there often, staying at the Hôtel du Cap-Eden-Roc in Cap d’Antibes, between Cannes and Nice. It is one of the most elegant hotels in the world, built on a cliff overlooking the Mediterranean and surrounded by a forest of pines. The yachts line up along the waterfront so that their owners can be ferried to the hotel’s outdoor terrace for lunch next to the pool. It was Bernie Madoff’s kind of place.

  The Madoff villa was nearby, in an area of Cap d’Antibes known as Château des Pins.

  Ruth and Bernie spent a lot of time and money collecting antiques and art for their French villa: a $35,000 painting bought at The Armory Show in New York, furniture from hidden Parisian shops, a leather chair from London. The villa was modest by the standards of many of the Riviera’s grand estates, but the Madoffs loved it.

  “Nothing flashy at all,” said Nando Pignatelli, the former stockbroker who often visited at the Madoffs’ place. “Don’t forget that I live in Monte Carlo, and I know what these rich people are and want to look like when they want to show off. He was never a show-off.”

  Madoff’s most prized possession was the eighty-eight-foot yacht he bought for about $7.5 million in 2007, named The Bull. He docked it at Juan-les-Pins in Cap d’Antibes, near the Riviera villa. His New York decorator, Susan Blumenfeld, decorated it for the Madoffs, and Bernie commissioned an oil painting of the vessel. Now he could be delivered by sea to the Hôtel du Cap’s terrace like the other wealthy residents of the area.

  He now had a yacht on the Riviera, part ownership of two private jets, four multimillion-dollar homes, access to a bank account with billions of dollars in it, and no way out of the monumental crime scheme that had made it all possible.

  After his arrest, Bernie was asked how he had planned to end his Ponzi scheme, what was his exit strategy?

  “I just somehow hoped the world would end, that would have been a way out,” he told a visitor.

  “But Bernie,” the visitor said, “that would mean that Ruth and the boys and the grandkids would all be dead.”

  “Right,” said Bernie.

  Ruth seemed oblivious to any problem, even though they otherwise seemed so close.

  “As far as I know, there was nothing that they kept from each other since they were teenagers,” said Eleanor.

  Ruth had helped Bernie run the business when he started it. Her father steered him some of his first clients. Ruth’s role had diminished over the years, but she still had her own office one floor below Bernie’s. Former employees have told investigators that she was there at least once or twice a week.

  At one point, she went back to school to study nutrition and received a master’s degree from New York University. She is also listed as one of the two executive editors of a cookbook called Great Chefs of America Cook Kosher, though her precise role in the book’s creation is in dispute. Although Ruth and her co-executive editor appear in a photograph wearing aprons in a kitchen, the editor of the book, Karen MacNeil, told ABC News that she wrote and assembled the book and its recipes herself and never once met or talked with Ruth.

  Mostly, when Bernie went to the office, Ruth seemed to be a rich wife who had lunch, played golf, played bridge at the club, worked out at the Equinox gym, and enjoyed her wine and a smoke. She did not seem to have a care in the world other than making sure all the help was paid.

  “People like Madoff pick people in their lives who stay with them. Who are basically codependent,” said former FBI agent Garrett. The type of person who thinks, “‘I don’t really want to know what you’re up to, but I do want to benefit with the yachts and clothes and houses and antiques.’”

  In the weeks before her husband’s arrest, Ruth emptied her accounts of $15.5 million and helped Bernie prepare for the collapse. If she didn’t know it then, she would soon realize that she was married to a crook, and yet she remained close and loyal. Still in love, she said.

  “When your life becomes this sort of mega-materialism and there’s really no reality in your life,” said Garrett, “you can basically rationalize away all those things around, outside this world of wealth and materialism that you’re entitled to.”

  When reality hit, Ruth would be devastated.

  CHAPTER

  SIX

  The SEC

  “OBVIOUSLY, FIRST OF ALL, THIS conversation never took place, Mark, okay?” Bernie Madoff warned the man on the other end of the line.

  “Yes, of course.”

  It was December 19, 2005, and for the first time in more than a decade, Madoff was facing the prospect that he might get caught by the Securities and Exchange Commission, which has broad powers to investigate the financial industry.

  The SEC investigators were due to arrive in a few days, and Madoff was on the phone, coaching a witness, Mark McKeefrey, on how to outsmart their questions.

  Madoff repeated his warning, “this conversation never took place.”

  Madoff was tense. His criminal scheme was booming. Customers were happy, and there were billions of dollars in the Chase account—more than enough to pay out the huge returns he had promised. The only thing other than a market crash that could get in his way was the SEC. And now they were at the door.

&n
bsp; Madoff had had close calls before. His scheme had narrowly survived the economic downfall triggered by the 9/11 attacks in 2001. Because he never bought or sold any stock, he did not really care what the market did. But the tough post-9/11 market led huge numbers of his customers to withdraw their money from him, and the Chase account bank balance had become precipitously low. Investigators say Madoff hid this liquidity shortfall by repeatedly sending bank wire transfers of hundreds of millions of dollars to his London office, which then immediately wired the money back to him. It was a Madoff version of “kiting checks.” The SEC did not notice, and no one at the firm or its banks raised a red flag.

  Madoff’s last close call had come in 1992, when the SEC investigated the accounting firms of Avellino & Bienes and Telfran Associates, who had been steering millions of dollars to Madoff. But the accountants had received only civil fines, and the SEC did not pursue Madoff’s “too good to be true” returns of 12 to 20 percent a year. As a result, Madoff’s name never appeared in any of the SEC’s public documents back then. The perception of many investors, in fact, was that the SEC investigation cleared Madoff of any suspicion of wrongdoing. There was a flattering article in the Wall Street Journal and new customers pleaded for Bernie to take their money.

  In 2004 the SEC initiated, but then shut down, an inquiry into allegations that Madoff was “front-running,” the illegal practice in which brokers place their own orders to buy and sell before their customers. The SEC dropped the case after “higher-ups” apparently decided all investigative resources should be focused on the unrelated allegations that mutual funds were playing fast and loose with their money.

  But now, in 2005, Madoff sensed he was again in the cross hairs of the SEC.