Madoff with the Money (32 page)

They say that Shana, described as “a diva,” was constantly gallivanting off to shop during the workday—or having other Madoff worker bees run personal errands for her.

Toniann Astuto, hired at BLMIS as Shana's $40,000-a-year assistant in 2001 after the previous assistant threw her hands up and quit, characterized her as “an absolute princess.”

Though Astuto was hired to assist Shana with her important compliance duties—making certain the BLMIS traders had proper registrations and followed other rules—she seemed to be spending most of her time as Shana's personal slave.

Astuto asserts that Shana spent only half her time on the job—and a lot of that was doing “human resources” work rather than compliance—and the other half dealing with personal stuff. “When she really needed to, she would spend more time on [compliance] work-related things, like if we were being audited. She was always on top of the traders, always monitoring their continuing education.”

Another veteran female Madoff employee viewed Shana as “a spoiled brat. She'd make the firm's chauffeur take her dog's specimens to the vet. She was despicable. She had no sense of money, no sense of responsibility. In one year she spent $50,000 on cell phones. Her dog would break her phone, or her daughter would break her phone, and she'd want new ones, the best and latest, all the time. She'd say, ‘My name is on the door. Do what I want you to do. I'm a Madoff.' She relied on secretaries whose asses she worked off. Their responsibilities were ridiculous, and she had many secretaries quit on her. She used and abused her employees.”

Others, however, took a far different view, and maintained that Shana was driven and dedicated at her uncle's firm, and was well-respected in the financial community.

The Girl Scouts of America, for instance, honored her as a “woman of distinction” at the organization's 16th annual Women of Distinction Breakfast a little over a month before her uncle was branded a crook. Deborah Norville, the anchor of the tabloid TV show
Inside Edition
, was the mistress of ceremonies. One of the Girl Scouts' benefactors was Uncle Bernie himself, a former Boy Scout. The underwriter of the event at the New York Hilton was the Bank of New York Mellon, where Bernie had assets that were frozen after his arrest.

Early in her Madoff career, Shana had spent a lot of time in Washington, D.C., where she rubbed shoulders with regulators. She served on the compliance advisory committee of the Financial Industry Regulatory Authority (FINRA), and in the same capacity at the Securities Industry and Financial Markets Association, the lobbying arm for the industry. After Bernie was arrested, she resigned from those groups. While at sessions involving such organizations, she met her future second husband, Eric Swanson, formerly of the Securities and Exchange Commission.

The two were married in late September 2007 at the trendy Bowery Hotel attended by more than a hundred guests, many of them soon to be Ponzi victims. At the glam affair, Bernie jokingly stated that his niece was marrying “the enemy.” Also in 2007, while sitting on a business panel discussing the workings of his firm, Bernie talked about SEC regulation and got a chuckle out of the audience when he bragged that he had a “very close” relationship with an SEC lawyer, and “in fact, my niece even married one.”

Curiously, while there was a wedding announcement in the
New York Times
for Shana Madoff 's first marriage, none could be found for her fancy nuptials with Swanson, which raised the question: Did the Madoffs feel it was better not to advertise the union because it might raise red flags—a big announcement that the compliance officer and family member of a firm already suspect was betrothed to a former lawyer for the government agency that polices such firms?

Those who contended that she was a devoted workaholic pointed out that while the newlyweds were on their honeymoon in the Caribbean, according to a source who talked to the
Wall Street Journal
, Shana spent so much time arranging for speakers for an industry event that her groom “threatened to throw her BlackBerry into the ocean, or lock it in the hotel safe.”

People close to the Madoff-Swanson merger wondered whether it would last longer than the Madoff-Skoller marriage.

Meanwhile, back at the office before Bernie's niece remarried, Astuto says she spent more time dealing with Shana's social schedule and making arrangements for her personal travel than handling official business.

“She would change her mind on a whim,” the former assistant states. “She'd say she wanted to go to St. Bart's and stay at a certain hotel and leave and arrive at a certain time. I'd make the arrangements, and then she'd say, ‘I changed my mind. I don't want to leave that day. I want to leave the next day.' And then of course she'd get there and hate the hotel. She'd call me at all hours and say, ‘This hotel isn't nice enough. Find me a nicer one.'”

