Key Players in the Madoff Scandal

Bernard L. Madoff, who faces charges of securities fraud, was the founder and chief executive of Bernard L. Madoff Investment Securities LLC until late December, when he admitted to his sons that his firm was “basically, a giant Ponzi scheme” and was arrested by FBI agents at his home.

As of Jan. 6, 2009, 8,000 claim forms had been mailed to customers of Madoff seeking protection under the Securities Investor Protection Act. The claims are being handled by the Securities Investor Protection Corporation, which, according to its Web site, is “the U.S. investor’s first line of defense in the event a brokerage firm fails, owing customer cash and securities that are missing from customer accounts.” SIPC is working with an appointed trustee, Irving H. Picard, to help these customers “recover funds.”

Below are some of the key players involved in the rise and fall of Madoff and his firm.

The Fairfield Greenwich Group

The Fairfield Greenwich Group was founded in 1983 by Walter M. Noel, the father of a prominent Connecticut family, and merged with a firm whose general partner was Jeffrey Tucker in 1989. Tucker brought Madoff and Fairfield together and Fairfield began investing money with Madoff beginning in the early 1990s. Noel has three daughters who married “into international families that provided additional connections for [Fairfield],” The New York Times wrote on Dec. 20 in an article about the scope of Madoff’s scheme.

Indeed, Mr. Noel’s sons-in-law became partners in marketing at Fairfield and “spent much of their time marketing the firm’s funds in either their home countries or regions where they had their own family connections.” They helped to set up “feeder programs” with several European banks, which then “became conduits that carried fresh money to Mr. Madoff.” Bloomberg reported that the Fairfield fund Fairfield Sentry Ltd., valued at $7.3 billion, was funded by Madoff, making it likely the “biggest loser” among the funds that invested with Madoff.

Sonja Kohn

Mrs. Kohn, the founder of Austria’s Bank Medici, had approximately $2 million invested with Madoff’s firm. She was reported to have “dropped out of sight” by The New York Times on Jan. 6; Austrian regulators took over the bank last week. The Times explains that Kohn’s investors included several “Russian oligarchs,” which is of note because “Russia’s richest men have been especially strapped as commodity prices and their stock market have collapsed.”

Kohn, a Jewish Eastern Europe emigrant to Vienna, was one of a handful of women running New York brokerage firms in the 1980s, when she “started a decades-long friendship with Mr. Madoff” and “became one of Mr. Madoff’s international conduits for securing billions of dollars from the global rich.” Apparently sharing Madoff’s marketing philosophy, Kohn “used the promise of entree to an otherwise unavailable investment as her key selling point.”

Robert Jaffe

Former stockbroker and philanthropist Robert Jaffe, a mainstay of the Palm Beach Country Club, is one of several people listed as a “middleman” of Madoff by The Wall Street Journal in an article about the Madoff firm’s “feeders.” Jaffe is now “facing tough questions from dozens of investors” whom he recommended invest with Madoff, including Jerome Fisher, the co-founder of Nine West, and Jaffe’s father-in-law, Carl Shapiro, an apparel tycoon.

Robert Schulman

Schulman ran Tremont Group Holdings, which funneled about $3.3 million to Madoff, according to The Wall Street Journal. Tremont is owned by Massachusetts Mutual Life Insurance Co. (MassMutual), which was able to enter the “fast-growing hedge-fund business” by acquiring Tremont in 2001. Schulman said in an interview recently that he and his family and friends had been “duped by a scheme that effectively fooled some of the most significant and smartest organizations in the world.”

To investors, Schulman described his relationship with Madoff as close, but the Journal noted that Tremont’s marketing documents “did not always disclose the relationship between Mr. Madoff and the feeder funds.” Neither Tremont or Schulman, who left the company last July, have been charged in connection with Madoff’s scheme.

R. Thierry Magon de la Villehuchet

Mr. Villehuchet was found dead at the New York offices of his investment firm, Access International Advisers, on the morning of Dec. 23. According to the Associated Press, Villehuchet had $1.4 billion invested with Madoff and had been attempting to reclaim his investors’ money for days after the Madoff scheme became public. Villehuchet, found on the floor of his office by a security guard, had slit his wrists and taken sleeping pills.

Villehuchet, of “rich French lineage” and formerly the chairman and chief executive of Credit Lyonnais Securities USA, “tapped his upper-crust European connections to attract clients” that included Philippe Junot, the ex-husband of Princess Caroline of Monaco, AP writes. “It was not immediately clear how he knew Madoff or who his clients were.”

Several people expressed skepticism about Madoff’s high returns long before his arrest in December. A report by the now defunct semi-monthly publication MARHedge published in 2001 pondered: “What is striking to most observers is not so much the annual returns—which, though considered somewhat high for the strategy, could be attributed to the firm’s market making and trade execution capabilities—but the ability to provide such smooth returns with so little volatility.”

Newsweek reported on Jan. 3 that those who profited from investing with Madoff and “got out” before it was too late may not be entitled to their money. Mark Hosenball writes that the legal precedent of the case against the Bayou Group, a Ponzi scheme unmasked in the fall of 2008, will help dictate what happens to Madoff’s profiteers:

“In October 2008 a judge in the Bayou case, Adlai Hardin Jr., ruled that investors who cashed out their interests within two years of the scheme’s exposure had to hand back their principal as well as their profits—even though they were innocent victims of the swindle—if there was evidence that they got out because they suspected, or had been warned, there was something amiss.”