'Bag Lady Papers': Riches To Rags Via Madoff Artist and editor Alexandra Penney had it all. Then she got a phone call that her savings were gone, lost in the Bernard Madoff scandal. Penney talks about her life since then, as chronicled in her memoir, The Bag Lady Papers.
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'Bag Lady Papers': Riches To Rags Via Madoff

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'Bag Lady Papers': Riches To Rags Via Madoff

'Bag Lady Papers': Riches To Rags Via Madoff

'Bag Lady Papers': Riches To Rags Via Madoff

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Author Alexandra Penney is the former editor-in-chief of Self magazine. Donna Svennevik/ABC hide caption

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Donna Svennevik/ABC

Artist and editor Alexandra Penney had it all. Then she got a phone call that her savings were gone, lost in the Bernard Madoff scandal. Penney talks about her life since then, as chronicled in her memoir, The Bag Lady Papers.

Penney told host Neal Conan she has relied on a variety of mental strategies to get her through, and past her financial tragedy. One, she only allowed herself one minute of self pity a day, and she doesn't even do that anymore. Her second rule is "SNT: Stop Negative Thinking," which she followed up with "SFT: Stop Future Thinking." By living in the moment, Penney tries to "keep the anxiety completely at bay."

Her ability to tap into mental discipline surprised Penney. She wrote the book hoping to reassure readers "that you will surprise yourself, you have resources... And there are ways you can control your thinking so you don't get completely crazy and anxious."


Artist, editor, and sometime fishmonger Alexandra Penney was lucky and talented enough to write a couple of best-selling books and earn enough to buy a sunny East Side apartment in New York, modest homes in Florida and Long Island, and tuck away what most of us would consider a very comfortable nest egg. One problem: it was all invested with Bernie Madoff. She has written about the fury, anxiety, and clarity that followed, first in a blog called The Bag Lady Papers and now in a new book by the same name.

And while the details of her story are unique, some of you share the experience of plummeting from riches to rags. So if that's your story, what did you learn? Give us a call: 800-989-8255. Email us: talk@npr.org. You can also join the conversation on our Web site. That's at npr.org, click on TALK OF THE NATION.

The full title of Alexandra Penney's book is "The Bag Lady Papers: The Priceless Experience of Losing it All." The author joins us now from our bureau in New York. Thanks very much for coming in.

Ms. ALEXANDRA PENNEY (Author, "Bag Lady Papers: The Priceless Experience of Losing it All"): I'm delighted to be here, Neal.

CONAN: And do you still wake up every morning at 4:00?

Ms. PENNEY: I do.

(Soundbite of laughter)

Ms. PENNEY: I do. And what I've learned to do is either go to bed earlier because no matter what I'm going to wake up at 4:00. I used to have terrific anxiety and panic attacks. And one of the things I've learned, having - this book is basically about having the rug pulled out from under you. And one of the things I've learned is how to stop this constant panic and worrying. I'm a worrier, and actually I start cleaning the house when I'm worried.

CONAN: Yeah.

Ms. PENNEY: But this is bigger than cleaning the house.

CONAN: There's no house big enough.

Ms. PENNEY: Yeah.

CONAN: Or dirty enough.

Ms. PENNEY: That's, well...

CONAN: Well, my house. Maybe.

Ms. PENNEY: Yeah.

CONAN: But anyway.

(Soundbite of laughter)

CONAN: The day the trapdoor opens underneath your feet, you're about to host a dinner party, and in fact somebody calls you on the phone and says, you got to go turn on the TV, you're not going to believe this.

Ms. PENNEY: Exactly. It was my best friend. And at the same moment, a click on my cell phone was my son and he said, Mom, I know that you're invested with Madoff. He's just confessed to a Ponzi scheme. He said, you can come out and live with us. He lives in Los Angeles. So I kind of knew at that moment that it was the end. I mean, I've worked since I was 16, sometimes two and three jobs because I've been a freelancer, a book writer. I've always been an artist, and taking jobs to make money to afford my art.

CONAN: Mm-hmm.

Ms. PENNEY: So this was hard-earned money.

CONAN: And this was from a situation where you were envisioning a future where you all seem - you seem pretty well set.

Ms. PENNEY: Oh, I was totally set as I thought, given what I saw - I mean, not hugely rich, but because this is like a 401(k). It was an IRA, an individual retirement plan. So it looked pretty good on those Madoff statements which also looked pretty good to me. So one of the things that I learned was you can give up a lot of luxuries, but there's one big luxury that I didnt realize I had, which was pretty much peace of mind from having a savings account. Unfortunately, it was with Bernie Madoff.

CONAN: Mm-hmm.

Ms. PENNEY: Before that, it was in the bank.

CONAN: There's a fascinating part of your book where you encouraged some friends of yours. You basically asked them an email question, which is, what can money buy and what can't it buy.

Ms. PENNEY: Money is a very interesting phenomenon. Obviously it cannot buy you health. It cannot buy you - being taller. It cannot buy you...

(Soundbite of laughter)

Ms. PENNEY: ...a family. It cannot buy you integrity or your reputation. It cannot - it can buy you a trip to the sun, so I can't say it can't buy you the sun and the moon because money can buy you a place where you can see those things. But the very basic things like health and a healthy, loving family, it cannot buy.

CONAN: There's also an interesting point in which you ask yourself, would it be better to have had, as you did, it all, so to speak, and then lose it, or to have never had it ever?

Ms. PENNEY: You know, that's a very interesting question. And somebody had asked me that and that's why I wrote about it. If you have money, you see two things. Yes, it can buy you a lot of things, but it's not all it's cracked up to be. It - you know, it doesn't buy you health. It doesn't buy you real peace of mind, which comes from - back to what Skip Gates was saying, know thyself.

So it's a mixed bag. I would rather have it. I'd rather be on the inside and know what it was like and then to lose it. But I think that the big, big point is really that you learn who you are when you've had the rag pulled out from under you. And I basically totally surprised myself - and that's about this know thyself...

CONAN: Mm-hmm.

Ms. PENNEY: I thought I'd fall apart when my worst nightmare would come true, the nightmare of being a bag lady, which was a childhood fear and on and off throughout my adult years - a fear which many, many women suffer. What I surprised myself about was I didn't just get paralyzed. Fear like that, a trauma like that can paralyze you or galvanize you. So fear has actually a good part to it. And I just was totally galvanized. I had to go back to work to pay the electric bill. I'm an artist. I'm a photographer, and the art market had tanked so I hadn't sold work for months.

And so, after Madoff, I didn't have - I had a little bit in the bank account just to pay, you know, bills for that month and a couple more months. And I thought, where - how am I going to survive? But I didn't fall apart. That surprised me. I got up, I went back to work, I called an agent in London. I was - my 4:00 wake-ups were happening and he was up, of course, because the time difference is such. And I said, Ed, you know, you haven't heard from me in 20 years, but I need a job. I need to write. I need to write something right away.

CONAN: And that evolved first into the blog on the Daily Beast with Tina Brown called The Bag Lady Papers. It's now a book called by the same name, "The Bag Lady Papers: The Priceless Experience Of Losing It All." Alexandra Penny is with us from our bureau in New York. If you've had the experience of going through that financial trapdoor from riches to rags, give us a call, tell us your story 800-989-8255; email us talk@npr.org.

And let's start with Sheila. Sheila with us from De Peyster in New York.

SHEILA (Caller): Hi. It's not a rags, or riches to rags story, but my question is, I had read an article about Bernie Madoff, that part of his allure for what he was doing was not just to make money for people but to make them feel, if you're with me you're special, you're an extra level up from those other people that aren't investing with me. And I wondered if that was part of his pull to get people in, that you know, the emotional, you're special, you're more special than these other people.

CONAN: Yeah. The con, if you will. Yeah.

SHEILA: Right. Right.

Ms. PENNEY: Well, I never met Bernie Madoff. He was a great abstraction to me. The way I got into it was through an - I was - had my money in the bank and I had saved a lot because I'd written books and I had been the editor in chief of Self magazine. And I was talking to an old friend who said, My money has been with this man for years. My daughter's money is with him. Let me see if I can get you in because the fund is closed. I had no idea that this was some special thing.

Now, I made about nine to 10 percent, which I thought was a huge amount. I then was checking with people - Harvard MBAs, Wharton people, financial advisers, people in the business, because that's where - what a lot of people do in New York, and they said that's not a huge return, people are making a lot more, but the thing about Madoff is that he's steady and he's stable and he gives those returns. Little did I know he's giving people like 50 percent returns.

CONAN: Mm-hmm.

Ms. PENNEY: Then I would have like freaked and said there's something wrong here. But at that time, nine, 10 percent, this is, you know, at the height of the economy, was not greedy, not, you know, totally out of line with what other successful working women were getting.

CONAN: Sheila, thanks for the call.

SHEILA: Thank you.

CONAN: Bye-bye. Let's go next to - this is Afif(ph), I hope I'm pronouncing that correctly, in Cleveland.

AFIF (Caller): Yup. That's correct. First, real pleasure to get on the show. My family was living during all the '80s up until the first Gulf War in Kuwait. And, you know, we were - my father was working with the government, extremely successful. Every year we spent, you know, three months a year in, you know, my mother's home country of England. We had everything we could ever want -private schools - and we were on vacation and we got a notice, you know, from someone that, oh, Iraqi troops are gathering and, you know, we were assured from people back in Kuwait nothing's wrong and then overnight not only did, you know, we lose our home, but all our accounts were frozen because, you know, in the U.S. - and they didn't know what was being taken by the government.

So we went from, you know, this great lifestyle to literally, you know, an apartment in England with only summer clothes and, you know, with no work and no prospects of work. And you know, 20 years later I was telling your screener that just through perseverance kind of we rebuilt ourselves, immigrated to the U.S. and you know, been on the road back ever since.

CONAN: So what's the fundamental lesson, do you think, when you suddenly lose everything?

AFIF: One, is that - and your guest said this - that money does not define you. The most important thing to us was family. And two, that you can always, always persevere. And the story where she said she called someone that she hadn't talk to for 20 years, you know, my father, he had one conference (unintelligible) in D.C. and he literally rented a DOS computer at the time and typed up a resume and he got two job offers having, you know - with no money, no anything. And, you know, ever since that, there's literally nothing that if you put your mind to it, that it's possible.

CONAN: Well, Afif, thanks very much for the phone call. I had the chance to see Kuwait right after the war and it was pretty ruined. So...

AFIF: Right.

CONAN: Yeah, indeed. Thanks very much for the call. Appreciate it.

AFIF: Take care.

CONAN: We're talking about the experience of going from riches to rags with Alexandra Penney. Her new book is "The Bag Lady Papers."

You're listening to TALK OF THE NATION from NPR News.

And let's go next to John. John with us from Swansboro, North Carolina.

JOHN (Caller): Hey, sir. It's a pleasure to be on your show. I love it.

CONAN: Thanks for calling. Go ahead.

JOHN: I actually am a photographer also. I do family studio work and we had the grace to be on a military base. We had a government contract for the past three years. And unfortunately, due to renovations in the studio space and the area around us, we - our contract was ended a few years early. And we've now had to find a place to move our studio to and not being into a high traffic area like we were, where we were doing 12 hundred sittings a year, now the past few months I've done two sittings.


JOHN: And, yeah, it has dropped my income from almost 200,000 to almost nothing, literally. And it's the first time in my life where I've actually had to start budgeting and clamping down. For most of my life, I was lucky to have family and friends who are - helped me out when times are tough. And now my fianc�e and I, we're on our own trying to figure out how to pay bills and keep things going without living beyond our means anymore.

CONAN: And what have you learned through this?

JOHN: Mainly, just to kind of watch the pennies and dimes. The pennies and dimes honestly has helped us out. Instead of buying the name brand stuff, we've gone to the Foodline brand and the off-market brands and cutting back from expensive cable to basic necessities. Figuring out what those basic necessities are are key to making it - at least for us in the economy where it's at right now.

CONAN: Alexandra Penney, you write about going from the gourmet Dean and Deluca coffee to, what, Caf� Bustelo?

Ms. PENNEY: Yeah. Actually, I love - it's actually (unintelligible). But you know, what I did? I sat down - I had so many friends who helped me and once said, you know, what's your strategy? I said, I don't have a strategy. And he said, come on, you got to sit down. And what I did was I made a very detailed list of every single thing I spent money on and I said to myself, I'm cutting it down by 60 percent. I have to. Or 70 percent. There's no wiggle room here.

You know, I need food, I need my computer, I need electricity, running water. And you know, I stopped subscriptions. But you know what? You can live with so much less and you do not feel deprived - at least I didn't. And it came from knowing that I could work again, even if the art market had tanked away, the photography market has tanked for your caller. And that if I did one particular thing - two things: one, no self pity. I allow myself self pity maybe one minute a day. No more. I don't even do that anymore. And the other was stop negative thinking, because it made me panicky and anxious. So I do SNT, stop negative thinking. And also I do stop future thinking, SFT.

CONAN: Mm-hmm.

Ms. PENNEY: Because if you start thinking about the future and what might happen and the fact that I have no savings and if some new catastrophe would happen, what should I do? So the mental discipline of saying stop future think - you're talking to Neal on the phone, your - or on the radio.

CONAN: On the radio today, yes.

(Soundbite of laughter)

Ms. PENNEY: You sound like my friend on the phone. I'm talking with Neal on the radio, you know, I'm enjoying myself listening to your listeners, and everything is okay. So I don't even think about tonight when I get home and maybe a new bill might be there. I try and keep the anxiety completely at bay. And in that way, I can get to work with a clear mind - not all the time...

CONAN: Mm-hmm.

Ms. PENNEY: ...but that's what the discipline is. That's what I learned.

This year after Madoff taught me so much, and basically I wrote this book so that people could understand that you will surprise yourself, you have strength, you have resources like your caller from Kuwait, and that there are ways you can control your thinking so you don't get, you know, completely crazy and anxious, and you can work and concentrate and focus.

CONAN: John, good luck with your photo studio.

JOHN: Thank you very much.

Ms. PENNEY: Good luck. Absolutely.

JOHN: Thanks.

CONAN: Bye-bye. And, Alexandra Penney, this probably not a 10-second answer, but did you ever get any of your money back?

Ms. PENNEY: I'm going to get, I hope - it looks very good - something called Sipik(ph) money, which is a fraction of - it's what you get from a government agency that insures it.

CONAN: Some kind of investment.

Ms. PENNEY: Yeah. Who knows if I'm going to get it, but it's looking good. Not that much. But anything helps, believe me.

CONAN: The book is "The Bag Lady Papers: The Priceless Experience of Losing It All."

Alexandra Penney, thanks very much for your time today.

Ms. PENNEY: I love being with you.

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Excerpt: 'The Bag Lady Papers'

The Bag Lady Papers book cover
Note: There is language in this excerpt that some readers may find offensive.

Chapter 1: December 11, 2008

The Bag Lady Papers
By Roger Rosenblatt
Hardcover, 240 pages
List price: $23.99

I am carefully placing Baccarat crystal goblets on my dining room table. The lacquered pear-wood is set for four, with starched white place mats and napkins, pretty flowered English antique plates, and a handful of white votive candles. Five small silver vases filled with white freesia and the first delicate white tulips that signal spring will be on the way—and the sooner the better. Even though it is just mid-December, it seems as if it's been forever winter here in steely gray New York, with four snowfalls and single-digit windchill factors that invade the bones and frost the soul.

I have lived in this sun-filled apartment with wide views of the East River for almost twenty years, and I love to entertain here. Good friends will arrive soon and I have dug up my ancient Julia Child cookbook to make dessert. It's so old the covers have fallen off, but the Grand Marnier soufflé is a wow and actually very easy to prepare. In the kitchen the soufflé is waiting in its mold so I can pop it into the oven as soon as everyone is here.

The phone rings and I answer it.

"I'm hoping it's a rumor," a very dear friend, Alex, says, "but Bernard Madoff's just been arrested. All your money's with him, right?"

