Profile: Bernard Lawrence Madoff

29 Jun 2009, 1:40 pm   -   Source: SBS staff and agencies
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Bernard Lawrence Madoff was born on April 29 1938 and kicked off his investment career at the age of 22 when he put the $5,000 proceeds of his summer jobs into his first business.

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Bernard Lawrence Madoff was born on April 29 1938 and kicked off his investment career at the age of 22 when he put the $5,000 proceeds of his summer jobs into his first business.

By the early 1990s, the Wall Street high flyer soared up the corporate ladder and became chairman of the Nasdaq Stock Market.

The early years

He founded the Wall Street firm Bernard L Madoff Investment Securities LLC in 1960 and was the company chairman until his arrest last year.

His business grew significantly with the help of his father in law, accountant Saul Alpern, who referred a circle of friends and their families.

The firm functioned as a third market provider, which bypassed exchange specialist firms by directly executing share orders over the counter from retail brokers. The firm also had an investment management and advisory sector.

Loved the high life

Madoff loved a flashy lifestyle, and had homes in Manhatten, the Hamptons, Palm Beach and Florida.

According to a filing by Madoff earlier this year, he and his wife Ruth were worth up to $US126 million plus an estimated $US700 million for the value of his business interest.

Other major assets include securities ($US45 million), cash ($US 17 million), half-interest in BLM Air Charter ($US 12 million), 2006 Leopard yacht in France ($US 7 million), jewelry ($US2.6 million), Manhattan apartment ($US 7 million), Montauk home ($US 3 million), Palm Beach home ($US 11 million), Cap d' Antibe, France property ($US 1 million), and furniture, household goods, and art ($US 9.9 million).

Generous giver

Despite the fraud allegations against him, Madoff was a well known philanthropist and served on boards of nonprofit institutions, many of which entrusted his firm with their endowments.

Madoff donated approximately $US6 million of his own wealth to lymphoma research after his son, Andrew, was diagnosed with the disease.

He and wife Ruth also donated almost $US250,000 to political causes since the early 90s. Reportedly almost 90 per cent went to the Democratic Party and 12 per cent to the Republican Party.

Scandal hits Madoff family

On December 10 2008, Madoff informed his sons Mark and Andrew that he'd be paying several million dollars of bonuses two months earlier than scheduled. According to investigators, the sons demanded to know why their father could pay the bonuses ahead of time but not afford to foot the cash for investors.

Madoff admitted the asset management arm of his firm was an elaborate Ponzi scheme.

He was arrested a day later and charged with securities fraud.

The 70-year-old pleaded guilty to 11 federal crimes, including securities fraud, mail fraud, money laundering and making false filings with the SEC.

The Ponzi scheme explained

According to Madoff, the Ponzi scheme began in 1991 and said he never made any legitimate investments with his clients' money.

Instead, he deposited the money into his business bank account with the Chase Manhatten Bank.

He then went onto use the account for client withdrawals, claiming the "profits" were the result of a uniqie "split strike conversion strategy".

Madoff told the Court his intention was to always resume legitimate trading activity when the economy picked up, but it proved "difficult and ultimately impossible" to break even for his clients.

It's believed his actions have short changed investors to the sum of $US65 billion.
 

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