(1938 - )
Bernard (Bernie) Madoff is a former financier who was convicted of operating a Ponzi scheme that has earned notoriety as the largest investor fraud ever committed by a single person. Madoff defrauded thousands of investors of an estimated $65 billion.
Madoff was born in Queens, New York on April 29, 1938 to Ralph and Sylvia. Ralph Madoff worked as a stockbroker. Madoff attended the University of Alabama for one year but ultimately graduated from Hofstra University in 1960 with a degree in political science. In 1959, he married Ruth Alpern, who graduated from Queens College and worked in the stock market.
Madoff founded the firm Bernard L. Madoff Investment Securities LLC on Wall Street in 1960, and was its chairman until his arrest on December 11, 2008. Beginning as a penny stock trader, the firm grew using innovative computer information technology that would soon become the NASDAQ. At one point, Madoff Securities was the largest market maker at the NASDAQ and in 2008 was the sixth largest market maker on Wall Street. The firm also had an investment management and advisory division that was the focus of the fraud investigation.
Throughout much of his life, Madoff was known as a philanthropist and business expert. He served on the boards of several nonprofits, including Robert I. Lappin Charitable Foundation, the PIcower Foundation, and the JEHT Foundation, all of which were closed after his assets were collapsed. He donated $6 million to lymphonma research after his son Andrew was diagnosed with the disease.
Madoff also served as Chairman of the Board of Directors of the Sy Syms School of Business and as Treasurer of the Board of Trustees at Yeshiva University. He was also a member of the Board of New York City Center, New York City’s Cultural Institutions Group, and the Wall Street Divisions of the UJA Foundation of New York. Madoff and his wife gave many gifts through The Madoff Family Foundation, contributing to educational, cultural, and health charities. Most of these were forced to close and The Madoff Family Foundation’s assets were frozen.
Madoff was Chairman of the Board of Directors and on the Board of Governors of the National Association of Securities Dealers (NASD). Madoff sat on the Board of Directors of the Securities Industry Association, which merged with the Bond Market Association in 2006 to form SIFMA.
From 1991 to 2008, Madoff and his wife gave around $240,000 to federal candidates, parties, and committees, including $25,000 a year to the Democratic Senatorial Campaign Committee between 2005 and 2008.
Both of Madoff’s sons, Andrew and Mark had millions invested in their father’s stocks. Mark owed his parents $22 million and Andrew owed $9.5 million. There were two loans in 2008 from Bernie Madoff to Andrew Madoff: $4.3 million on October 6, and $250,000 on September 21.
Concerns about Madoff's business activities surfaced as early as 1999, when financial analyst Harry Markopolos informed the Securities and Exchange Commission (SEC) that it was legally and mathematically impossible to achieve the gains Madoff claimed to deliver.
In 2004, a lawyer in the SEC's Office of Compliance Inspections and Examinations, Genevievette Walker-Lightfoot, informed her supervisor Mark Donohue that she had discovered multiple inconsistencies in Madoff’s records and recommended further questioning. However, because of agency pressure to investigate the mutual fund industry, she had to drop the probe.
On December 10, 2008, Madoff told his sons that he decided to pay several million dollars in bonuses two months earlier than scheduled despite the fact that he could not even afford to pay investors. Madoff then admitted that the asset management arm of his firm was an elaborate Ponzi scheme. Madoff's sons reported him to federal authorities through their attorney and Bernie Madoff was arrested the next day on charges of securities fraud.
On March 12, 2009, Madoff plead guilty to 11 federal crimes, including securities fraud, wire fraud, mail fraud, money laundering, perjury, and falsifying files with the SEC. Refusing to name accomplices, he claimed sole responsibility for the Ponzi scheme and defrauding his clients of $65 billion.
On June 29, 2009, Denny Chin sentenced Madoff to 150 years imprisonment, a reduction for good behavior, in the Federal Correctional Complex in Butner, North Carolina. Chin called the fraud "extraordinarily evil," "unprecedented," and "staggering," and maintained that the sentence would deter others from committing similar frauds.
Former SEC Chairman Harvey Pitt estimated the actual net fraud to be between $10 and $17 billion, as this calculation does not include the fictional returns Madoff credited to his customer accounts. Prosecutors identified $13.2 billion in losses in accounts opened since 1996.
The court-appointed trustee, Irving Picard, claimed that the American Express credit card statement and other records prove that the Madoff family used clients' money as their own personal bank account, taking or transferring funds to other Madoff entities at their whim.
In a settlement with federal prosecutors, Madoff's wife Ruth agreed to forfeit her claim to $85 million in assets, leaving her with $2.5 million in cash.
Madoff’s primary residence was on Manhattan’s Upper East Side. According to a March 13, 2009 filing by Madoff, he and his wife were worth up to $126 million, plus an estimated $700 million for the value of his business interest in Bernard L. Madoff Investment Securities LLC. Other major assets included securities ($45 million), cash ($17 million), half-interest in BLM Air Charter ($12 million), a 2006 Leopard yacht ($7 million), jewelry ($2.6 million), Manhattan apartment ($7 million), Montauk home ($3 million), Palm Beach home ($11 million), Cap d' Antibe, France property ($1 million), and furniture, household goods, and art ($9.9 million).