Madoff with the Money (10 page)

Schrager continues,

In fact, as it would later be revealed by the SEC, the firm of Avellino & Bienes did more than accounting. They had started in business with Ruth's father, Saul Alpern, and were feeding investors to Bernie early on—and they would become very rich doing it. (In the early 1990s, the SEC would probe their operation, force them to return investors' money, and put them out of business. But they still continued as a feeder fund. The Avellino & Bienes affair would be the first red flag raised and mishandled by the SEC.)

In the mid-1990s or thereabouts, Schrager was invited to attend a business meeting in Boca Raton, Florida, just south of Palm Beach, where Bernie by then had a multimillion-dollar home and a yacht and belonged to the best country clubs. It was there that he was actively working his Ponzi scheme with a slew of the posh resort's wealthy, mostly Jewish elite.

“There were two guys in my friend's office and they were laughing and joking and having a great time,” says Schrager. “I was introduced to these two guys, and they had just come off a cruise and they told me that the whole cruise was sponsored by Bernie Madoff, and they were boasting, ‘Oh, we're making so much money. It's like crazy.'

“So I said, ‘Do you think you could get me an introduction? Maybe I could invest some money in Madoff.'” Schrager was only putting them on, interested in how they would respond. “And one of the guys says, ‘Oh, no, no, no! It's closed. He's not taking on any new business. '”

In September 1957, Bernie enrolled as a sophomore at Hofstra College, in the town of Hempstead, Long Island. He decided to major in political science, which he had heard was an easy way to skim his way to a bachelor of arts degree. Tuition was inexpensive, and he was able to live at home, thus cutting his expenses. Besides, he and Ruth were now a genuine item.

Back then, before Hofstra expanded and became a full-fledged university in 1963, it was a commuter school. “It was like an extension of high school,” says a classmate of Bernie's. Although some big names graduated from there—including director Francis Ford Coppola; actors James Caan, Madeline Kahn, and Christopher Walken; singer Lainie Kazan; and New York Governor David Paterson—the school when Bernie attended was considered to be one of the bottom-feeders of New York City area institutions of higher education.

Just like at P.S. 156, Far Rockaway, and Alabama, Bernie made no impact during his three years at Hofstra. In fact, he didn't even bother to show up for his class's yearbook picture. He was virtually invisible, except for the fact that he continued to serve in ROTC and proudly wore the Army green uniform, drilled weekly, and attended summer training encampments—determined to win the two gold bars of a second lieutenant.

He also knew by this time what he wanted to do with his life. His father and mother, Ralph and Sylvia, who were involved in what was a questionable stock business, and his future father-in-law, Saul Alpern, the creative accountant who would send him some of his earliest investors, had convinced Bernie that Wall Street and the business of trading stocks and managing other people's money was where it was at—where he could make lots and lots of dough.

“Starting a stock brokerage was what Bernie always wanted to do,” notes Joe Kavanau. “That was his goal.”

To make a fast buck during his Hofstra years, Bernie decided to go back into the lawn sprinkler installation business that he first tried in high school. But he needed financial backing. Curiously, he had led some people to believe that his parents were dead and he had no family to give him financial help. Moreover, he had started hustling stocks to friends and fellow classmates at Hofstra, offering them hot tips on penny stocks. He was not a registered stockbroker at the time, and he never told any of his customers with whom he was placing their buys.

To his rescue for financial backing for his sprinkler business came one Sheldon “Shelley” Lieberbaum, a Far Rockaway and Hofstra alumnus and the older brother of Bernie's high school chum, Mike Lieberbaum. Their father, Lou Lieberbaum, had struck it rich in the stock market, bought an expensive seat on the New York Stock Exchange, opened a brokerage—and would help put Bernie on the map by sending him lucrative business a few years hence.

“My husband is the one who put him in the sprinkler system business. Bernie had no money. Shelley loaned him five to ten thousand dollars. I was told he didn't have parents to help him,” says Carol Ann Lieberbaum, the widow of Shelley Lieberbaum. A Brooklyn girl, the former Carol Ann Martz first met Bernie in 1958 when she began dating her future husband, and would know him and Ruth for a lifetime.

In fact, as it would turn out, Bernie may have actually used all or part of that loan from Shelley Lieberbaum as capital to fund his start-up brokerage—and he may have been placing his buys for college friends while at Hofstra through Lieberbaum & Company, owned by Shelley and Mike's father.

And down the road Bernie's Ponzi scheme would wipe out Carol Ann and members of her family.

Bernie had an interesting marketing ploy when he resumed his lawn sprinkler installation business while a student at Hofstra. Knowing that his potential customers were young couples, including desperate housewives who were home alone in the suburbs all day, he hired good-looking laborers: two fellow students, Mike Gandin and Gordon Ondis, who drew women to them like investors to Madoff.

Gandin had been in Bernie's class at Far Rockaway High and had previous experience installing sprinkler systems for classmates Ed Heiberger and Sheldon Fogel. Ondis, who was a few years older, had just gotten out of the army as a young sergeant, and was married.

Ondis used to hang out at the Hofstra cafeteria table frequented by members of the Epsilon Sigma fraternity, and that was where he first ran into Bernie, who also was a regular there.

Recalls Ondis:

Agreed the more modest Gandin years later, “The girls liked us.”

Ondis, who went on to make a killing and become a multimillionaire investing in inner-city housing, says Bernie was paying him and Gandin, a future lawyer—and Madoff Ponzi scheme victim—two to three dollars an hour.

Bernie's target area was the part of Nassau County, on Long Island, that bordered Queens and was known as the Five Towns—the villages of Cedarhurst and Lawrence, the hamlets of Woodmere and Inwood, and a grouping of communities called the Hewletts, where Shelley Lieberbaum's father, Lou, had a spectacular home on the water in swanky Hewlett Harbor. Years later, Hewlett Harbor was the setting for a fictional television series called
Five Towns
on the HBO series
Entourage
. And the village of Lawrence was where Lorraine Bracco's real-life character, Karen Friedman, lived and became the wife of the real-life mobster Henry Hill in the Mafia movie
Goodfellas
.

Bernie's sprinkler system market area was that kind of place.

Bernie worked quick and he worked dirty—he never got the required building or work permits, didn't always put much thought into his installations, and showed little knowledge about what he was doing. But he still raked in the money.

On one job, he had his workers in a customer's yard dig a well for a sprinkler system. An interested neighbor watching them slaving away came over and asked, “Do you guys have any idea about the water table in this area?” When they said no, he told them that they would have to dig down as much as 100 feet. “That attests to how smart Bernie wasn't,” observes Ondis. “He has sold this guy an elaborate sprinkler system, but didn't know how deep we had to dig. We're like two jackasses trying to dig this well. That certainly showed that Bernie was not a whiz when it came to the technical aspects of his business.”

Ondis continues, “When the guy came home and Bernie told him that it would cost more money to do the installation than he had estimated, the customer didn't go for it. As a result, Bernie had us abandon all the work and the materials and we just walked away from the job.”

Years later Bernie's many dissatisfied sprinkler system customers were still confronting him.

“There'd be times we'd be out having dinner—Jane and I and Bernie and Ruth,” recalls Joe Kavanau, “and some guy would come over to Bernie and say, ‘You put in my sprinkler system three years ago and I've been trying to find you. It needs to be fixed!' People would come over and shake their fists at him. And that happened on more than one occasion, which was kind of funny.”