After her divorce from Skoller and before she met Swanson, she got a reputation among her office associates as a partier. Her lifestyle was alluded to by her own brother, Roger, in his memoir. Astuto says that Shana was always asking her and other younger women in the office who were “wild” to go out clubbing with her. (Astuto therefore was relieved when she transferred from running errands for Shana to working for Madoff Energy, headed by Andy Madoff.)

That wild period of Shana's life was the source of much chatter around the watercooler at Madoff.

“She brought some of the guys she dated into the office,” asserts a colleague with close ties to the Madoff family.“They were really the low of the low. She must have met these people in clubs at three in the morning. They were all losers. And then I finally met Eric [Swanson] and I thought, ‘Oh, God, he's a nice guy.'” This person felt speculation was absurd that Shana had become involved with Swanson because of his SEC connections. “I think she's cold. I think she's shallow. I have zero respect for her. But who the hell would really marry someone just to protect her uncle's business? That's going too far. I would
think
that the girl had to have a little more self-respect.”

Bernie didn't particularly like his niece, whether or not she got into bed with “the enemy.”

At Ruth's suggestion, Bernie always had expensive orchids ordered for the office—“off the charts in terms of cost”—and also delivered to the homes of family members. Since Bernie liked black and gray, Shana took it upon herself to have all the orchids delivered in black porcelain pots to match the office décor.

A colleague recalls:

While the relationship between Shana and her husband was under a prosecutorial microscope for any possible conflict of interest, her cousins, Mark and Andy Madoff, also being looked at by investigators, were hit with bombshell lawsuits in mid-June 2009 that alleged they knew about their father's Ponzi scheme, assertions that had long been denied by them.

The suits were filed in Manhattan Supreme Court just two weeks before their father was to be sentenced.

For all of the Madoff principals in BLMIS, it seemed as if the walls were closing in.

The suits, seeking $1.77 million—miniscule in comparison to other lawsuits in the overall Madoff scandal—were brought by Reed Abend and Richard Stahl, both of whom worked in BLMIS's proprietary trading business. The brokerage, the legitimate arm of the Madoff empire, was sold for as much as $25.5 million—to be distributed to Madoff victims—to a Boston firm formerly known as Castor Pollux Securities. The principals, Frank Petrilli, former chief of TD Waterhouse, and Robert Mazzarella, former president of Fidelity Brokerage Services in Boston, renamed the new acquisition Surge Trading Company. Pending approval by the Financial Industry Regulatory Authority, Surge Trading was scheduled to be operating by late summer 2009 in the same space in the Lipstick Building that Bernie's firm utilized before he was arrested.

In the court papers, the former Madoff traders, Abend and Stahl, alleged that the Madoff brothers “perpetuated a fraud of their own on their employees,” and charged that Mark and Andy “had long known that their father's advisory business was an illegal enterprise” but failed to disclose it “to induce plaintiff (and others) to continue to earn legitimate profits.”

The Madoffs had claimed no knowledge of their father's crimes, and were the ones who had turned him in to authorities after he was said to have admitted to them that he was a fraud.

Stahl, who demanded $1.3 million, and Abend, who sought $474,000 in his suit, charged that they were promised $75,000 salaries plus 25 percent of the profits from their trades. Stahl said he made $5 million in profits and Abend $2 million before the firm was liquidated “and did so during the worst market sell-off in recent memory.” They asserted they were not paid the money Madoff owed them for 2008.

They both stated in the court papers:

The 10-page complaints brought up the
Barron's
red-flag-raising article in 2001, and revealed how the Madoff brothers allegedly brushed it off.

About a month and a half after Bernie was arrested and his firm became a crime scene, the out-of-work Abend saw the 42-year-old Andy Madoff buying take-out chicken on Manhattan's Upper East Side and confronted him, demanding to know, “Where's my money?” Andy is said to have responded, “What about
me
?” The two sparred back and forth as Abend followed Andy to his car, where the divorced Madoff son's fiancée, Catherine Hooper, waited. According to a report in
Vanity Fair
, Abend shouted, “Is that your new whore girlfriend?” With that, Andy slugged him, got in his car, and sped off.