Montauk Pioneer - April 5, 2009

Bernie Madoff, when he went to the police to report on what he had done, breathlessly told them that he had stolen $50 billion dollars from his clients during the last 15 years, which is an amount, as I reported last week, that is slightly larger than the gross national product of Bulgaria. He also told them he had come to turn himself in.

Now that he has been marched off to jail, investigators are going through his business files and think that it might be more like $65 billion that he stole, which puts him up in the region of having stolen the equivalent of the gross national product of Portugal.

In any case, they are hoping to recoup some of the losses from those he swindled. They will do this by seizing his bank accounts and other assets, which, from those they have been able to identify so far, would bring the total available for restitution to about $1 billion. They are also seizing his wife's assets, which, apparently, amount to about $85 million.

Among the assets being seized are the various houses he owns, along with the contents of them, which may include a lot of things with limited value, but might also include a lot of things of great value such as antiques and expensive paintings and jewelry. After all, he was the most successful man on Wall Street for 15 years. The man was entitled. His properties include a Fifth Avenue penthouse apartment in Manhattan, homes in Palm Beach and Cap d'Antibes, France and his oceanfront mansion on the Old Montauk Highway in Montauk.

All the properties, except Montauk, are in Madoff's name. The Montauk property is not. It is either in a corporate name or in his wife's name, perhaps because he might be able to write part of it off his tax bill if he held business conferences there. You never know. A buck here, a buck there, it adds up.

Also seized were his big yacht and at least five automobiles, including a Bentley. When you have this kind of magic on Wall Street, you can live large.

And who else was involved in this but him? This week, authorities arrested David Friehling, his accountant. He is being charged with aiding and abetting, investment advisor fraud and making false statements to the Securities and Exchange Commission. Among other things, Mr. Madoff, in dealing with these vast sums, hired Mr. Friehling's accounting firm. This firm works out of a one-room office in an obscure upstate town to file all his reports to the SEC and the IRS attesting to the accuracy of the work that Mr. Madoff was doing. I imagine him living in a tenement building in Utica, New York, wondering if all these zeros were accurate or not, and wondering if they were, if he ought to charge Madoff a little more. (He was paid just $12,000 a month, a piddly sum.)

Authorities in Britain are also investigating the connections between Bernard L. Madoff Investment Securities LLC. in New York and Madoff Securities International in London. Madoff who not only never made good stock trades over all these years with the money he received, but made no stock trades whatsoever, was pretending to wire the money to London, where employees in his London branch were pretending to make trades. Investigators now know that employees at the London branch were told not to use company email addresses when communicating with New York. They were to communicate only with accounts on Hotmail and Google. Wonder why?

So where did this money go? He certainly didn't go down with the stock market. He never was in the stock market. He takes in $65 billion. And when he's arrested, he's only got stuff worth about a billion and bank accounts for maybe a quarter of a billion? The answers could be that he spent it. Or he has it squirreled away somewhere they haven't found yet, or that he gave it away to charity. Some say that the "dividends" he gave to his investors was where it went. But that doesn't add up. Well, they'll find it. It's gotta be here somewhere.