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Sunday, 14 December 2008
For the defrauded, little solace
The zoning lawyer in Miami trusted him because his father had dealt profitably with him for decades. The officers of a little charity in Massachusetts respected him and relied on his advice.
By Diana B. Henriques and Alex Berenson 13 December 2008
NEW YORK: The zoning lawyer in Miami trusted him because his father had dealt profitably with him for decades. The officers of a little charity in Massachusetts respected him and relied on his advice.
Wealthy men like Ezra Merkin, the chairman of GMAC; Fred Wilpon, the principal owner of the New York Mets, and Norman Braman, who owned the Philadelphia Eagles, simply appreciated the steady returns he produced, regardless of market conditions.
But these clients of Bernard Madoff had this in common: They chose him to oversee much of their personal wealth.
And now, they fear, they have lost it.
While Madoff is facing federal criminal charges, accused by federal prosecutors of operating a vast $50 billion Ponzi scheme, many of his clients are facing an abrupt reversal of fortune that is the stuff of nightmares.
“There are people who were very, very well off a few days ago who are now virtually destitute,” said Brad Friedman, a lawyer with the Milberg firm in Manhattan. “They have nothing left but their apartments or homes - which they are going to have to sell to get money to live on.”
From New York to Palm Beach, business associates of Madoff spent Friday assessing the damage, the extent of which will not be known for some time. Many invested with Madoff through other funds and may not yet know that their money is at risk.
Emergency meetings were being held at country clubs, schools and charities to assess the potential losses on their investments and to look for options.
There is not much guidance available yet from regulators. On Friday, a federal judge appointed a receiver to oversee the Madoff firm’s assets and customer accounts. A Web site is being set up to keep customers informed, but no one is sure yet whether any sort of safety net will catch the most vulnerable investors.
For Stephen Helfman, a lawyer in Miami whose father had opened an account with Madoff more than 30 years ago, the news on Thursday came as a hammer blow.
“The name Madoff’ has overnight gone from being revered to reviled in the Helfman family,” Helfman said on Friday. His grandmother, at 98, relied on her Madoff money to pay for round-the-clock care, he said, and his two children’s college funds were wiped out.
“Thirty-six years of loyalty, through two generations, and this is what we get,” he said.
The news was equally devastating for the Robert I. Lappin Charitable Foundation in Salem, Mass., which works to reverse the dilution of Jewish identity through intermarriage and assimilation by sending teenagers to Israel and supporting other Jewish education efforts.
The foundation was forced Friday to dismiss its small staff and shut down its programs to cope with its losses in the Madoff funds, according to Deborah Coltin, its executive director.
“We’ve canceled everything as of today, everything,” she said tearfully.
Coltin said she did not know how the little foundation came to be so exposed to the Madoff firm. Its most recent tax filings show that it had $7 million at the end of 2006, with $143,344 in stocks and the rest in what it described as “government securities.”
It reported the sale that year of “Bernie Madoff” securities, but did not explain what those securities were.
Sam Englebardt, a media investor in Los Angeles, said several of his relatives had entrusted virtually all of their assets to Madoff - and he understood why.
“It seems like a huge overallocation, I know,” Englebardt said. “But remember, they had started out small and invested over five years, fifteen years, thirty years - and every year they got a great return, and they could always take money out without ever having a problem.”
As that track record lengthened, his relatives gradually entrusted more of their savings to Madoff, he said. “I suspect that is what has happened across the board,” he added. “People came to trust him so much that, eventually, they trusted him with everything.”
Such stories were repeated in e-mails and telephone calls throughout the day on Friday. A woman in Brooklyn whose father died just weeks ago, found that his entire estate and a substantial portion of her stepmother’s money was invested with Madoff. A law school official in Massachusetts fears he has lost millions in the collapse of the Madoff operation.
Some wealthy victims, of course, can afford to seek redress on their own. But for them, litigation seems the only certainty.
Throughout the rumor-fueled hedge fund world on Friday, money managers were comparing notes and assessing losses. By all accounts, they run broad and deep - in the billions.
