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Investor's clients count their losses after arrest

Investors wondering about their money gather in the building where Bernard Madoff has his offices Friday in New York.

Associated Press

Investors wondering about their money gather in the building where Bernard Madoff has his offices Friday in New York.

The zoning lawyer in Miami trusted him because his father had dealt profitably with him for decades. The officers of a little charity in Massachusetts respected him and relied on his advice.

Wealthy men like J. Ezra Merkin, the chairman of GMAC; Fred Wilpon, the principal owner of the New York Mets, and Norman Braman, who owned the Philadelphia Eagles, simply appreciated the steady returns he produced, regardless of market conditions.

But these clients of Bernard Madoff had this in common: They chose him to oversee much of their personal wealth. And now, they fear, they have lost it.

While Madoff is facing federal criminal charges, arrested Thursday by federal agents who accuse him of operating a vast $50-billion Ponzi scheme — perhaps the largest in Wall Street's history — many of his clients are facing an abrupt reversal of fortune that is the stuff of nightmares.

"There are people who were very, very well off a few days ago who are now virtually destitute," said Brad Friedman, a lawyer with the Milberg firm in Manhattan. "They have nothing left but their apartments or homes — which they are going to have to sell to get money to live on."

From New York to Palm Beach, business associates of Madoff spent Friday assessing the damage, the extent of which will not be known for some time. Many invested with Madoff through other funds and may not yet know that their money is at risk.

Emergency meetings were being held at country clubs, schools and charities to assess the potential losses on their investments and to look for options.

There is not much guidance available yet from regulators. On Friday, a federal judge appointed a receiver to oversee the Madoff firm's assets and customer accounts. A Web site is being set up to keep customers informed, but no one is sure yet whether any sort of safety net will catch the most vulnerable investors.

For Stephen Helfman, a lawyer in Miami whose father opened an account with Madoff more than 30 years ago, the news came as a hammer blow. His grandmother, 98, relied on her Madoff money to pay for round-the-clock care, he said, and his children's college funds were wiped out.

The news was equally devastating for the Robert I. Lappin Charitable Foundation in Salem, Mass., which works to reverse the dilution of Jewish identity through intermarriage and assimilation by sending teenagers to Israel and supporting other Jewish education efforts.

The foundation was forced Friday to dismiss its staff and shut down its programs, executive director Deborah Coltin said. "We've canceled everything as of today, everything," she said tearfully.

Andrew Calamari, an associate director for enforcement for the Securities and Exchange Commission, said the case involved "a stunning fraud that appears to be of epic proportions."

As thousands of investors counted their losses on Friday, federal authorities took control of what remained of Madoff's company and began to pore over its books.

Investor's clients count their losses after arrest 12/12/08 [Last modified: Thursday, November 4, 2010 11:57am]
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