Madoff with the Money (15 page)

“The letter said there was no need to worry about anything,” says Arenson. “We had a good laugh over that. It was rich—knowing especially at that point that Madoff was completely a Ponzi scheme.”

Arenson speculates that Bernie “was just simply crazy, that at some point he became rather demented, because it's incredible to me that somebody could be that callous, that insensitive, to hurt so many people.

“He acted the role of a philanthropist and a friend to the community. It's possible he had some inner need to screw the system in a grand way that no one had ever done before. It's entirely possible he knew someday his scheme would come out and he was just waiting for his moment in the sun.

“He will go down in history as the greatest Ponzi schemer and thief. I can't think of anybody who's stolen $50 billion from anybody short of one of those dictators in the past—Idi Amin, or the Shah of Iran.”

When in the mid-1960s Saul and Sara Alpern sold their home in Laurelton, Queens, where Ruth grew up, they bought a condo in a predominately Jewish complex, Point East, in North Miami Beach. But for years, and even as senility set in, they spent their summers at Sunny Oaks.

Despite having a lot of money and being able to afford luxurious accommodations, “They moved into this really disgusting bungalow in the summers,” says Cynthia Levinson Arenson. “When they got really old they hired a caregiver to help them.”

Ruth Madoff, according to Cynthia and David Arenson, rarely came to visit her aging parents. Her sister, Joan Roman, and her children were seen there more often, and Cynthia Arenson remembers seeing Bernie at Sunny Oaks no more than twice in all those years.

David Arenson, who helped his mother run Sunny Oaks before it finally closed, notes, “It did become a bit of a chore caring for Saul and Sara as time went on. Sara became a little senile. They weren't that self-sufficient.”

He said he got the strong impression from Bernie and Ruth that they were happy having the Arensons care for her aging parents during the summer. “Bernie would say, ‘Well, you guys take such good care of Saul and Sara.'”

By all accounts, Saul Alpern was frugal and fiscally conservative even though he became a multimillionaire through his close business ties with his son-in-law. In fact, he was so tightfisted, especially as he grew old, that he rarely bought new clothes for himself. He continued to wear the same suit, which had grown shiny and frayed with age. For his 80th birthday, Cynthia Arenson recalls, “My parents' friends had to chip in and they bought him a suit of clothes.”

Sara Alpern died in 1996 in Florida, leaving more than $2 million in three trusts at Bernie's firm, according to her will. She bequeathed the money to her husband, who was then 92 years old. Under the will's terms, Ruth and her sister, Joan Roman, married to insurance agent Bob Roman, who for a long time handled all of the Madoff firm's insurance, were to inherit more than $1 million after their father's death. Saul Alpern died at the age of 95 in December 1999, when his son-in-law's Ponzi scheme was at full throttle. After Bernie's arrest, Ruth claimed she had inherited millions from her father's estate.

In Saul Alpern's brief death notice in the
New York Times
on December 9, 1999, the “Yeshiva University family” mourned his passing, noting that Bernie's father-in-law was “a well-respected member of the Jewish community.” The university's president and the chairman of its board of trustees said of his survivors, “May they be comforted among the mourners of Zion and Jerusalem.”

Bernie sat on Yeshiva's board of trustees, was in fact its treasurer, and was one of the founders and chairman of the university's Sy Syms School of Business, named in honor of the discount clothing chain founder.

In Bernie's massive swindle, Yeshiva University was one of many Jewish nonprofits that had invested with him. The day after Bernie was arrested, the university's media relations director, Hedy Shulman, told the
Jewish Journal
, “We are shocked at this revelation. Our lawyers and accountants are investigating all aspects of his relationship to the university.”

And Bernie's name quickly vanished from the university's web site.

But in 2001, when Madoff and Yeshiva were as close as pastrami on rye, the university had awarded the Hofstra College nobody and Brooklyn Law School dropout an honorary degree, and a year later its trustees made him treasurer.

Initial accounts had stated that Yeshiva, located in Manhattan, with a student body of some 7,000, and home to an Orthodox rabbi seminary, had lost a whopping $110 million, but that estimate was soon lowered to $14.5 million because “fictitious” numbers allegedly had been given to the university by the head of one of Bernie's biggest feeder funds, J. Ezra Merkin, who had been chairman of Yeshiva's investment committee. Even though the loss was far less than had been estimated, the university didn't have the larger sum that its administrators had thought was available.