Merkin, the founder of a hedge fund called Ascot Partners, jolted his clients on Thursday with a letter announcing that “substantially all” of that fund’s $1.8 billion in assets were invested with Madoff.
“As one of the largest investors in our fund, I have also suffered major losses from this catastrophe,” Merkin said in the letter. “We have retained counsel to determine what our next steps should be.”
Some of Merkin’s investors have also “retained counsel.” Harry Susman, a lawyer in the Houston office of Susman Godfrey, said he is talking with several about their legal options.
“These investors were never aware that all of their money was invested with Madoff,” Susman said. “They are obviously shocked.”
Sterling Equities and the Wilpon family acknowledged on Friday that it had money at risk in the Madoff scandal.
“We are shocked by recent events and, like all investors, will continue to monitor the situation.” said Richard Auletta, a spokesman for Sterling and the Wilpons.
(The Mets organization issued a statement saying that the scandal will not derail its new Citi Field stadium project on Long Island or “affect the day-to-day operations and long-term plans of the Mets organization.”
A lawyer for Norman Braman of Miami, a wealthy retired retailer and the former owner of the Philadelphia Eagles football team, confirmed that Braman, too, had money locked up and perhaps lost in the Madoff mess.
And Bramdean Alternatives, a London asset manager run by Nicola Horlick, saw its share price plummet nearly 36 percent on Friday after it announced that nearly 10 percent of its holdings were caught in the Madoff scandal.
Madoff has resigned from his positions at Yeshiva University, where he was the university treasurer and deeply involved in the business school.
“Our lawyers and accountants are investigating all aspects of his relationship to Yeshiva University,” said Hedy Shulman, a spokeswoman for the university.
The most recent tax filings for the university show that its endowment fund, a separate charity, was heavily invested in hedge funds and other nontraditional alternatives at the end of its fiscal year in 2006.
The student newspaper, The Yeshiva Commentator, recently reported that the university’s endowment’s value had dropped to $1.4 billion from $1.8 billion - before the scandal broke.
1 comment:
For the defrauded, little solace
By Diana B. Henriques and Alex Berenson
13 December 2008
NEW YORK: The zoning lawyer in Miami trusted him because his father had dealt profitably with him for decades. The officers of a little charity in Massachusetts respected him and relied on his advice.
Wealthy men like Ezra Merkin, the chairman of GMAC; Fred Wilpon, the principal owner of the New York Mets, and Norman Braman, who owned the Philadelphia Eagles, simply appreciated the steady returns he produced, regardless of market conditions.
But these clients of Bernard Madoff had this in common: They chose him to oversee much of their personal wealth.
And now, they fear, they have lost it.
While Madoff is facing federal criminal charges, accused by federal prosecutors of operating a vast $50 billion Ponzi scheme, many of his clients are facing an abrupt reversal of fortune that is the stuff of nightmares.
“There are people who were very, very well off a few days ago who are now virtually destitute,” said Brad Friedman, a lawyer with the Milberg firm in Manhattan. “They have nothing left but their apartments or homes - which they are going to have to sell to get money to live on.”
From New York to Palm Beach, business associates of Madoff spent Friday assessing the damage, the extent of which will not be known for some time. Many invested with Madoff through other funds and may not yet know that their money is at risk.
Emergency meetings were being held at country clubs, schools and charities to assess the potential losses on their investments and to look for options.
There is not much guidance available yet from regulators. On Friday, a federal judge appointed a receiver to oversee the Madoff firm’s assets and customer accounts. A Web site is being set up to keep customers informed, but no one is sure yet whether any sort of safety net will catch the most vulnerable investors.
For Stephen Helfman, a lawyer in Miami whose father had opened an account with Madoff more than 30 years ago, the news on Thursday came as a hammer blow.
“The name Madoff’ has overnight gone from being revered to reviled in the Helfman family,” Helfman said on Friday. His grandmother, at 98, relied on her Madoff money to pay for round-the-clock care, he said, and his two children’s college funds were wiped out.
