Business | General
'Madoff was the real deal', duped investors reveal
The man behind the giant Ponzi scheme fraud was viewed as reluctant to take on new clients and did it only as a favour to existing ones.
- AP
- Published: 23:17 December 14, 2008
New York: They had known him for years as a golf partner, a family friend. Some were neighbours or fellow members of country clubs on Long Island and in Florida.
Many had begun investing with 70-year-old Bernard L. Madoff decades ago, often after being referred by a friend or relative who had known the Wall Street veteran even longer.
There had been some warnings such as that financial consultants had been suspicious for years about his astounding run of success.
They couldn't figure out how he managed to produce steady returns, month after month, even when everyone else was losing money - and leave almost no footprint while moving billions of dollars in and out of the markets.
"People would come to me with their statements and I couldn't make heads or tails of them," said Charles Gradante, co-founder of the Hennessee Group and adviser to hedge fund investors.
"He only had five down months since 1996," Gradante said. "There's no strategy in the world that can generate that kind of performance. But when people would come to him and say, 'How did I make money this month?' he didn't like it. He would get upset with people who probed too much."
Those investors were scrambling Friday to learn whether they had been wiped out by what prosecutors described as a multibillion-dollar Ponzi scheme.
In the scheme, money provided by new investors is used to pay seeming high returns to early stage investors. The scheme collapses when required redemptions exceed new investments.
The assets of Madoff's investment company were frozen on Friday in a deal with federal regulators and a receiver was appointed to manage the firm's financial affairs.
According to the criminal complaint, Madoff estimates he lost as much as $50 billion over many years. If true, it could be one of the largest fraud schemes in Wall Street history.
The roster of alleged victims included Sterling Equities, co-founded by New York Mets owner Fred Wilpon, as well as a long list of Madoff's friends, neighbours and country club associates - many of them from prominent Jewish families in New York and Florida.
Joyce Greenberg, a phil-anthropist and retired fin-ancial adviser in Texas, said her family began investing money with Madoff in the 1970s after being introduced by a stepbrother who knew him from college.
She stuck with him after her husband, the Houston entrepreneur Jacob Greenberg, died in 1987, partly because Madoff had been with them for so long, but mostly because he kept posting profits.
Like other investors, she said she never questioned his strategy.
"I hate computers, and I never tried to figure out what he was doing because the bookkeeping all added up," Greenberg said. She said she was still trying to figure out how much of her money was gone.
Investor Lawrence Velvel, dean of the Massa-chusetts School of Law, said he was introduced to Madoff by a friend whose late mother began investing with him decades ago. She was impressed by the fancy cars driven by those who had made a fortune with him, Velvel said.
He described a powerful word-of-mouth allure, with friends recommending Madoff as a sure thing, someone who took on new clients only reluctantly and as a favour.
"I was told there was a small number of people who practically begged him to let them keep their money with him," he said.
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