Madoff with the Money (19 page)

Prospective Lieberbaum clients with big money were usually given the grand tour of the offices by either Shelley or Lou Lieberbaum himself—a short, unassuming man who dressed to the nines, rarely talked to his brokers, and didn't spend a lot of time in the office—much the way Bernie operated when he got into the big time.

Visitors to Lieberbaum & Company saw brokers busy working the phones, ticker tape machines spewing buys and sells, world time zone clocks ticking away—it all looked very official and heady.

“When you walked in there,” recalls Zaphiris, “it looked like the place was popping. Today they call it a boiler room, but it was only nicer.”

Lou Lieberbaum always saved his tour's big Hollywood ending for last, literally and figuratively. Shelley would call Bernie at his office across the street and he'd come running over to watch the maestro's's closing act, the pièce de résistance.

“And now,” he'd proclaim as if to a drumroll, “How would you like to meet . . . ta-da . . .
Buster Crabbe
?!”

Seated right up front, handsome as ever, dressed like a movie star-turned-stockbroker in a pin-striped suit, starched white shirt, and subdued tie, was one of Hollywood's one-time biggest box office attractions—the actor who thrilled millions of kids playing comic strip heroes like Tarzan, Flash Gordon, Billy the Kid, and Buck Rogers on the big screen in films and in serials, and who later starred in television.

Then in his mid-50s, Crabbe was hustling stocks for Lou Lieberbaum. Like Bernie, Crabbe also was a swimmer—but big-time, winning a bronze medal in the 1928 Olympic Games and a gold medal in 1932. When his Hollywood career waned, he became a stockbroker and a businessman—hawking Buster Crabbe swimming pools for a New Jersey company. And like Bernie, he was swimming with sharks in the frenzied waters of Wall Street.

“Buster was a nice guy,” says Zaphiris, who sat in the trading room near him. “He was handsome as hell and dressed like Douglas Fairbanks. Everybody who was coming into Lieberbaum knew who Buster Crabbe was. He was Tarzan
and
Flash Gordon.”

In 1983, at the age of 75, Crabbe suffered a fatal heart attack.

After less than a year, Peter Zaphiris decided to leave Lieberbaum & Company. He had seen enough.

Lou Lieberbaum retired to “God's waiting room,” Pompano Beach, Florida, where the state bird is jokingly referred to as “the early bird,” and a home bordering the exclusive Palm-Aire Country Club. He died in the 1980s of a type of leukemia, his daughter-in-law says.

In 1985, Carol and Shelley got divorced.

Mike Lieberbaum had gone off on his own, settling in Westport, Connecticut, and Sarasota, Florida, where his in-laws, the Greenbergers, had a home. But Mike and his wife, Cynthia, continued a “very close relationship” with Bernie and Ruth, and lived the good life like them. In a June 2003 letter to the
New York Times
, Cynthia Lieberbaum wrote about how she and her family vacationed in Positano, Italy, every year for more than three decades “and finding no travel experience more rewarding than being welcomed with open arms . . . by people who have known us since we were in our early 30's.”

By the 1990s, as Bernie was in full Ponzi mode, his close friend and investor, Shelley Lieberbaum, began getting into some serious trouble himself.

The National Association of Securities Dealers (NASD) alleged that he and some others “engaged in market manipulation, inaccurately maintained books and records and failed to adequately supervise the activities of employees” in connection with a public offering of a stock, according to SEC records. In 1995, Lieberbaum and the others “voluntarily entered into a Letter of Acceptance, Waiver and Consent” with the NASD. He was censured and fined by the association, agreed to pay with the others restitution to customers, and was suspended from associating with any NASD member for a month.

That same year, after a decade-long divorce, Shelley and Carol Lieberbaum remarried.

By then the original Lieberbaum & Company, founded by Shelley's father, had morphed in 1990 into one called Lew Lieberbaum & Co., a stock brokerage headquartered in Garden City, on Long Island, with an office in lower Manhattan. It had a customer base made up of thousands of affluent people in five states.

Starting in 1992, the new Lieberbaum company, with more than 200 employees and over $20 million in revenue, had been censured by the NASD four times, and ordered to pay fines and restitution to customers of more than $1.2 million. But none of the principals ever admitted guilt.

Now money and sex and racism seemed intermingled.

Shelley Lieberbaum became a key figure in a full-blown, headline-making case in the mid-1990s—a sensational sexual and racial harassment scandal in which his company became a “brokerage firm-turned-animal house, ” as the
New York Daily News
called it, where top executives were accused of groping women, holding lesbian stripper parties, and mistreating minorities.

