The Next Uncle Bernie Installment

The story has been building. Uncle Bernie and his entourage, family, friends, people in high places, further exposed in one of the latest expositions on the fraud of the century. In How Bernie Pulled Off His Massive Swindle Fortune tears into the finer details of family life in the Madoff household in the 50's and 60's. There are some rather startling allegations, or evidence presented. Here are some choice pieces from my perspective:

The employees were transfixed. Standing on the mid-Manhattan trading floor of Bernard L. Madoff Investment Securities in late 2007, a half-dozen staffers stared up at the ceiling-mounted TV as CNBC aired a report on the mysterious Palm Beach death of a hedge fund manager who had been leading a double life. The police, it appeared, were even considering the possibility that he had been murdered. "Bernie," someone casually asked as Madoff happened to walk by, "have you heard of this guy?" Madoff glanced at the screen, blanched, and exploded: "Why the fuck would I be interested in some shit like that?" The employees recoiled. "I never saw him react like that before," says a Madoff trader who witnessed the outburst. "It obviously hit a nerve."

There was a point in the early stories when it was touted that Uncle Bernie was the father of electronic trading. He called for the future of trading to be handled automatically. Carl Shapiro gave Uncle Bernie $100k after he was able to turn trades around in 3 days instead of three weeks. Said Mr. Shapiro also entrusted Bernie with an additional $250M (yes - million) only days before he fessed up - for a stated total of $545M lost in the scheme. Ok, ok, so, then what do you make of .... this?

Bernie didn't have a BlackBerry. He didn't even use e-mail -- he could barely turn his computer on. His PC was configured essentially just to give him financial news, says Nader Ibrahim, who used to work on the technology help desk at Madoff's firm. "It was set up in a manner that the computer never shut off," Ibrahim explains. "So the format on the screens, how his windows were set up, and everything like that would just come up the same way. If he were to touch the stock menu and something [unexpected] came up in front of his system, he would get all flustered and call us."

The reality is that whether it was his attendance at Hofstra or his involvement in the "creation" of the NASDAQ, these were Bernie's versions, and by some's measure, not altogether the whole truth.

That account is largely correct -- except for Madoff's role in it. Says Charles "Dick" Justice, who started with the National Association of Securities Dealers in 1968 and was its chief technology officer for decades (and knows Madoff), "he wasn't involved in the founding of Nasdaq at all." Asked about a separate Madoff comment that he was "involved in the design of the Nasdaq technology," Justice says, "No, he wasn't."

And then we get the guts of the trading operations. And who was involved, and what did they know. There is some speculation to these statements, but as this story unravels, and the details become more intertwined, it remains most interesting, and I suppose, astonishing, the details. Yes, astonishing.

According to a person familiar with the matter, DiPascali has no evidence that other Madoff family members were participants in the fraud. However, he is prepared to testify that he manipulated phony returns on behalf of some key Madoff investors, including Frank Avellino, who used to run a so-called feeder fund, Jeffry Picower, whose foundation had to close as a result of Madoff-related losses, and others. If, for example, one of these special customers had large gains on other investments, he would tell DiPascali, who would fabricate a loss to reduce the tax bill. If true, that would mean these investors knew their returns were fishy.

Say what? The investors themselves were dictating the returns to better "manage" their overall financial health. WOW! That's big.

And then there are the obsessions and quirks. The elliptical building, and the need for angles, consistent alignment and parallel lines. Say what? the Lipstick Building? There are better choices, I think. Black stick pins by the box load. Bernie rearranging the entry-way floor coverings on his knees.

The SEC records have an ever climbing account balance for Mr. Madoff. By the early seventies, he had reached the millionaire's club. That was big change in those days. Gasoline was $0.40/gal. A Popsicle was $0.10. Average cost of a new car was $3,600. And his stature in the Wall Street community was also rising.

Before it all went to pieces, Bernard L. Madoff Investment Securities appeared to be a charmed firm run by a tight clan. People believed in Bernie. Nasdaq made him its chairman; the SEC appointed him to industry panels; Congress invited him to testify. New York Senator Charles Schumer stopped by the office in the run-up to the Iraq war and gave a rousing talk on the trading floor. Everywhere you looked, there were signs that Madoff -- and by extension his firm -- had special status. Bernie was even able to arrange with his friends the Wilpons, owners of the New York Mets, for staffers to play charity softball games on the field at Shea Stadium.

And then came 2008. and the confession, the Mexican restaurant holiday party, and the ride home that evening. He commented to his driver, "All my life, I've watched the evening news. But tonight I sure won't be watching."

So what's left? Bernie's in prison. Ruth has visitation. His son's haven't spoken and have expressed no interest in speaking with their parents. So, where's the money? A little over a billion has been accounted for? Claims are upwards of $20B or$30B. Not the $65B figure that is commonly floated. That is the artificially inflated investment account expectation of all the false statements. is this proportional? By my measure ($1B out of $65B translates to the residence exchange of a 4000 sq ft. to 61.5 sq ft.), Uncle Bernie's been bonused a cell larger than the proportionate expected recovery for his clients.

As for Madoff himself, he has traded a 4,000-square-foot penthouse for a 76-square-foot jail cell. The bespoke charcoal suits have been replaced by an orange jumpsuit. Even so, one person close to the family says he's bearing up well in jail. He's exercising. He is reading a lot of books. "He makes the best of it," adds this person, who says that Madoff looks surprisingly good these days. Perhaps that's because for the first time in decades, Madoff has no secret weighing him down.