Madoff with the Money (17 page)

She immediately called the Madoffs' penthouse hoping to talk to Ruth, who she knew “had kept the books” for Bernie at one time and presumably was aware of everything that was going on. She and Ruth had close ties. For years Ruth's parents rented a Manhattan apartment from the Lieberbaums that the Alperns used as a pied-à-terre. Over the years, she says, she came to the conclusion that Ruth was “definitely classier” than Bernie. “She was refined. He acquired as much as he could, if you can say you can
buy
class. But he wasn't showy. He was not ostentatious. He was humble. It sounds ludicrous to say that today, but I mean he was a good guy. He was low-key wealth—enormous wealth. That's how it looked.”

No one picked up the phone at the Madoffs', and Lieberbaum left a message on their voice mail.

“I told Ruth, ‘I can't believe what's going on. This is all a terrible, terrible mistake, right? I hope everyone will be all right. My prayers are with you. Call me.'”

She never heard back.

“Now I'd like to put a bullet in both their heads.”

Carol Lieberbaum's sister-in-law, Cynthia Greenberger Lieberbaum, came from an immensely wealthy family. “I know Cynthia's parents had a lot of money with Bernie from the very beginning,” says Carol Lieberbaum.

The patriarch, Sidney S. Greenberger, who died of heart disease in 1964, made his fortune as founder of the Graphic Paper Corporation in New York. Before joining the
Wall Street Journal
, one of his sons, Robert Greenberger, was listed as secretary-treasurer of Graphic Paper.

Robert and Cynthia's brother, John (Greenberger) Maccabee, says their late mother, Ruth, who died in March 2004, “would have killed” Bernie had she lived to see how he stole the family's investment in his Ponzi scheme—an investment that began in 1961, a year after Bernie started his company.

When Ruth Greenberger's funeral was held in Queens, Bernie and Ruth Madoff were two of the few nonfamily members who were among the mourners. At the time, Bernie's Ponzi scheme had been in operation for years without the Greenbergers' knowledge.

Maccabee recalled that as he was leaving the cemetery following the interment Bernie approached him and discreetly told him that “the deal” he had had with the Greenberger family was over now that the matriarch, whom he always called “Mrs. G.,” was gone.

Maccabee says that Bernie “was able to get away with this kind of dark humor,” but he meant what he said.

When Maccabee learned that he and his wife, Sherry, and their two sons had lost their invested money in Madoff, he said:

He decided to write the magazine piece about Bernie, and planned to write a book about the Greenberger family, and the impact that Bernie had on it through the years.

Yet, Maccabee did not always feel this way about the former “messiah.” At one point in his life, acknowledges Maccabee, “I was proud of Bernie, actually. There was something about him that he engendered that made you want to take care of him as well as be taken care of by him. I did like Bernie and Ruth, and we had a long and complicated relationship. There were a great many people who revered Bernie for what he made of himself. He was a legend. A lot of people felt that way about him.”

A 1963 graduate of Far Rockaway High School, Maccabee characterized his parents as Bernie's “angel investors”—meaning they had been in business with Bernie from the very beginning, just like the Lieberbaums. He recalled that when Bernie first approached his parents to invest, he whipped out a recent bank statement that showed he had invested $5,000 of his own money in his fledgling business—proof that he believed enough in himself and his abilities to make money for Bernie Madoff and for other people. Later, he convinced Mrs. Greenberger, after she became a widow, to invest another $300,000.

Yet, the Greenbergers were tough angels who demanded and received returns on their money every quarter in the form of a “golden-yellow” check from the Madoff company—along with a detailed accounting.

Maccabee's mother, who had knowledge of bookkeeping, and had been his father's secretary at Graphic Paper, would sometimes catch an error in the Madoff accounting and immediately call Bernie, usually speaking to his assistant, believed to be Annette Bongiorno. She would come under suspicion as a participant in Bernie's fraud for allegedly ordering the creation of fake trading tickets, and for feeding Bernie investors from her Queens neighborhood, according to reports.

Bernie usually returned Mrs. Greenberger's call to say that the error was minor. Maccabee quoted Bernie in his
New York
magazine piece as telling her, “Give me a break, Mrs. G. Don't worry, I'll make up the $17 to you next quarter.” He said his mother actually wanted the
full
amount that she was shortchanged—“17 dollars and 63 cents.”

Bernie's response, in his Queens accent, was:“Mrs. G., ya killing me.”

His mother ended the conversation by saying, “On the contrary, Bernie. I pray for your health daily.”

And then Bernie would often flatter her, probably in hopes of softening her up for more money. He used niceties like, “I've got a lot to learn from you, Mrs. G.”

However, he was incredibly mean-spirited with Maccabee's sister, Cynthia, with whom he had bonded in high school, and who married his pal, Mike Lieberbaum. Maccabee quoted Bernie as once telling his sister: “If you think you're any prize, and that your husband should kiss your ass for the measly couple of million bucks you stand to inherit, you are fuckin' delusional.”

Despite their close ties, Bernie felt no qualms in laying into his longtime friend. That was Bernie, they all thought. Don't take him too seriously. After all, look at those golden returns. But with friends like Bernie, who needed enemies?

If Bernie ever had a Wall Street guru and someone he hoped to emulate, it was Mike Lieberbaum's father, Lou Lieberbaum, who would serve as Bernie's third mentor on his journey to fraud, deception, and deceit.

Originally from Brooklyn, Lieberbaum had moved his family to Belle Harbor, one of the fancy communities on the Rockaway peninsula of Queens, up the road from the wealthy Greenbergers in Neponsit. But in the beginning he was considered the neighborhood schlepper.

Surrounded by mostly affluent Jewish families, the Lieberbaums had moved into a small two-family house about a block and a half from the ocean. In order to put food on the table and pay the rent, the patriarch worked as a milkman in Belle Harbor and, his daughter-in-law Carol says, a bagel baker in Brooklyn.

But like Bernie, who would become a partner of sorts, Lieberbaum was a shrewd, street-smart hustler who had an interest in the stock market.

Bernie could have been his son.

The stock that would make Lieberbaum very, very wealthy was Polaroid.

In the mid-1950s, he is said to have switched from delivering milk to selling mutual funds and stock for a relatively new firm, Dreyfus and Company, one of the first on Wall Street to aggressively hawk mutual funds to the public through its Dreyfus Fund. Lou's son, Shelley, four years older than Bernie, also worked for Dreyfus for several years in the late 1950s. The founder, Jack Dreyfus, considered one of Wall Street's most successful investors in the 1950s and 1960s, was a onetime candy salesman who started his company on the advice of a gin rummy partner. These were the kind of wheeler-dealers who ran the Street long before the MBAs came along.

The former candy salesman is said to have taken a liking to the former bagel baker.

Lieberbaum started making decent money hustling everyone he knew to buy into Dreyfus, targeting among others the well-to-do in Belle Harbor and Neponsit who had been on his milk route. It wasn't a difficult sell. The Dreyfus Fund was a gold mine. For the period from the mid-1950s to the mid-1960s, the fund had a return of a whopping 604 percent while the Dow Jones Industrial Average showed a measly 346 percent return.

In 1957, when Bernie was still a Sammy fraternity boy at Alabama, Jack Dreyfus, who by coincidence was born in Alabama, invited his protégé Lieberbaum to take a tour of the Polaroid factory. Still a privately held company, Polaroid a year earlier had sold its one-millionth camera, and was about to go public. After the tour, Dreyfus gave the former bagel baker a piece of advice: He said, “Lou, if I were you I'd run up and down the street trying to sell everyone Polaroid,” according to people who knew Lou Lieberbaum and his legendary rags-to-riches story.

A fast learner, Lieberbaum didn't have to be told twice. “My father-in-law was extremely self-taught. He was brilliant,” observes Carol Lieberbaum.

“Lou became enamored with Polaroid when it was down at a new issue price, and he told everybody and his brother, ‘Buy Polaroid! This stock's gonna fly!' And voilà, the stock
flew
,” says Bernie's high school classmate Peter Zaphiris, who later worked for Lieberbaum. “Lou, along with a whole bunch of other people, made quite a bit of money, and better than that, Lou was smart enough to understand that he now had a
following
, people who loved him, trusted him, and would invest their money with him.”

It was just like the kind of following Bernie would develop and captivate.

While Lou Lieberbaum never made it as big or became as famous as his mentor, Jack Dreyfus—who was a bridge expert, won many amateur golf championships, owned thoroughbred racehorses, served as chairman of the New York Racing Association, and lived like royalty, according to his obituary in the
New York Times
—Lieberbaum did quite well for himself.

Not only did he make millions on Polaroid as the stock soared, but he bought a seat on the New York Stock Exchange. With his following of avid investors, he also opened his own brokerage, Lieberbaum & Company, sometime in the late 1950s or early 1960s, with the blessing of his mentor, Jack Dreyfus, who died at the age of 95 in March 2009, as the Bernard Madoff scandal raged.

Lieberbaum would become one of Bernie's mentors.

Flush with riches, Lieberbaum bought a spectacular home in Hewlett Harbor. In order to let guests know where all his money came from, he is said to have had the Polaroid logo etched on a big mirror “like it was a Picasso” in the expensively and overly decorated living room of his mansion. The ex-milkman and his wife, Lillian, staffed the huge home with servants, had chauffeurs to drive their fleet of Cadillacs, and oversaw a small flotilla of boats moored at their dock.