Madoff with the Money

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Copyright © 2009 by Jerry Oppenheimer. All rights reserved.

 

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

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If you read things in the newspaper and you see somebody violate a rule, you say well, they're always doing this. But it's impossible for a violation to go undetected, certainly not for a considerable period of time.

Around nine o'clock on the morning of Thursday, December 11, 2008, the employees of Bernard L. Madoff Investment Securities LLC began drifting into the midtown Manhattan firm's high-tech offices, where everything was in tones of black and gray, the boss's chosen colors. More than a few were a bit hung over. The night before they had all joined in toasting the holidays at the festive annual Christmas party that their respected and beloved financial icon threw every year at an upscale restaurant.

Despite the after effects of all the drinking and food consumption, everyone was feeling fine emotionally, if not physically. Some strong black coffee or a couple of Tums would take care of their ills. The holidays at Madoff were always a joyous time, a time for celebration, and this holiday season was to be no exception. That morning the employees came to work with visions of their promised year-end bonuses dancing in their heads, and with expectations of the usual splendid Christmas presents dispensed by their munificent boss, Bernie, and his lovely wife, Ruth.

Despite 2008 being in the depths of a recession seemingly on a par with the Great Depression, and with the stock market tanking, generous, wonderful Bernie still promised all of them bountiful bonus money. Two traders alone had brought in some $7 million in profits and were pledged 25 percent of the take.

There also was no reason to doubt that Madoff 's gifts would be under the tree. Ruth always knew how to spend money, especially around the holidays.

“We used to call it Ruth's ‘Twelve Days of Christmas,'” says a Madoff veteran. “Beginning in the early '90s she'd spend at least $150,000 a day, give or take, during the holidays, buying gifts, and who knows what else.”

Her expenditures during the holiday time frame were well documented because certain Madoff employees had the responsibility of keeping tabs on Bernie's and Ruth's cash flow.

“They had so much money coming in and out of their accounts they needed five people to keep track of it,” the employee asserts. “There was a Disneyland atmosphere. Money meant nothing to the Madoffs.”

Accordingly, Madoff employees were thrilled. They considered Bernie one terrific, generous, magnanimous boss. The more money that flowed, the better. Many of them got well-paying positions with him right out of high school, and learned what they had to know on the job. In return for their loyalty, they earned good salaries, better than most were paid in the financial sector, and nice perks, too. And a few very special ones even became extremely well-off, with big homes and expensive cars and boats.

A job at Madoff, if you watched your p's and q's, meant virtual lifetime security. “Bernie seldom fired anyone,” says a lifer. “You just got recycled into a different department.”

Some invested wisely with Bernie, trusting his financial acumen—after all, the boss was considered an investor's dream, a genius, and one of the most powerful money men on Wall Street. How lucky they were to work for him. They thought of Bernie almost like a father figure, a messiah, and most felt secure that they'd have a very pleasant retirement. Unlike the bleak situation at other financial firms in the terrible economy of the latter part of the first decade of the new millennium, no one from Madoff was joining the growing ranks of the unemployed.

“We were always like one big, happy family,” offers one of those Madoff veterans who had invested their life savings. “Bernie was our god, a wonderful boss, eccentric, sometimes scary eccentric, but still wonderful. He was a stand-up guy.”

But all of those warm feelings quickly evaporated around 10 o'clock on that wintry December morning. Christmas 2008 for the 180 or so Madoff workers (and for thousands of other Madoff victims across the country and around the world) was going to be far different from Madoff Christmases past.

The weather service had forecast “a wintry mess” for the tristate New York metropolitan area for that Thursday.

For the employees of Madoff it would be more like a horrific terrorist attack.

As one longtime employee sadly observes,“12/11 was our own 9/11.” Bernie and Ruth Madoff were about to become as controversial a couple as Julius and Ethel Rosenberg, and as infamous as Bonnie and Clyde.

Around 10 o'clock that morning, the boss's younger brother, Peter, the number two in charge of the family-run firm—Bernie's sidekick for some four decades—entered the trading room on the 18th floor and called for everyone's attention.

His hands were trembling, and he needed to lean against a desk to steady himself. His voice was tremulous.

“I have some bad news,” he told the gathered workers. “Bernie's been arrested.”

“He looked scared, teary-eyed, and everyone was suddenly in a state of shock,” vividly recalls one of those standing there, listening in utter disbelief. “Someone asked Peter what happened, and he said he did not know why Bernie was arrested, or for what reason—or whether it was personal, or whether it was business. He said he didn't know whether it was for good, and he didn't know whether it was for evil. (This was a claim that would later turn out to be untrue.) And he said,‘Don't discuss this with anyone.'

“When we found out later that day what Bernie had done, I remembered how sincere Peter had sounded that morning, and I thought, ‘In his next career he could win an Oscar.'”

A close and longtime elderly crony of Bernie's who was permitted by the boss to use a desk and a phone and conduct private business in the office whenever he wanted to—and was a major investor—happened to come in that horrific morning.

“Peter made the announcement that Bernie had been arrested, and all havoc broke loose,” he recalls, the memory of the moment indelibly imprinted. “I immediately thought,‘It's a mistake.' Maybe his passport had expired. Maybe there was an SEC regulation that the company didn't adhere to, and they were just going overboard on setting an example.”

Though no smoking was permitted in the office, he lit one up and held his head in his hands for half an hour, contemplating what kind of crazy jam his chum Bernie had gotten himself into.

Then he left the office in a daze.

“I was in a state of shock, and I actually walked home from 53rd Street to 83rd Street, and never went back. People started to call me, and I told my friends, ‘It's all a big mistake. I'm going to go to sleep tonight knowing that tomorrow morning you'll find out it's a mistake.'”

In another section of the three floors on which Madoff had offices in the striking Lipstick Building, the announcement of Bernie's arrest was made by gregarious, likable, jeans-wearing Frank DiPascali, who everyone knew was the boss's right-hand man on the 17th floor. No one ever really knew what he did for Bernie, or for that matter what Bernie did in one of those offices on seventeen.

“We didn't have a care in the world that morning,” recalls a longtime employee. “Suddenly Frankie comes crashing in telling us the boss has been arrested by the FBI. ‘We're not certain exactly what happened, ' he says. ‘He's engaged a lawyer. Do not talk to the news media, period.' That's the first time Frankie ever gave orders like that. We were all sitting at desks and were kind of thunderstruck. ‘What the hell did the boss do to get arrested by the FBI?' Little did we know.

“A little while later Charlie Wiener, the boss's nephew who was head of administration at Madoff, came in with two or three other fellows and introduced them as SEC guys and told us, ‘They are going to be camping out here for a while.' There was just a little trading that day, and then it stopped and we just sat at our desks like the waking dead.”