Five Years Later, Madoff Scandal Echoes Through the Jewish Community, and Beyond
The lingering effects of his massive Ponzi scheme on a century-old youth group, a Boston philanthropist, and small investors
Five years after Bernard Madoff admitted to his sons, and then to federal investigators, that he had been running the largest Ponzi scheme in history, the saga of his monumental ripoff continues to unspool. Lawsuits, settlements, and criminal trials are still ongoing, and Madoff himself, now 75, is just at the start of serving his prison sentence, with a fantastical projected release date in November 2139. Like a Mafia capo, he went down professing his own guilt but offered little in the way of help or information about the complicity of others.
Some of those others—from the wealthy money managers who like Madoff had the trust of their clients to Madoff’s office staff charged with helping conduct the fraud—have clung to their claims of victimization at the hands of a man whose career as one of the world’s most sophisticated investors was, as he infamously put it, “one big lie.”
In Manhattan, the trial of five key Madoff employees—who are charged with fabricating and mailing client statements and other documents detailing trades that never happened—is currently under way. This week, Frank DiPascali, Madoff’s former finance chief, testified that the staff was well aware of the fraud, that indeed no one so close to the scheme could possibly have missed it. Defense attorneys for the workers—Annette Bongiorno, Daniel Bonventre, JoAnn Crupi, Jerome O’Hara, and George Perez—say DiPascali, who has already pleaded guilty to a raft of fraud charges, is squealing in hopes of a lighter sentence.
But some of the other people who made Madoff’s crime possible—his biggest investors and boosters—continue on. J. Ezra Merkin, who ran one of the largest feeder funds for Madoff’s investment operation and who brought in contributions from Jewish institutions ranging from the Fifth Avenue Synagogue to Yeshiva University and the Ramaz School, faces continued litigation despite agreeing last year to pay more than $400 million to settle a suit by the New York attorney general.
Of all the feeders, Jeffry Picower was the biggest. An accountant and investor who became a billionaire many times over by funneling funds to Madoff, Picower had, not long before his death, been listed No. 371 on the Forbes list of the wealthiest Americans. On Oct. 25, 2009, nearly a year after Madoff’s arrest, Barbara Picower and her housekeeper fished Jeffry’s lifeless body out of his Palm Beach swimming pool; the local coroner ruled that he suffered a massive heart attack and drowned. His widow was left to face authorities. In 2011, Barbara Picower agreed to pay $7.2 billion in a settlement with Irving Picard, the trustee overseeing the bankruptcy of Bernard L. Madoff Securities. By settling with Picard, she bought immunity from a host of individual lawsuits by victims who had invested with her husband. Indeed, some of those victims, notably Adele Fox, fought a hard but unsuccessful battle in federal court to have Picard’s settlement with Picower overturned so they could pursue their claims individually. Picower’s widow has continued to carve out a life as a philanthropist, making grants in healthcare research, poverty alleviation, and environmental study.
Other top Madoff feeders died before ever having to defend their actions. Stanley Chais, who the SEC says funneled more than $1 billion to Madoff without disclosing that fact to any of his clients, succumbed to a blood disease in 2010. Chais’ Beverly Hills phone number was at the top of Madoffs speed-dial list in his Lipstick Building office, yet before he died his only response was to blame the government for not catching Madoff sooner.
Picard continues to pursue those at major institutions who also turned a blind eye to Madoff’s methods. He was recently given a green light by a federal judge, Jed Rakoff, to pursue $8 billion in claims through cases against a host of financial institutions with units said to have acted as feeder funds to Madoff, including Bank of America, Barclay’s, and Standard Chartered. JPMorgan Chase, which made many millions in fees handling processing for Madoff’s accounts, may have to return some of that money in a jumbo settlement with the Department of Justice that could include a deferred prosecution agreement—which could ultimately allow the bank and its officers to avoid criminal prosecution as long as no similar crimes are committed again.
Meanwhile, life goes on. Madoff’s brother Peter is serving a 10-year prison sentence for his role in perpetuating the scam. Madoff’s wife Ruth, who decamped to Florida after the scandal broke, now lives in Old Greenwich, in a house paid for by her son, Andrew, who is battling stage-four blood cancer. (Madoff’s elder son, Mark, hanged himself in his SoHo apartment on the second anniversary of the revelation of his father’s crimes, in 2010.)
Picard has so far distributed $4.9 billion to investors big and small—less than a quarter of the estimated $20 billion in losses suffered by Madoff’s victims. Those include individuals who went to Madoff with their childrens’ college funds, or their retirement savings, along with large institutions and nonprofits, many of them Jewish. Some of their stories follow.
A Stockbroker, a Statistician, and His Mom on Life After Madoff
Five years after the Madoff debacle, most of the individual investors who lost their life savings do not want to talk about it. However, a few people were willing to share their experiences. Joyce Greenberg is a retired stockbroker in Houston. Michael De Vita, an independently employed statistician, and his mother, Emma De Vita, live in Bucks County, Penn. Here are their stories.
For One Bankrupted Philanthropist, an Unexpected Recovery
Robert I. Lappin remembers exactly where he was when he got the call from his portfolio manager at 5 p.m. on a Thursday in December 2008: at the Breakers in Palm Beach, where he used to spend his winters. “Bernie Madoff has been arrested for running a Ponzi scheme,” his manager told him. “Does that mean we are wiped out?” Lappin asked her. “I’m sorry,” she said. Lappin was dumbstruck. “I said to my wife, ‘Well, I’ve got to call the kids,’ ” he told me on a chilly afternoon last month, when we met at his office in Salem, just outside Boston. “And then I said, ‘We’re going to have to go home.’ ”
The next day, Lappin’s $8 million foundation—which gave more than $1.5 million a year to Jewish programs in 23 cities and towns north of Boston, including his hometown of Salem, Mass.—announced its doors were closing because of the loss. All five of its employees were officially terminated, and its programs were immediately suspended. “The money needed to fund the programs of the Lappin Foundation is gone,” read a solemn press release. It made Lappin one of the earliest and most striking examples of the devastation Madoff’s Ponzi scheme wrought on nonprofits—and specifically on Jewish charities.
The country and the world came to a standstill then. Can his death inspire a similar momentum for change?