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.
But in the years since, Lappin has managed carry on doing the work he almost lost. Today, his foundation’s doors are again open in a beautiful old green house with stained-glass windows, a faithful replica of a 250-year-old company store of a textile mill, couched in the Boston suburb of Salem among the witch wax works museums and the psychics.
Lappin, who will be 92 years old in a few months, was wearing sunglasses and a denim shirt under a soft gray sweater. His white hair was gathered in a ponytail. I met him and Debbie Coltin, his longtime director. “It was like Sept. 11,” Coltin said. “You remember where you were.” She’d been at her husband’s office holiday party and hadn’t heard the news about Madoff’s arrest until she got a message from Lappin saying that he needed to speak to her urgently. “I woke up early, and came into work at 6:30,” Coltin told me. “I remember my colleague asked me, ‘Is our money with Madoff?’ We were literally wiped out. Wiped out. Wiped out!” She banged the desk she was sitting behind. “Mr. Lappin called and said to me, ‘You understand that you don’t have a job?’ ”
But a donor—who wished to remain anonymous—gave Lappin $100,000 so the foundation could continue its flagship program Y2I, short for “Youth to Israel,” which sends teenagers from the Massachusetts North Shore to Israel. The money allowed that summer’s cohort to travel and bought Coltin time to figure out what to do next, though she and other staffers worked on a volunteer basis for months. “It was devastating,” she said. “But what was more devastating personally was the job. It wasn’t just a job, this was my life.”
The foundation’s money was entirely invested with Madoff, who Lappin remembers as “kind of a strange guy, because he avoided people.” He invested through a portfolio manager but later met Madoff with his family at the Breakers. Lappin’s own personal fortune was depleted from $22 million to $2 million. The substantial trust funds he had created for his grandchildren were gone.
But Lappin says that when he and his wife returned to Salem the Sunday after he got the news, he realized that something else was missing: the assets from the 401k plans of his employees at the foundation and in his real-estate business. “That really haunted me, because some of them were up in years, and the 401K plan was their entire nest egg,” he said. “So, I thought about that, and that caused me to lose sleep. So, then I made a decision and after I made that decision I was OK. The decision was that I was going to find a way to restore their assets.” With the help of his children and what was left of his own depleted funds, Lappin restored the pensions of some 60 employees, to the tune of $5,145,000.
Lappin was born in Salem in 1922; his father had emigrated from Jerusalem, where he had been training to become a rabbi but lost faith and moved to the United States to become a peddler of household wares. “He walked around Salem and Peabody and Beverly and Marblehead, and then he did well and got a horse and a wagon,” Lappin told me. The horse, he remembers, was called Queenie. Eventually, Lappin’s father moved into real estate, as did Lappin, who started out manufacturing vacuum cleaners and floor polishers. In 1948, as Israel was established, he began donating to the United Jewish Appeal and became president of the Massachusetts North Shore Federation in 1967. In 1972, he decided to create his own foundation to develop Y2I—a kind of precursor to Birthright. (Coltin went on the second trip, in 1973.)
In the past five years, Lappin has managed to recover a quarter of his lost fortune as the real-estate market has recovered. But because the foundation took out more money from its Madoff accounts than it initially put in, it wasn’t eligible for the government-supervised compensation program. The foundation, which also underwrites the PJ Library and other family programs, now relies on Coltin’s fundraising efforts to stay afloat. “Debbie saved us,” Lappin told me. “She said, ‘I’ll go to the community, we’ll raise money.’ So I said, ‘Have you ever done that before?’ And she said, ‘No, but I’m going to do it.’ ” “We did it,” Coltin corrected softly. “I’ve got to tell you, it’s taken some of the fun out of what we do,” Lappin said. “Neither of us enjoy that part of it, but we’re doing it, we have to do it.”
Young Judaea, Cut Free From Hadassah in Post-Madoff Cuts, Finds New Life
In December 2008, the women’s group Hadassah announced it had invested, and lost, $90 million with Bernie Madoff—a seemingly astronomical sum that represented almost a tenth of the organization’s total assets. The revelations came at a time when Hadassah, like most nonprofits, was already feeling the effects of the credit crisis, and one of the first moves the organization made was to make dramatic cuts in funding to Young Judaea, a century-old organization providing Zionist youth camps and gap years in Israel that had been wholly dependent on Hadassah since 1967.
The group had already endured cutbacks, letting staff go and shutting most of its U.S.-based youth clubs in 2005 after Hadassah reduced YJ’s budget by $6 million to $2.8 million as part of a system-wide review. But in the wake of the Madoff revelations, YJ also sold two of its buildings: its youth hostel in the Givat Masua neighborhood of Jerusalem and a community center for immigrants called Merkaz HaMagshimim in the German Colony, consolidating both facilities in Jerusalem’s Baka neighborhood. (Merkaz HaMagshimim subsequently closed in 2011.) In 2009, several senior staff members resigned, including the group’s longtime U.S. director, Ramie Arian. A year later, YJ’s Israel-based director of 10 years, Keith Berman, who logged record enrollment numbers by creating 12 individualized tracks at YJ, left to launch Aardvark Israel, a more affordable gap-year Israel program, taking with him YJ’s former assistant director Debbie Goldsmith and three other YJ staff. (Berman declined to speak with Tablet about his departure from YJ).
It seemed to some at the time that one of the oldest pillars of Zionist youth education was about to be destroyed. But today, a year after Hadassah turned over control of the organization to a group of alumni and parents, YJ is on its way to a revival of sorts. Granted $7 million in transitional funding from Hadassah, to be disbursed over three years, the group has hired a new director, Simon Klarfeld.
Klarfeld is charged with the monumental task of building a nonprofit from the ground up. Klarfeld says the new, nimbler, YJ is evolving to cater to the changing needs of Jewish American youth, who unlike their predecessors are less likely to be interested in spending a year hanging out in Israel than in finding real work. Klarfeld plans to redirect the group’s resources away from travel to its five-month WUJS internship program, which pairs young Jewish college students with major Israeli companies in areas like finance, healthcare, hospitality, and media, which currently draws about 45 participants each year. “There is more of a need for it because people aren’t finding jobs right after college,” said Klarfeld.
Meanwhile, YJ’s five affiliated summer camps—which serve as feeders for YJ’s Israel programs—have become wildly popular, particularly at the Texas and Midwest locations, a surprising turn which may help resuscitate the gap-year program. For Camp Young Judaea Midwest in Wisconsin—which lost 20 percent of its budget and its supporting staff in 2008—the shift has been dramatic. Last year, CYJM staff struggled to accommodate a 70-camper waiting list. “It was very sudden that this became a popular destination,” said camp director Noah Gallagher. “We are kind of at a turning point. This year, we will be likely have to turn campers away for lack of space.”
Gallagher credited a recent increase in prominent and influential community members sending their kids to YJ camps, the fruit of a concerted effort that was made to cultivate relationships with community leaders—and Jewish celebrities, of a sort: In 2012, Israel’s prime minister Benjamin Netanyahu sent his son Avner to CYJM, which generated much excitement.
Today, YJ is at the halfway point through the transition period and, while the financial future of the century-old youth program is still uncertain, Klarfeld is optimistic. “In the long-term we have incredibly passionate alumni,” he said. “The impact its had on people’s lives, it’s amazing to see. If we can harness that energy, the long term future for Young Judaea is unbelievably bright.”
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From the editors of Tablet Magazine.