Jesus Christ!!!! All!! Every cent I ever saved since I started working summers at Lord & Taylor when I was sixteen years old. This cannot be true!

My cell phone begins to ring. The screen shows that it's my son calling from California. I hang up with Alex and my son repeats the news: "Don't worry, Mom, everything will be okay. We love you and you can always stay in our guest house."

I am grateful to the point of tears for the offer. But I am not going to be a burden to anyone. I never have been and I never will be.

I call Paul, my closest friend and on-and-off longtime companion, who's on his way to my place for dinner, and tell him what's happened.

"Please take a taxi and get here as fast as you humanly can. I can't be alone. I'm beyond physically terrified. And would you call Will and Jae and tell them not to come over? They'll understand."

I phone my lawyer and leave a message that I've lost all my money with Bernard Madoff and that I need to see him ASAP.

Whenever anxiety avalanches over me, I am compelled to clean whatever is in sight, to collect things and put them into tidy piles. This is one of those moments.

The soufflé has fallen in its mold. How fitting! My world is collapsing as well. I take the silver, linens, and candles off the table and place them precisely back in their drawers and cabinets.

I pause at the flowers. I bought them late this afternoon, as I usually do before a dinner party. Will I ever be able to afford fresh flowers again? Since college days, when I hung out in the musky, humid botany conservatory to escape the freezing New England cold, I have loved flowers. To see a magnificent rose unfurl its petals and reveal its fragrance freely to the world, and then to give itself quietly back to nature, has always been a wonder to me. So, instead of tossing the freesia and tulips, I take them out of the silver vases and place them carefully in a couple of drinking glasses and add some water. The little vases go into their corner cupboard, the remains of the soufflé are emptied into the garbage, and the soufflé mold is scoured.

Oh god, there's the meat loaf still cooking in the oven. I scoop it out of the pan, and even though it's too hot, I wrap it in foil with neat corners and put it in the refrigerator alongside the caramelized walnut and arugula salad I've made for an appetizer. I scrub that pan, too, wash it, dry it, and store it under the counter alongside the other organized rows of pots and cookware.

The last thing on the table is the crystal. I carry each heavy goblet to the glass-fronted cabinet where their lovely facets catch the light. I bought the Baccarat piece by piece because, twenty-five years ago, I didn't have the money to buy more than one glass at a time. As I'm putting the last one away, Paul flies in the door and gives me a huge hug, which has the unintended effect of physically reassuring me that I am not in some sort of weird dream state. He's canceled the other two dinner guests.

I stand in my spotless kitchen and haven't the faintest idea of what to do. He gives me another hug, then clicks on the television and the computer. He's scanning the channels and Googling Madoff. Apparently, the MF confessed to his sons and to the FBI that he has put all his investors into a giant Ponzi scheme. Nothing much else is clear, but I have a gut certainty that I have lost it all.

Terror snakes through my veins. The phone rings again. I'm still standing, dumbstruck, in the kitchen. It's another friend, Gayle, who says, "I had money in Madoff, too. What are you going to do?"

I don't know what to tell her. She doesn't know what to tell me. All we can do is agree to stay in close touch and hang up.

The call, at least, has broken the spell that seemed to have cemented my feet to my black-and-white-tiled kitchen floor. I make my way to my desk in the library and take out all the MF's statements, which have appeared so real and reassuring to me over the past years. There were the stocks he'd bought: Apple, Google, Hewlett-Packard, ExxonMobil, Bank of America, and many others, all familiar names to me. I look more closely. On the bottom line I see that he had put all my money into United States Treasury bills at the end of October.

In my panic, I'd forgotten about the Treasury bills. A few weeks ago, in the beginning of November, I had not received the MF's usual financial paperwork, which unfailingly arrived in the first week of the month. I had wondered why. I wanted to redeem my retirement money and have it in cash, out of the fund. The market was going crazy and I was at least smart enough to know it was no time to be in any kind of stock market investment, legendary or not.

I had waited a couple of days more for the statement to arrive, just to make sure there wasn't a post office delay, then I phoned Madoff headquarters on November 11; I remember the day because it was my father's birthday. Over the ten years that my savings were with the MF, I had called the office only two or three times about some procedural matter, in each instance speaking to a different person who appeared knowledgeable when I gave my name and account number.

The woman who took my call on November 11 told me that the statements were to be mailed out "tomorrow" and that someone would get back to me about redeeming my money.

"You have no worries," she said that day, "you're in United States Treasuries."

I called again a few days later and was informed that the statements "had gone out" and, once more, all was well, I was in Treasury bills, which were "one hundred percent safe." Still, I replied that I wanted to take my money out of my account. Someone would get back to me as soon as possible, she said.

I was momentarily lulled because the last paperwork had been issued a few short weeks ago, in October, and because the woman at Bernard L. Madoff Investment Securities had repeatedly reassured me that I was in United States Treasury bills.

As I now check the computerized pages of the October statement, I feel a tendril of hope. My money is backed by the American government! Maybe I haven't lost it all.

I call Gayle back excitedly, and we compare statements. She has Treasuries, too. But when we examine the paperwork closely, we realize that the numbers of the bills are exactly the same. Motherfucker! These are fake, too.

Gayle and I hang up again and I start pounding the computer keys to find the number of the United States Department of the Treasury in Washington, D.C. I locate the number, dial, and a machine asks me to leave a voice message.

I say my name and explain, "I am a client of Bernard Madoff. I understand he's been arrested for fraud and I would like to check on a Treasury bill number. If someone could please call me back, I would be most appreciative."

I know it is ridiculous to phone the United States Treasury at this hour. But what else can I do? The apartment is spotlessly clean. I need activity to help alleviate my anxiety. Suddenly I remember that I have stashed away one very strong tranquilizer in the bathroom medicine chest in case there should be a death in the family. Well, there it is. My money has passed away. I pop the pill in my mouth.

Alex's husband, Byron, rings up to remind me of Emerson's line, "I am defeated all the time, but I am born to victory."

I am thanking him when the other line rings. "This is Mr. W, from the United States Department of the Treasury," a deep voice says.

It's past eight at night, and the U.S. Treasury is returning my call? I am now even more horribly certain that this Madoff thing is real and that I am standing in the middle of a nightmare.

I tell him that I have a Treasury bill and want to check the number to see if it is real.

"I've heard from about fifteen Madoff clients," he says before asking me the bill number.

"That is indeed a Treasury offering. And there are many entities that would buy that offering."

"How can I find out if Madoff is one of them?" I ask.

"I don't think there is any place where you can find out who bought what," he responds.

"There must be a way," I plead. "Do you have any idea how I could go about it?"

"It sounds like a bad situation and I am sorry but I can't offer advice," he says with finality.

The tranquilizer is hitting me like a tsunami. Paul tells me he'll spend the night, since he doesn't think I should be alone. I'm so groggy that I don't know how to tell him how grateful I am, so I give him one last hug and head for bed. He stays glued to the TV, scanning the channels for more news and details on the situation. All the cable stations are covering the story.

I don't turn out the lights. I start up the laptop that's on my night table. A thought has been hovering in my mind since Alex and my son called, and it's a thought that many before me have had upon receiving devastating news. It's the universal out, the final option, that, like it or not, exists for everyone. I Google the Hemlock Society. I want to know a painless way to die. The Hemlock Society Web site, it turns out, has been dismantled; it has gone to cyber heaven. If I weren't in such a morbid state, I'd have a good laugh about that.

I check out a few more sites that pop up after I search for "self-inflicted death." I learn that, unfortunately, it takes a while to cross the Styx to get to the otherworld, such as it may be. If you're in a major hurry, guns work fast, as does jumping out of windows, and cyanide, which is used in making jewelry, seems to work best and is speediest. I love jewelry, especially pearls, so this link to the chemical that could end it all seems to reflect perfectly the irony and absurdity of what is happening to me. Before I can find out more, the tranquilizer takes over and, mercifully, I pass out.

From The Bag Lady Papers by Alexandra Penney. Copyright 2010 by Alexandra Penney. Reprinted by permission of Voice. All rights reserved.