“Thirty-six years of loyalty, through two generations, and this is what we get,” he said.
The news was equally devastating for the Robert I. Lappin Charitable Foundation in Salem, Mass., which works to reverse the dilution of Jewish identity through intermarriage and assimilation by sending teenagers to Israel and supporting other Jewish education efforts.
The foundation was forced Friday to dismiss its small staff and shut down its programs to cope with its losses in the Madoff funds, according to Deborah Coltin, its executive director.
“We’ve canceled everything as of today, everything,” she said tearfully.
Coltin said she did not know how the little foundation came to be so exposed to the Madoff firm. Its most recent tax filings show that it had $7 million at the end of 2006, with $143,344 in stocks and the rest in what it described as “government securities.”
It reported the sale that year of “Bernie Madoff” securities, but did not explain what those securities were.
Sam Englebardt, a media investor in Los Angeles, said several of his relatives had entrusted virtually all of their assets to Madoff - and he understood why.
“It seems like a huge overallocation, I know,” Englebardt said. “But remember, they had started out small and invested over five years, fifteen years, thirty years - and every year they got a great return, and they could always take money out without ever having a problem.”
As that track record lengthened, his relatives gradually entrusted more of their savings to Madoff, he said. “I suspect that is what has happened across the board,” he added. “People came to trust him so much that, eventually, they trusted him with everything.”
Such stories were repeated in e-mails and telephone calls throughout the day on Friday. A woman in Brooklyn whose father died just weeks ago, found that his entire estate and a substantial portion of her stepmother’s money was invested with Madoff. A law school official in Massachusetts fears he has lost millions in the collapse of the Madoff operation.
Some wealthy victims, of course, can afford to seek redress on their own. But for them, litigation seems the only certainty.
Throughout the rumor-fueled hedge fund world on Friday, money managers were comparing notes and assessing losses. By all accounts, they run broad and deep - in the billions.
Merkin, the founder of a hedge fund called Ascot Partners, jolted his clients on Thursday with a letter announcing that “substantially all” of that fund’s $1.8 billion in assets were invested with Madoff.
“As one of the largest investors in our fund, I have also suffered major losses from this catastrophe,” Merkin said in the letter. “We have retained counsel to determine what our next steps should be.”
Some of Merkin’s investors have also “retained counsel.” Harry Susman, a lawyer in the Houston office of Susman Godfrey, said he is talking with several about their legal options.
“These investors were never aware that all of their money was invested with Madoff,” Susman said. “They are obviously shocked.”
Sterling Equities and the Wilpon family acknowledged on Friday that it had money at risk in the Madoff scandal.
“We are shocked by recent events and, like all investors, will continue to monitor the situation.” said Richard Auletta, a spokesman for Sterling and the Wilpons.
(The Mets organization issued a statement saying that the scandal will not derail its new Citi Field stadium project on Long Island or “affect the day-to-day operations and long-term plans of the Mets organization.”
A lawyer for Norman Braman of Miami, a wealthy retired retailer and the former owner of the Philadelphia Eagles football team, confirmed that Braman, too, had money locked up and perhaps lost in the Madoff mess.
And Bramdean Alternatives, a London asset manager run by Nicola Horlick, saw its share price plummet nearly 36 percent on Friday after it announced that nearly 10 percent of its holdings were caught in the Madoff scandal.
Madoff has resigned from his positions at Yeshiva University, where he was the university treasurer and deeply involved in the business school.
“Our lawyers and accountants are investigating all aspects of his relationship to Yeshiva University,” said Hedy Shulman, a spokeswoman for the university.
The most recent tax filings for the university show that its endowment fund, a separate charity, was heavily invested in hedge funds and other nontraditional alternatives at the end of its fiscal year in 2006.
The student newspaper, The Yeshiva Commentator, recently reported that the university’s endowment’s value had dropped to $1.4 billion from $1.8 billion - before the scandal broke.
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