April 28, 2009 | 1:33 pm

Bernie Madoff’s business auctioned for $25.5 million

Posted by Danielle Berrin

Only Bernie Madoff makes $25.5 million look like a bad sell. After swindling multiple billions from people all over the country, the sale of Bernard L. Madoff Investment Securities LLC for $25.5 million won’t do much to compensate victims of his fraud. Worth only a token of its former value, a Boston financial company agreed to purchase the firm by paying $1 million now and the rest in deferred payments to Madoff victims by 2013. A stingy compensation when your bottom line is $60 billion.

From Reuters:

NEW YORK (Reuters) - Bernard Madoff’s market-making business was sold at an auction on Monday to Castor Pollux Securities LLC for up to $25.5 million, a fraction of what it was worth previously, as part of an increasingly contentious global effort to recover money for the swindler’s defrauded customers.

The court-appointed trustee winding down Bernard L. Madoff Investment Securities LLC said in a statement late on Monday that the Boston financial company will pay $1 million at closing and up to $24.5 million in deferred compensation through December 2013.

Three bidders competed in the auction for the trading unit, which was once worth $1 billion. Castor Pollux originally bid $15.5 million in March.

“The auction today yielded a higher and better offer for the market-making business,” trustee Irving Picard said. “The additional consideration that we will receive as a result of the auction will benefit Madoff’s victims.”

He said the deal allows Madoff’s victims to participate in future earnings of the business. The New York lawyer has said he has recovered only about $1 billion in assets of Madoff, who ran a worldwide fraud that drew in as much as $65 billion.

In the protracted process that invariably attends the retrieval of assets in such frauds, 223 individual and institutional investors have been told by Picard to return a total of $735 million in profits or be sued.

The so-called “clawback” has been feared by these direct investors, who withdrew money in the six years before the discovery of the massive fraud last December, the biggest investment scam in Wall Street history.

“People are invited to provide their valid defenses against a potential lawsuit…If they have one, the trustee would not commence any action,” said a source familiar with the position of the trustee.

Other investors continue to use the courts to stake claims, notably one lawsuit in the past week by an investor against Madoff’s banker JP Morgan Chase, which the investor accuses of knowing that the billions it held in Madoff money was part of a fraud.

The bank denied the allegations that if it had shut down the Madoff accounts in September, when it withdrew its own money out of a Madoff “feeder fund” run by Fairfield Greenwich Group, the $12.8 million of Florida plaintiff MLSMK Investments Co would not have been lost.

Fairfield has also been sued by investors for fraud and charged by Massachusetts state regulators.

Madoff, 70, a former nonexecutive chairman of the Nasdaq stock market, was arrested on December 11 and pleaded guilty on March 12 to charges including securities fraud, money-laundering and perjury. He is in jail pending his scheduled June sentencing.

April 24, 2009 | 1:40 pm

Madoff the movie

Posted by Brad A. Greenberg

Madoff Insider Interview Edmund Druilhet from edmund druilhet on Vimeo.

Madoff for cable? The Fundermentalist found this report on The Insider about “casting America’s most hated man.” Not sure why they say the “reviled Wall Street greedmonger who was allegedly behind a $65 billion scam.” Um, he pretty much admitted to it. No, wait. He did. In fact, last month he plead guilty.

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April 14, 2009 | 2:16 pm

Madoff Finally Sees Real Returns…on his Mets tickets.

Posted by Jay Firestone

It seems not all of Bernie Madoff’s investments have been crippled by inflated promises and nonexistent profit.  His opening day Mets’ tickets earned a 614 percent return, selling for $7500 for the pair.

From CNBC:

“Bernie Madoff’s two tickets for Opening Day at the Mets new stadium Citi Field have sold on eBay for $7,500.

The tickets for Monday’s game in the Delta Club Platinum level were auctioned off by trustee Irving Picard.

The tickets might have been Madoff’s best investment yet. The face value of the tickets are $525 each, meaning the trustee’s return on investment was 614 percent.

But that profit of course represents only a small percentage of money that will eventually be seen by investors who lost so much in the ponzi scheme.

It appears as though the tickets themselves had a premium value associated with it because of Madoff’s name. A pair of two tickets near the Madoff seats can be had on StubHub for less than $2,000.” more at CNBC.com

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April 13, 2009 | 2:13 pm

Madoff losses spur social war in Palm Beach

Posted by Danielle Berrin

Maybe you don’t feel bad that someone in Palm Beach, Fla values their net worth as down to $12 million. But if you consider that prior to Madoff’s momentous swindle that figure was closer to $30 million, then you think, ‘Ouch.’ Even for the superrich, that’s gotta hurt.

While places like Palm Beach, considered one of the most affluent neighborhoods in the country, may seem recession proof, it’s actually not that lucky. As yesterday’s NY Times revealed (through an apt metaphor of Bernie Madoff’s unclaimed $2,000, custom-made Italian pants) economic hard times aren’t hurting America’s wealthiest, but they are hitting them. While people around the country are losing their jobs, health benefits and dignity, people in Palm Beach are lamenting the good old days—when they could heedlessly spend $800 on a shirt.

