Getting nothing for something

You're at an upscale speakeasy. A man peers out a peep-hole and says, "Yeah?"

You say, "Bernie sent me."

The guy replies, "Come back later. We're full."

Repulsed a second time, you appear a third time and say, "Mr. Madoff sent me."

This time you're allowed in but told you're allowed one drink, a smooth, 18-year-old scotch.

That, in essence, is how Bernard Madoff lured his investment suckers. He made them want to part with their money. Only later did they learn it was rotgut whiskey, not scotch, they were being served.

It's difficult to feel much pity for them. Most were super rich to begin with. Rather than shoot for the moon they saw paper profits of 8 to 12 percent even in down markets, year after year. Each felt that he/she was one of a hundred of so privileged to park their life savings--hundreds of thousands, tens of millions--into Madoff's Ponzi scheme.

As Ron Chernow notes in The New Yorker, "The aura of exclusivity was bogus, of course; he ended up with almost five thousand client accounts."

Google "Ponzi scheme" and you get 5,010,000 hits.

Some of Madoff's early investors did see rewards from money "invested" by later arrivals. But when the market began to bottom out, $7 billion in chits came pouring in. That's when "Uncle Bernie" 'fessed up. His total take: some $65 billion, the largest scam in history.

Mark Seal, writing about "Madoff's World" in Vanity Fair, says he himself tried to get into Madoff's investment fund, fortunately, in vain.

"In November," says Seal, "I invited a friend and long-time Madoff investor to dinner and literally begged him to get me in. He listened politely, then shook his head slowly. 'Forget it,' he said. 'Bernie was closed; Bernie didn't need the money.' His discouraging response only made me want Bernie all the more."

Seal interviewed dozens of former millionaires and multi-millionaires for his article.

Some wealthy widows, heeding to their dying husbands' wishes to put everything in Bernie's hands, wound up as paupers.

Houston stockbroker Joyce Z. Greenburg had a fortune invested in Madoff. But when she inherited an investment from her husband she resumed a part-time job at a brokerage. Seal says Madoff found out and called her in 1999, fuming, "I never manage money for anyone who works at a brokerage." Either chose between his account or her job. She closed her account, and he wired her the money.

Seal quotes her further: "That's the good part. The stupid part is that I retired in 2001 and asked to open a new account. ... And now that's gone with the wind."

Two older men, Norman F. Levy and Walter J. Shapiro, both wealthy philanthropists, treated Madoff like a son, including him and his wife Ruth to every birthday, anniversary, bat mitzvah, wedding or graduation. He took Shapiro for more than half a billion dollars. The Betty and Levy Foundation and those of their sons had to shut down after Madoff's arrest.

The scheme could have been nipped in 2000 when Harry Markopolos, an accountant and private fraud investigator sounded the alarm to the Securities Exchange Commission to no avail. In 2005, he sent regulators a 19-page memo titled "The World's Largest Hedge Fund Is a Fraud."

He was referred to the SEC's New York branch chief, Meaghan Cheung, who, he wrote in an e-mail to one of her colleagues last year, "didn't have the derivatives or mathematical background to understand the violations" much less prosecute them.

One of the sadder cases is that of Maureen Ebel, 60. Seal relates:

"Following the untimely death 1n 2000 of her physician husband, she got suckered into the Madoff fund. 'All your problems are over,' said an elderly relative of her late husband's. 'My guy Madoff has agreed to take you as a favor to me. I pulled on his heartstrings.' Feeling blessed, she eventually transferred everything she had: $7.3 million.

"Now she was sitting among the ruins, having returned Christmas gifts, begged back her annual $5,000 International Polo Club membership fee, persuaded the Leukemia & Lymphoma Society to return her $1,000 donation, sold valuable jewelry, put up her Lexus for sale on-line, and listed her home ... she had to take a job caring for a wealthy friend's 93-year-old mother, which developed into 'basically being a maid,' she said. On the day of my visit, she had just been informed by her employer, 'We're interviewing a Hispanic woman to do the work. It's best for us.'

Ebel added, "If I have to feed myself, I can go and work as a waitress."

Meanwhile, Ruth Madoff, who seeks $69 million, claiming it was not part of the Ponzi scheme, has expensive tastes of her own, going to Davidoff of Geneva on one of her husband's recent birthdays to buy a $14,500 humidor, inlaid with a buffalo motif, filled with his favorite cigars.

{Honicker is a retired newspaperman and a freelance writer}.