The school also faced the problem of governance—a question raised by Moody's Investors Service: How and why was such a thief as Bernard Madoff appointed to such a sensitive position at the university?

There was much to atone for.

One of Bernie Madoff 's first offices—a $50-a-month hole-in-the- wall that he shared on and off with his father—was in the 20-story edifice at 40 Exchange Place known as the Lords Court Building that was built in 1893 and was located about a block from the center of American capitalism, the New York Stock Exchange, at 11 Wall Street.

It was in the Exchange Place office that Bernie scored one of his first lucrative stock underwriting clients in March 1962, a month before he turned 24. Along with the investment clients he was getting through Ruth's father at Sunny Oaks, a Queens company had retained him to help it go public with 100,000 shares of common stock. He was handling the offering “on a best efforts all or none basis,” according to an
SEC News Digest
, dated March 30, 1962.

The principals of A.L.S. Steel Corporation, Abe Eisenberg, Herman Loonin, and Gabriel Sobel, may have been connected to either Ralph Madoff or Saul Alpern since Bernie was getting his early business from family and friends.

A.L.S., on Northern Boulevard in the Corona section of Queens—Bernie's old stomping grounds—was involved in the sale of “processed flat rolled strip steel to a customer's specifications and requirement,” the SEC announcement stated.

For Bernie, it was an esoteric product that could have been made on Mars, but the fees that were part of his underwriter deal—if he was able to pull it off—were, in fact, out of this world.

On each of the 100,000 shares offered for public sale at $4.50 per share—common, over-the-counter stock—Bernie as the underwriter was set to receive 45 cents, or $45,000 if all shares were sold at the offering price. Beyond that, he was to receive a whopping $15,000 for “expenses,” which were never explained. All told, the full $60,000 would be equal to more than $420,000 adjusted for inflation in 2009 dollars.

Above and beyond that, the company sold Bernie “6,000 outstanding shares . . . at ten cents per share” and “at one-cent each five-year options to purchase 10,000 shares at $4.50 per share.”

With that deal, if in fact it was ever fulfilled, and along with the business he was scoring from his elderly Borscht Belt clientele, Bernie was generating enough money for him and Ruth to move from their little apartment in Bayside, Queens, to a rental in the more affluent village of Great Neck, on Long Island's North Shore, a 45-minute train and subway commute to the Wall Street area.

“The new apartment was definitely more upscale,” says Jane Kavanau. “Ruth had been working for somebody on Wall Street doing some sort of bookkeeping and accounting, and then she went to work for Bernie.”

Bernie and Ruth in those days weren't all about business all the time. They were young and a bit carefree, and spent time socializing with their young friends, such as the Kavanaus. Several times a month, the two couples went out for fun dinners, mostly to simple restaurants on Long Island, rather than to pricey and extravagant Manhattan eateries. In the winter, they spent weekends together skiing at Bel Air and Hunter Mountain in upstate New York, a far different milieu from the high-flying Aspen lifestyle the Madoffs would later enjoy and profit from as they made the rounds of chic resorts, entertaining and rubbing shoulders with the wealthy who would entrust their money to Madoff.

Recalls Joe Kavanau:

The man who years later admitted to taking the lifeblood from thousands of investors was once a pussycat who fawned over his pets.

Generating enough income in the early 1960s, Bernie and Ruth fulfilled the American dream by buying a new home in the incorporated village of Roslyn Estates. Their house was in one of the many developments springing up in the 1960s on former Long Island farmland, housing tracts that were bedroom communities for New York City commuters. It was during this time that they also welcomed their first son, Mark, into the world—the beginning of what would become the infamous Madoff dynasty.

The Madoffs' purchase at such a young age and so early in their marriage tended to raise eyebrows among other young couples in their circle—friends from Laurelton, and pals like Elliott Olin and his wife, from high school and college, many of whom were still struggling to make ends meet.

Recalls Olin's widow, Sheila, “I said to Elliott, ‘I want to ask you something. How in the world after a year or two of working, how could Bernie buy a house there?' Elliott, who was finishing law school, just pushed off the question, but I just had bad feelings about what Bernie was doing. I thought he was doing something wrong, because how could he have so much money to buy a new home? Everyone else was still struggling. I was making $115 a week and we were barely paying our rent, and Bernie has suddenly become so successful.”

Jay Portnoy, Bernie's friend from Laurelton who had gone to college with Ruth, was hearing through the years about his childhood pal's growing success from his mother, who had remained friends with Sylvia Madoff and Sara Alpern.