What made Madoff do it? Revenge
They called him “Uncle Bernie” or “The Jewish T-Bill”, after US Treasury Bills, the dullest and most secure investment. With his silver hair, Savile Row suits and avuncular manner, Bernard Madoff radiated solidity, security and honesty. He was a bastion of Wall Street, where he ran an enormously successful, legitimate, share-trading operation as well as his fraudulent investment scheme. He was a fixture on the Jewish charity circuit, confidant of multi-millionaires, equally at home in the salons of Manhattan’s Upper East Side, the luxurious Palm Beach Country Club and the French Riviera.
It was all, as Madoff himself eventually confessed, “One big lie”. Behind the designer facade, Madoff was the latest in a dark continuum of Jewish criminal masterminds rooted in the Lower East Side of Manhattan, a modern version of Arnold Rothstein and the notorious Meyer Lansky.
Rothstein and Lansky used baseball bats and guns to build their criminal empires. Madoff used computers to engineer the largest and most enduring fraud in modern history. Each month, thousands of personal clients, many of whom were sophisticated investors in their own right, received detailed accounts of stock trades that had never taken place, and account balances that did not exist, none of which they questioned.
Madoff’s $65 billion investment fraud is a very 21st-century story of gullibility tinged with greed and a powerful sense of financial entitlement. But it is rooted in a rancorous divide between two waves of Jewish immigrants that shaped the psyche of a generation of American Jews.
Madoff intentionally defrauded the Jewish establishment in what is known as an “Affinity Fraud”. This type of fraud targets the members of a specific religious or ethnic group, abusing the trust and acceptance of insiders to defraud other members.
Bernard Madoff’s grandparents arrived in the United States from eastern Europe about a century ago, four hopeful new arrivals among more than two million Jews who fled wars, pogroms and oppression for a new life in the Goldene Medinah. And like all of the eastern European Jews who hoped for a welcome from the American Jewish establishment, they were sorely disappointed. The grand German families, the Yekkes, who had already made New York an international financial centre: the Lehmans, Warburgs, Schiffs and so on, were horrified at the waves of eastern European Jews pouring in.
The German Jews feared — correctly, as it transpired — that the immigrants would foster antisemitism. They spoke a bastard dialect with a thick accent. They were noisy and rough-mannered. They came from primitive shtetls, with no running water or electricity.
The newly arrived eastern European Jews mostly lived on the Lower East Side, where Bernard Madoff’s grandparents ran a shvitz - a Turkish bath. The Lower East Side was a giant shtetl, transplanted to the back streets of Manhattan. Crowded with tenement slums, sweatshop factories, back-room bars, and bordellos, it was run by shtarkers, tough guys, who knew how to look after themselves. Not all shtarkers were criminals, but all the criminals were shtarkers. The narrow alleys and crowded tenements of the Lower East Side nurtured a generation of Jewish gangsters. These were the streets where Bernard Madoff grew up. He spent much of his childhood on the Lower East Side scampering through his grandparents’ shvitz and he absorbed the gangsters’ mores.
Madoff intentionally defrauded the Jewish establishment in what is known as an “Affinity Fraud”. This type of fraud targets the members of a specific religious or ethnic group, abusing the trust and acceptance of insiders to defraud other members. Madoff developed a sophisticated network of contacts across Jewish communal institutions including charities, schools, universities, synagogues, and country clubs and stole their money.
His gateway to plunder was the modern Orthodox Fifth Avenue Synagogue, home to one of the richest and most powerful congregations in America. That led him to Yeshiva University, where he was a valued member of various governing committees; the Ramaz day school; and numerous Jewish charities and foundations.
He even defrauded Elie Wiesel, the Nobel laureate and Holocaust survivor, of much of his personal wealth, and the assets of his charitable foundation. A century after Bernard Madoff’s grandparents stepped off the boat to be slighted by the Yekke establishment, Madoff the shtarker wreaked a revenge of almost biblical proportions.
Adam LeBor’s book, ‘The Believers: How America Fell for Bernard Madoff’s $65 billion Investment Scam’ will be published next month by Weidenfeld and Nicolson.