Country club circuit key to Madoff's rise
Bernard Madoff built the foundation for his Ponzi scheme by word of mouth at charity balls and country clubs from New York to Florida. And he's not the only one. Amy Scott reports.
The Palm Beach Country Club in Florida is where Bernard L. Madoff is said to have recruited some of his investors to his fund. Madoff is suspected of leading a $50 billion Ponzi scheme. (Joe Raedle/Getty Images)
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TESS VIGELAND: The list of prominent investors engulfed in the Bernie Madoff ponzi scheme just keeps growing. Today Massachusetts Mutual Life Insurance Company said it lost almost $10 million through one of its subsidiaries. Some charities and individual investors have been completely wiped out by the alleged fraud. Many of the victims were connected to Madoff through posh country clubs in Florida and New York.
As Marketplace's Amy Scott reports, it's a common way of doing of business on Wall Street.
AMY SCOTT: Like many other fund mangers, Madoff found investors on the golf course or at the black-tie charity ball.
Alan Davidson runs investment firm Zeus Securities on Long Island and knows the Madoff family. He says when people see their peers making a lot of money, they want in.
ALAN DAVIDSON: So they say to their friend who they're playing golf with, "Where's your money?"
"Oh, I'm doing real well. I'm with Bernie Madoff and I'm getting this 18 percent return."
They say, "Well, how do I get into that?"
Thus, Bernie Madoff managed to attract investors from Southampton, New York, to Palm Beach, Florida -- a place attorney Adam Doner calls investor's paradise, for all the wealthy retirees.
ADAM DONER: Like there's a gas station in most cities of America on all four corners, there's like a brokerage house on all four corners.
Doner represents investors who lost money with Madoff. He says Wall Street is full of charming sales people selling trust.
DONER: I've been doing securities arbitrations for 20 years, and all I ever hear from all my clients -- and they can be people of limited means -- was, "The broker was so nice. He's such a nice guy. I can't believe this has happened to me."
But Madoff was more than a nice guy. He was the former chairman of the Nasdaq.
Securities lawyer Jake Zamansky:
JAKE ZAMANSKY: One of the lessons we've learned is just because somebody's prominent and you see them in a social setting, or even we've had a number of Ponzi schemes where there's an affinity or religious affiliations, you need to do your due diligence.
Zamansky says the other lesson from Madoff's demise: If you can't figure out how your fund manager is making money, it's probably a good idea to get out.
In New York, I'm Amy Scott for Marketplace.
Comments
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From Los Angeles, CA, 03/25/2009
Testing some of the problems with punctuation. It’s a “nightmare” (really). Really bad — if you know what I mean. Not much to ‘say’ about it besides that… if you aren’t already aware. % and $ too.
From Montgomery, AL, 12/17/2008
How does Massachusetts Mutual Life Insurance Company get involved with any type investment like this. Even if it is from a subsidiary how does it happen.
If those involved in Wall Street can't determine the validity of an investment what chance does a single investor have?
We lost half of our IRA in the bank mortgage down turn and should retire in less than three years. Fat chance!
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