Meet the Madoff Minions

An illustrated guide to the other players in the largest Ponzi scheme in history.

Illustrations by Steve Brodner

Bernie Madoff swore he’d acted alone when he pleaded guilty to his $65 billion Ponzi scheme. It was a preposterous claim, so why, more than 15 month later, isn’t more of his inner circle behind bars? Neither the FBI nor the US Attorney’s Office is talking. But for some of these Madoff enablers, the vacation on the investors’ dime may not last forever.

UPDATE: On April 30, the AP reported that Bernie Madoff’s sons will likely face tax-fraud charges sometime in 2010. But as yet, there’s no indication that they’ll be brought up on more-serious charges of securities fraud. Papa Madoff had claimed his boys, who codirected trading at the firm, learned of the fraud only when he told them, days before his arrest. Alternate theory: Madoff knew the jig was up and took the fall to protect his family. Mark Madoff withdrew nearly $67 million from company accounts over the years, claims Irving Picard, the trustee hired to liquidate Madoff’s enterprise, and he divides his time between a $5.6 million Manhattan apartment, a $6.6 million Nantucket home, and a $2.2 million pad in Greenwich, Connecticut. All told, Mark got more than $29 million in salary and bonuses, and racked up $797,000 in personal expenses on the corporate AmEx. [Editor’s note: two years after his father’s arrest, Mark Madoff killed himself.] Andrew Madoff received more than $31 million in compensation, Picard alleges, and used another $32 mil to cover expenses such as a $300,000 investment in Blow Styling Salon, LLC, and a $75,000 payment to Lock and Hackle, a members-only fly-fishing and hunting club. And waiter beware: After dropping more than a grand on the corporate card at Manhattan’s swank Per Se, Andrew left a miserly $60 tip. Picard is suing Mark and Andrew, along with Bernie’s brother Peter and his niece Shana, to recover some $199 million. But their assets are not frozen, and none of them has yet been charged with any crime. 

Ruth Madoff paid the bills at Bernard L. Madoff Investment Securities LLC in the early days, when her father donated office space to help get it going, and was active in management up until the end. Over the years, the firm covered everything from her movie rentals to Armani shopping in Paris and a $2.3 million yacht. Ruth was reportedly intensely secretive, locking her office door even to go to the bathroom. In the weeks before her husband’s “confession” to his sons, she pulled $15.5 million from her Madoff LLC accounts, court documents say. Ruth is being sued by duped investors, and there may be more in line—old acquaintances who trusted their modest nest eggs to the firm. She forfeited some $85 million in assets in a deal that gave her $2.5 million to live on, but she must report any expenditure exceeding $100. And Irving Picard, the court trustee in charge of liquidating Madoff’s empire, is suing to recover nearly $45 million more in ill-gotten gains.

Update: On June 29th, 2012, Peter Madoff plead guilty to numerous crimes but denied having any knowledge of his brother, Bernie’s, Ponzi scheme. In a deal cut with the FBI, Peter could spend 10 years in prison.

After law school, Peter Madoff’s daughter became his deputy at Uncle Bernie’s firm, where she served as a compliance director. Shana Madoff used her company AmEx (total charges: $379,342) at Kiki de Montparnasse, a high-end sex store. The company also shelled out for her $2.9 million house in East Hampton (plus $30,000 for a decorator) and some $242,000 for rent on her NYC apartment between 2002 and 2004. Shana married Eric Swanson—a former SEC official whose team of examiners ran a routine check of Madoff’s brokerage firm in 2004 and reported nothing odd. (The two weren’t dating yet.)

In a workplace where pricey suits were the norm, Bernie’s Marlboro-smoking right-hand man dressed in jeans and sneakers, but he was so gruff when investors called him with questions that many simply stopped calling. Frank DiPascali helped invent and perpetuate Madoff’s phony trading scheme; his take included a mansion in Bridgewater, New Jersey, a pair of Benzes in the driveway, and a monster fishing boat whose captain had his very own Madoff AmEx. The only true insider indicted as of press time—others included rubber-stamping accountant David Friehling and two IT guys charged with providing tech support for the scam—DiPascali faces up to 125 years upriver. Sentencing is set for May. In the meantime, from jail, he’s helping the FBI make sense of company records and build cases against as yet unnamed coconspirators.

The longtime Madoff friend and investor was found dead of a heart attack in his Florida swimming pool in October, five months after Picard sued to recover $7.2 billion Jeffry Picower allegedly withdrew from Madoff accounts. His paper gains were often laughably suspect—950 percent in 1999, a year the S&P 500 gained 19.5 percent. Picower was “totally shocked” by Madoff’s scam, family attorney William Zabel professed to the New York Times. But Picower’s vast estate is fair game for the bankruptcy court.

Walter Noel is founder of Fairfield Greenwich Group, a so-called feeder hedge fund that invested $4.5 billion of its clients’ cash with Madoff. In 2007 alone, Noel and his business partner, former SEC attorney Jeffrey Tucker, earned nearly $31 million each from Madoff transactions. Trustee Picard, who is suing the firm for all it invested, claims they chose to ignore the obvious. They could have verified Madoff’s holdings with the Treasury Department and the Depository Trust Company (DTC)—but apparently didn’t. An SEC attorney later testified that it took only “a few days” and “a phone call” to confirm that Madoff had never traded a dime. Massachusetts has sued Fairfield on behalf of state investors, but the feds have taken no action against the fund or its partners.

A Beverly Hills money manager and the first person on Bernie’s speed dial, Stanley Chais lured in rich clients like Forrest Gump screenwriter Eric Roth. He allegedly pulled more than $1 billion from his own Madoff accounts—and as the pyramid imploded, Madoff transferred another $46 million to Chais’ accounts outside the firm. In October, a judge temporarily froze his assets, and California attorney general Jerry Brown is suing him for $25 million, claiming he enabled Madoff to bilk state residents for nearly $270 million.

The do-nothing SEC commissioner and his minions had Bernie right under their noses and still couldn’t smell him. Examiners who asked tough questions—notably SEC attorney Genevievette Walker-Lightfoot—were reassigned before they could make a case. Christopher Cox was just one in a series of SEC heads—Arthur Levitt, Harvey Pitt, William Donaldson—who missed the elephant in the room. Even Madoff was “astonished” when, in 2006, he gave SEC sleuths his DTC account number to verify his trading activities—and nothing happened. “I thought it was the end, game over,” Madoff later recalled. In October, two New York-based investors sued the federal government for $2.4 million in damages, alleging “gross negligence” by the SEC. So far, the agency has not fired a single employee over the Madoff affair.



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