All of it was revealed in shocking lawsuits against Lew Lieberbaum & Co., of which Shelley was one of the founders, filed by three former white female employees and the U.S. Equal Employment Opportunity Commission (EEOC). The probe began in April 1996, when the women complained of widespread and routine sexual harassment in a $100 million lawsuit against the company and nine executives, including Shelley Lieberbaum.

One young woman claimed that two Lieberbaum executives demanded oral sex from her. “I felt like nothing but a shell when I left,” she was quoted in a press report as saying. Another said she was forced to give an executive back rubs, watch lesbian strippers perform, and “run a gauntlet” in the trading room, known as “The Pit.” Relevant evidence in their case included photos of a Lieberbaum executive celebrating his birthday at the office with his face between a stripper's bare breasts, with his head between her legs, holding a banana near her crotch.

Several months later the charges of racial discrimination were added by the EEOC involving at least nine women. About 40 percent of Lieberbaum's employees were female.

One of the women, identified as Keiser L. Williams, who had worked as a receptionist in the New York office of Lieberbaum, maintained she was “sickened” by the behavior, pointing directly at Shelley Lieberbaum. She alleged that he made racist slurs and told jokes of a racial and sexual nature. Mark Lew, the company's chief executive—the Lew in Lew Lieberbaum—consistently denied all the charges. He was quoted in the
New York Times
as saying that Shelley “was known for telling such jokes” and that Williams had “encouraged” him to do so. Lew said the allegations of racial discrimination were “outrageously untrue.”

In April 1998, however, without admitting any guilt, the Lieberbaum firm agreed to pay $1.75 million in an out-of-court settlement with the EEOC—the second largest settlement ever reached by the commission in a case of harassment. By then the company, facing a sharp drop in revenue because of the publicity surrounding the case, had changed its name to First Asset Management, and Mark Lew had changed his last name to Lev. Four months after the settlement, Lew Lieberbaum & Co. went out of business.

Carol Lieberbaum maintains that Shelley had gotten involved with “bad guys” and was “really devastated” by the scandal. “Shelley was a very classy guy, very quiet and refined, everything that his new partners were not. Shelley was just a very aboveboard guy, and my recollection of the others was that they were not.”

Shelley Lieberbaum died in March 2007 at the age of 72, having suffered from Parkinson's disease and dementia, she says.

Bernie and Ruth, loyal to the end—except for the fact that he was stealing the Lieberbaum-Greenberger money in his Ponzi scheme—attended the funeral service in Fort Lauderdale.

Lieberbaum's death notice in the
New York Times
was filled with love and respect, and described him as “A true
mensch
who was loved by his friends, family and fine doggies and who loved him [
sic
] back in double doses. Master of the one-liner, author of epic comedic poems, victor over countless landlocked salmon, tennis player whose game was feared from Boro Park [Brooklyn] to Emerald Hills [an exclusive club in Hollywood, Florida]. He will be lovingly remembered.”

Speaking of her late husband, who was instrumental in many ways in Bernie's early successes, Carol Lieberbaum declares:

I guess he was wrong.

By the mid-to-late 1960s, Bernard L. Madoff Investment Securities was making good money—from Bernie's take of the business being fed to him by his friends at Lieberbaum & Company, from positions he was personally holding and selling in over-the-counter and penny stocks that were possibly if not probably manipulated, and from fees and commissions related to the business he got from his growing private investment group that would eventually turn into his massive Ponzi operation.

Life was good at 39 Broadway, although Bernie was starting to act weird—and Bernie's world would become even more bizarre as time went on. His obsessive-compulsive tendency was beginning to manifest itself so that others who worked with him saw his odd behavior for the first time, such as when he personally began vacuuming the office floors on a daily basis, even though the building had a cleaning crew to do that every night.

Ruth, a mother of two, would stop in every so often from the Long Island suburbs to see how things were going, and she'd be there especially around the holidays to help Bernie dispense gifts. In exchange for probably getting stock tips and business from other brokerage houses, he was giving away bottles of expensive Chivas Regal scotch whiskey.

“At Christmastime the office was awash with cases of Chivas,” says Bill Nasi, Bernie's longtime trusted messenger, who spent some 20 years at Madoff during two separate stints, and was there when the Ponzi scheme came crashing down, ruining his life and the lives of so many others.

He continues:

It was during one such frenetic holiday time in the late 1960s that Nasi witnessed a most curious tableau in the office involving Ruth, then in her late 20s, ministering to Bernie, who was nearing 30, one that in a strange, indecipherable way seemed to underscore their close bond.

Recalls Nasi: