Florida's Palm Beach Rocked By Madoff Scandal
Florida's Palm Beach Rocked By Madoff Scandal
A federal judge in New York has taken steps to help potential victims of what is being described as the biggest financial fraud in history — ordering that an investment company owned by Bernard Madoff be liquidated and that a federal fund be set up to pay out up to $500,000 to those who may have been bilked.
Banks, investment funds, individuals, even charities are trying to determine how much money they may have lost in Madoff's alleged $50 billion Ponzi scheme.
'Is My Money All Gone?'
Palm Beach, the ritzy Florida enclave where Madoff had a home and where he found many of his clients, might have been hit harder than any other community.
Few people there watch the island's money more closely than Richard Rampell, who runs an accounting firm founded by his father in 1959. Rampell, who is also a board member of the NPR Foundation, says he started getting a lot of calls Friday from clients who had invested money with Madoff, who was arrested Dec. 11.
They all had the same questions: "Is my money all gone? Can I get any of it back?" Rampell says. "Some of these people are very wealthy ... people that live in expensive houses or expensive condominiums and may have lost everything."
Over the years, he says, his clients received regular statements showing the steady returns Madoff was known for. Some clients withdrew millions of dollars from Madoff's fund, Bernard L. Madoff Investment Securities LLC, with no problems. But others reportedly had invested almost all of their savings.
One thing many of Madoff's clients had in common is membership at the Palm Beach Country Club. It's an exclusive club, with a beautiful golf course, ringed by palms, overlooking the Atlantic Ocean.
Madoff was a member, and other members sought introductions in hopes of being allowed into an even more exclusive investment club that brought steady, double-digit returns even when the market was down.
Rampell says he once ran into Madoff and asked him how he delivered such consistently high returns. "He says, 'Well, I don't tell you my trading strategy; that's proprietary,' which is not unusual. He says, 'But I can tell you this: I can make money when the market goes up; I can make money when the market goes down; I cannot make money when the market stays flat,' which indicated to me that maybe he's doing some sort of day-trading."
Not all of Madoff's clients were super-wealthy. Arnold Sinkin, a retired carpet salesman in Boynton Beach, says he put his life savings — nearly a million dollars — into Madoff's fund. He's now being forced to put his townhouse up for sale.
Sinkin and his wife, Joan, were interviewed on ABC's Good Morning America. Joan Sinkin said, "You can get in with Bernie Madoff — wow, you're lucky. And it's just gone in one telephone call." Arnold Sinkin added, "This is what they refer to as the golden years, when you retire and you try and enjoy life. And then you get wiped out in 48 hours."
All over Palm Beach, from the country club to the ultra-exclusive Breakers hotel, Madoff and his alleged Ponzi scheme has been the talk of the island. Over the weekend, at least one new multimillion-dollar condo near the Breakers was put on the market by an investor reportedly hit by the fallout.
More could soon follow.
Panicked investors are turning to lawyers such as Brad Friedman of Milberg LLP for answers. Five days into the scandal, Friedman already has agreed to represent more than 100 of Madoff's clients, some with investments totaling over $100 million.
Friedman says one of his first efforts will be to find out where all the money went. "Fifty billion dollars did not just go up in smoke. ... It went someplace," he says. "If that money went into some of his other operations, we're going to chase that money down and recover it for investors."
Friedman says that as people come to terms with their losses, ripple effects will spread throughout the economy. One of the first casualties, he says, will be charitable giving.
"The victims of this fraud," he says, "for whatever reason, tended to be overwhelmingly Jewish, I suppose many of them because they met Mr. Madoff through the Palm Beach Country Club or the Glen Oaks Country Club. These communities are decimated, and they're some of the most philanthropic communities in the country."
Some Jewish charities had their savings invested in Madoff's fund. One philanthropic group, the Jewish Federation of Greater Los Angeles, says it lost more than 10 percent of its endowment, $6.4 million. On Monday, three foundations — including the Chais Family Foundation, which gives millions of dollars a year to Jewish causes — announced that they were being forced to shut down.