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?”
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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.

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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March 30, 2009 | 3:10 pm

Wiesel and Foundation Receive Generous Support

Posted by Tom Tugend

Elie Wiesel

After Elie Wiesel lost more than $7 million of his personal fortune in the Bernard Madoff scandal, and his foundation took a $15.2 million hit, the Nobel Prize winner roundly cursed the Ponzi scheme artist, but he has now discovered a redeeming aspect to the financial blow.

Wiesel first disclosed the extent of his loss on Feb. 26 at a Conde Nast Portfolio panel discussion, but the business magazine’s web site has now weighed in with a follow-up.

During the last months, small and large donations, totaling $400,000, have flowed into The Wiesel Foundation for Humanity. Some of the money was given directly to Wiesel and his wife Marion, but the couple turned everything over to the foundation.

“At any moment it would have been an amazing outpouring of generosity,” Marion Wiesel told Portfolio.com, “but specifically in these times it’s so amazing, and it continues.”

Among the donors are two alumni of Boston University, where Wiesel has taught for more than 30 years, who launched an e-mail campaign to encourage one million people to each donate $6, in remembrance of the six million Holocaust victims.

Donations to the Wiesel Foundation, which supports after-school centers in Israel, international conferences and various humanitarian awards and prizes, have ranged from $5 to $100,000.

Many small contributions came from “people we don’t know, in places we’ve never been to,” Marion Wiesel said.

At the earlier panel discussion, Wiesel said of Madoff, “We gave him everything; we thought he was God, we trusted everything in his hands.”

Wiesel added at the time that he could never forgive Madoff, who is now in jail awaiting sentencing. “I would like him to be in a solitary cell with a screen, and on that screen, for at least five years of his life, every day and every night there should be pictures of his victims,” Wiesel said.

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March 14, 2009 | 10:28 pm

Is Jim Cramer Jewish?

Posted by Rob Eshman

Google the question, “Is Jim Cramer Jewish?”  Go ahead—about 500,000 web surfers already have.  For a long time, the first result to pop up was a forum entry at stormfront.something-or-other, the Internet’s safe harbour for Frustrated White Males.  The entry offers only this question, “Does anyone know if Jim Cramer is Jewish?”

Let’s resolve the deep mystery about whether a brash, media-savvy Harvard-educated financial expert with an East Coast accent and a last name derived from the German word for “peddler” is—SHOCKING!—Jewish.  Um, yes, he is.

But here’s the white Aryan dilemma—so is Jon Stewart.  It wasn’t stormfront.hate or the Klan who outed Cramer, it was The Daily Show host who took Cramer to the ethical woodshed. And Stewart is not, in fact, a descendant of the House of Stuart or the younger brother of Martha.  He was born Jonathan Stuart Leibowitz.

So there you have it: Jews can be immoral (we’re talking about you, Mr. Shenanigans) and Jews can be moral crusaders.  Jews can be ideological warmongers (Did someone say Doug Feith?  Never mind, I thought I heard something.) and Jews can be at the forefront of fighting against wrongheaded wars (Robert Greenwald,  Sen. Russ Feingold). Jews can be dangerous demagogues fomenting hatred (Avigdor Lieberman) and Jews can be heroic peacemakers (Yitzhak Rabin).

I apologize if that short circuits any FRM’s black-and-white thought process, but it is the complicated truth about Jews, about Christians, about Muslims, about any group, race, religion or nationality. Cramer and Stewart, as I quickly and not too elegantly wrote in an earlier post, actually represent twin poles of Jewish thinking. To see them in conflict Thursday night was actually NOT, as the Stormfront denizens likely see it, yet another sign of Jewish chicanery.  It was a sign of Jewish complexity, with, you know, a few good jokes thrown in, too.

For more of our Cramer v. Stewart coverage, click here.

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March 13, 2009 | 10:10 pm

Cramer v. Stewart…Jew v. Jew

Posted by Rob Eshman

Cramer v. Stewart; Jew v. Jew

Last night’s encounter between Jon Stewart and Jim Cramer should be replayed, studied, discussed and memorized at every single yeshiva and Jewish day school.
Make the debate a mandatory part of the curriculum.  Why?  Because there are few more concise, dramatic and entertaining ways to engage in one of the central ongoing questions Judaism asks:  How do you balance the need for money with the curse of money?
In many ways these two men are mirror images of each other: both are from modest, middle class Jewish upbringings.  Both are from the northeast (Stewart from New York and New Jersey, Cramer from Pennsylvannia).  Both went to good east coast schools (Stewart attended William and Mary and Cramer graduated from some place called Harvard).  They are scrappy outsiders: combative, quick-witted, engaging (okay, I can’t say Cramer is my idea of fun, but he has his fans).  These two middle -aged, affluent white Jewish males are similar on so many counts, from their outsized ambitions to their modest heights.
And yet, and yet… in their souls, in their values, they represent the twin poles of Jewish existence, almost to the point of caricature.
Think of Cramer as representing the need for wealth and the security it brings.  In Jewish history, this was embodied in the stories not just of our patriarchs like Abraham, who may have started poor but ended up as pretty well-off, but of the kings, who pursued wealth and palaces and women.  Judaism is not a religion of poverty and self-abnegation.  It accords no special place to the meek and the poor.  In fact, the ancient rabbis made laws to protect the rights of the rich, who may be unjustly treated by courts sympathizing with the impoverished.  And yet…
Confronting the tradition of our patriarchs and kings are our prophets.  They railed against the unbridaled power and wealth of the kings.  They decried the role of money and empty ritual in Jewish life.  They exhorted Jews to return to the non-materialistic, eternal values— justice, mercy, faith, charity.  And they were pursued and persecuted, always in conflict with the kings.
What the world saw Thursday night was the king versus the prophet, the marketplace versus the temple, greed versus grace, the things of this world versus the eternal values of the world-to-come. It is a tension at the heart of Jewish life, and the tension and temptation within all our hearts.
When Bernie Madoff and his wife gave millions of stolen money to support the Gift of Life bone marrow transplant registry, it’s possible they were trying to reconcile their inner Cramer with their inner Stewarts.  Even crooks can have a conscience, and I suspect Jewish goniffs have particularly twisted ones.  Which, by the way, may explain why Jim Cramer looked so uncomfortable last night….

Ask Jim Cramer

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