But the impact of the economic crisis among the uber-wealthy involves a different sort of scale-balancing. In Palm Beach, it’s become a social war between Jews and Gentiles. According to the NY Times, the significant losses to the Jewish community there have buffeted the island’s gentile population. What has spiraled in recent months (but was always a feature of the Palm Beach social arrangement) is a tit-for-tat accounting of which team—or rather, club—is enjoying higher social standing. So, millions in Madoff losses is worse than simply losing money—it equals “points” for the other side.

From Sunday’s NY Times business section:

To learn what ails the place, you need to talk to retailers and the rare chatty local. Palm Beach, they will tell you, is reeling and much of it is seething, too. Jews and gentiles here have long lived and socialized in different spheres, with some of the latter quietly irked to find more of the former moving in every year. The Madoff scheme targeted the Jewish populace, as everyone knows, and among Jews there is a galling sense that the gentiles are privately thrilled by the fiasco.

As paranoid as this might sound, it has a ring of truth to Laurence Leamer, a Palm Beach resident and author of “Madness Under the Royal Palms,” a history of the island.

“In fact, there are a lot of gentiles here who thought the Jews got what was coming to them,” he says. “The gentiles think this is their place. As far as they’re concerned, the Jews have Boca Raton and Miami. What are they doing in Palm Beach?”
...
WHEN you try to take the temperature of Palm Beach, you quickly learn that it won’t so much as look at the thermometer, let alone open up and say “ah.” Even servants sign confidentiality agreements. Request an interview with the mayor, Jack McDonald, and you get a call from his assistant saying, “The mayor doesn’t do interviews with reporters from out of town.”

The cold shoulder seems part of the local DNA. There aren’t any hospitals, cemeteries or funeral homes here, as though illness and death could be willed out of mind, no mean feat for a place filled with 80-year-olds.

Aside from death and money, the topic that preoccupies everyone here the most, and is spoken of the least, is the gentile-Jewish divide. As recounted in “Madness Under the Royal Palms,” Palm Beach was founded in the late 19th century by Henry Flagler, a Standard Oil executive, and for years it was dominated by white Anglo-Saxon Protestants.

In the middle of the last century, A. M. Sonnabend, a Jewish entrepreneur, started buying commercial property, including what became the Palm Beach Country Club, and nouveau-riche Jews suddenly had a hotel, beach club and a golf course of their own. Gradually, enough moved here to be described by the Christian elites as “the other half,” many of them clustered in large condominium buildings south of a place called Sloans Curve, known informally by just about everyone as the Gaza Strip. (That the real Gaza Strip is inhabited by Palestinians is apparently beside the point.)

The score between these two tribes has traditionally been kept on the society pages of The Palm Beach Daily News, known as the Shiny Sheet for its smudge-free paper, which covers parties and galas. The more you’re covered, the better your tribe is doing.

So that article about the Duchess of Marlborough’s 50th birthday party at the Everglades, for which the ladies reached “into the vault,” as The News put it, for their finest jewelry — that goes in the win column for the gentiles. An article about the three-day, Brooklyn-themed 80th birthday party for Larry Herbert, the father of the Pantone color system, with a quotation from his wife, “The president said to go out and spend money, so I did” — chalk one up for the Jews.

But the Madoff fiasco has changed the game here. It’s hard to find local victims of his fraud to talk on the record, but one retiree agreed to speak on the condition that he not be named. He says he and his wife lost a modest sum, compared with others.

“When this whole thing broke it was like they dropped a veil over this town,” he said. “Now, Madoff is all we talk about. Today, I was hitting golf balls with a friend of mine. He turns around, out of nowhere, he says, ‘My accountant told me the I.R.S. said you can take a 95 percent loss against ordinary income going back five years.’ I says: ‘Where the hell did that come from? I’m in the middle of hitting 9-irons!’ ”

He estimates that 80 percent of the Jewish community here was affected in one way or another, either directly or through charitable endeavors that are now struggling. Hit worst were the people who took out a second mortgage on their home to give Mr. Madoff additional funds. If the guy delivered a steady 10 percent or 12 percent, why not?

“We’re going to dinner tonight with a few couples,” this man continues, slightly amused by how obsessed everyone has become by this topic. “We’ll raise a glass and make a vow — no Madoff talk. It’ll last five minutes.”

Read more of this fantastically fun story here.

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April 13, 2009 | 1:39 pm

Madoff’s models

Posted by Brad A. Greenberg

I’ve been a bit busy, writing about how Jews aren’t to blame for the economic mess and the like, so I hope you’ll excuse this three-week-late reference to a New Yorker essay about “Madoff and His Models.” The article by Ron Chernow, author of several excellent financial books, including “The Warburgs,”  focuses on the Ponzi scheme’s namesake, Charles Ponzi, who was brash and flamboyant and flamed out after less than a year of high-rolling, and his Swiss predecessor Ivan Krueger.

