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Madoff victims at Palm Beach club stunned by betrayal

PALM BEACH — The room of somber whispers fell silent when the two men walked in.

Just days after the collapse of Bernard L. Madoff's suspected $50-billion Ponzi scheme, two of his emissaries returned to the epicenter of the financial disaster to face some of the hardest-hit investors, many of them old friends whom they had recruited to invest in Madoff's firm.

As Carl J. Shapiro and Robert M. Jaffe sat down at the Men's Grill of the Palm Beach Country Club, they scanned an awkwardly quiet room, seemingly looking for friendly faces and reassuring nods.

The moment was a stark reversal for two men whom people used to trip over themselves to meet in hope of a chance to invest with Madoff.

"You doing okay?" asked one of the several club members who approached the men in a show of support. "We're here for you."

While the fallout from Madoff's suspected con game shook investors globally, perhaps nowhere was there a higher concentration of victims than in this room. Investors were said to have paid hundreds of thousands of dollars a year to remain members of this club in hopes of an introduction to Madoff, usually by Jaffe or Shapiro. Madoff has been a member since 1996.

But more than wealth, these people seemed to have lost a sense of trust and prestige. During a visit to the club Saturday, many members, asked for their reactions, requested not to be named because they did not want to ruin their standing among friends.

In Madoff's fall, their world turned upside down, they said. Those who prided themselves as financially savvy suddenly seemed gullible. The trusted friend, sage adviser and model philanthropist they thought they knew was now charged with being a multibillion-dollar swindler.

There is no evidence that either Shapiro, who joined the club in 1974, or his son-in-law, Jaffe, who joined in 1992, knew of the fraud. Both men, who give millions every year to countless charities, are also said to have been duped of hundreds of millions of their own money, according to friends of their families.

But as a steady stream of older men in pastel sweaters and sockless penny loafers slowly stood and approached the center table for hushed conversations and to offer pats on their backs, Shapiro and Jaffe looked ashen.

"All I can say is that this is an awful, awful time for us," said Shapiro's wife, Ruth.

This was not the first scam to hit this country club, which was formed in the 1950s by Jewish residents who were banned from other island haunts.

Only three years ago, a handful of its members were victims of a similar, albeit smaller, pyramid scheme. Two men, John and Yung Kim, ran a company called the KL Group, which was based on the island and bilked investors of more than $190-million.

"But everyone at the club saw this differently," said Laurence Leamer, an island resident and author of a forthcoming book, Madness Under the Royal Palms, about the island's elite.

"Anyone can get robbed," he said. "Madoff's scam was so much worse because he was one of their own."

Everywhere at the club, it was the topic of conversation.

Upstairs in the women's dining room, a woman joked that she now knew the proper way to pronounce his name.

"Made off," she said. "You know, like he made off with all our money."

Even off the island, many investors said they were impressed with how careful Madoff seemed.

The shame of the Madoff scandal seemed especially bitter here in part because the club is known for its noblesse oblige in requiring members to give tens of thousands of dollars each year to charity.

Madoff victims at Palm Beach club stunned by betrayal 12/14/08 [Last modified: Monday, November 7, 2011 4:47pm]
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