The most interesting section of the article was that which discussed just how different Madoff was from his models, how his Pyramid Scheme 2.0 took conning to the next level with a touch of class and exclusivity. Here’s an excerpt:

Instead of openly courting investors, he pretended to fend them off. Back in teh nineteen-twenties, sophisticated investors joined together in pools that manipulated individual stocks, and such funds acquired a certain cachet. Something similar happened in recent years with hedge funds, which retained snob appeal even when returns flagged. Madoff made it seem impossibly difficult to invest with him. As a rule, his fund was closed to new investors, requiring special introductions to the club. “I know Bernie, I can get you in” was the open sesame whispered throughout the world of Jewish society,  where “Uncle Bernie” was affectionately touted as “the Jewish bond.”

Unfortunately, that bond matured.

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April 9, 2009 | 1:38 pm

Mini-Madoffs get big boost on YouTube

Posted by Brad A. Greenberg

About 23,000 videos promoting cash-gifting that have popped up on YouTube. The Better Business Bureau says these programs are akin to Ponzi schemes. Here’s today’s story from the LA Times:

The videos usually don’t ask for money directly but send viewers to websites where they are urged to sign up for the “gifting program,” usually for fees ranging from $150 to $5,000.

Ponzi scams, also known as pyramid schemes, depend on getting an ever-larger number of people to invest with promises that all will reap the rewards. It was the same mechanism used by disgraced financier Bernard Madoff, except his fraud totaled $65 billion.

One of the videos added today on YouTube featured Bible quotes, pictures of stacks of money and a testimonial from a man who said he not only got rich from cash gifting, he also found true happiness and lost 35 pounds.

Some of the videos claim that because it’s “gifting,” it’s somehow legal.

“They talk about ‘cash leveraging,’ whatever that means, and other vague marketing talk,” Southwick said. But the basic scheme is that participants are told to recruit more people who will put in more money, and so on.

“It’s just money changing hands,” she said, “and it always goes to people at the top of the pyramid.”

The BBB doesn’t identify specific videos, but in the above clip, Rob Abrams sells you on how he made $35,000 in a week. All you got to do is get other people to send you money for their enrollment.

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April 6, 2009 | 1:38 pm

NY attorney general sues Ezra Merkin

Posted by Brad A. Greenberg

Look out J. Ezra Merkin: Your sister might be willing to give you a free pass, but the New York attorney general isn’t. This morning Andrew Cuomo sued the disgraced investor for the uber-rich, a man who is accused of being one of Bernard Madoff’s primary fund feeders.

Here’s the story from The New York Times:

The lawsuit, filed under state charity and securities laws, claims that Mr. Merkin improperly collected more than $470 million in fees from his clients, who included more than a dozen nonprofit organizations, by “falsely claiming he actively managed their funds” when in fact he simply handed their money over to Mr. Madoff, without adequate investigation or oversight.

The complaint charged that Mr. Merkin had failed to carry out the diligent research and investigation he had promised, and in some cases had deliberately deceived clients about investing with Mr. Madoff.

“Merkin’s deceit, recklessness, and breaches of fiduciary duty have resulted in the loss of approximately $2.4 billion,” according to the complaint filed by Mr. Cuomo’s office, which opened an investigation of Mr. Merkin soon after the Madoff scheme collapsed in mid-December.

The accusations echo charges that have already been made against Mr. Merkin in private lawsuits filed by some affected charities and institutions, which include the New York University Law School and a charitable foundation established by Mortimer B. Zuckerman, the publisher and real estate executive.

A lawyer for Mr. Merkin, Andrew J. Levander, could not immediately be reached for comment, but he has said in the past that his client will “fully cooperate with any investigation by the New York attorney general’s office.”

You can read the rest here. And don’t say we didn’t see this coming.

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April 3, 2009 | 2:07 pm

Children’s Museum to file for bankruptcy

Posted by Brad A. Greenberg

Count the Los Angeles Children’s Museum as a second-party victim of Bruce Friedman, who was sued last month by the SEC for allegedly misappropriating $17 million in a real estate fraud. His Friedman Charitable Foundation had been the museum’s biggest benefactor, gifting $10 million of the $58.5 million needed for the long-delayed museum near Hansen Dam.

But largely in response to Friedman’s legal troubles, the museum plans to file for bankruptcy:

Without the $10-million gift, the museum would be about $22 million short of the $58.5 million it needs to open, Glassman said.

The museum’s board of governors, which includes state Sen. Alex Padilla (D-Pacoima) and former Assemblymen Mike Roos and Richard Katz, voted March 27 to declare bankruptcy.

Museum officials have been in discussions with a court-appointed receiver managing Friedman’s assets to determine whether the museum needs to return the money it has received from Friedman. Meanwhile, the FBI and U.S. attorney’s office have opened a criminal investigation into Friedman’s operations.

The museum had not received a single donation since the SEC’s action against Friedman was disclosed. It lost about $100,000 in the last month when concerned donors rescinded their pledges, Glassman said.

“The only thing that could change the course is if there were one or more angel donors who would step in and see the value of the project,” Glassman said. “Otherwise, we’ll probably not see a children’s museum in Los Angeles.”

The Dodgers, with which Friedman had also pledged support for the building of 42 community baseball fields across the region, are expected to survive, possibly even win the pennant.

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