12.11.10

Mark Madoff's Agony

For the two years since he turned his father Bernie Madoff in to authorities, the pressure on Mark has been relentless and increasing. Allan Dodds Frank on what drove him to suicide.

Until Bernard Madoff’s giant Ponzi scheme collapsed, his family seemingly had no worries in the world. Now, on the second anniversary of his father’s arrest, Bernard Madoff’s older son, Mark, killed himself, police say.

Mark took his life after apparently exchanging disconsolate emails with his second wife Stephanie who was in Florida with their daughter. He hanged himself— NBC News says with a black dog leash—in their fourth floor apartment on Mercer Street in the Soho section of Manhattan as the couple’s young son slept. According to news reports, his father-in-law found the body and called police shortly before 7:30 a.m. Saturday, two years to the day Bernard Madoff was charged with the biggest Ponzi scheme ever.

Gallery: Madoff Family Photos

In mid-October, 2009, Mark Madoff had disappeared for a night, later telling his wife that he was “stressed out” and had checked into the Soho Grand Hotel. She became so stressed out herself that she successfully petitioned a New York judge early this year to change the last name Madoff to Morgan for her and the couple’s children, Audrey and Nicholas.

For 46-year-old Mark Madoff, maintaining a posture of innocence about his father’s Ponzi scheme has been unbearable ever since he and his brother Andrew turned their father in to authorities. The brothers then claimed that act proved they had nothing to do with the fraud and, on the instruction of their lawyer, they reportedly have never again talked to their father or their mother Ruth. One source familiar with the case says their lawyer was worried: “Mommy and Daddy were setting the sons up to commit felonies (by hiding money).”

Still, the Madoff brothers and Bernie’s brother Peter have faced ever-increasing pressure from criminal prosecutors, the bankruptcy trustee and angry investors. Ruth Madoff has been out of public sight and Bernard Madoff is serving a 150-year-sentence at the federal prison in Butner, N.C.

The final tipping point for Mark may have been lawsuits filed recently by bankruptcy trustee Irving Picard, including one in Great Britain that claims the Madoff brothers shared responsibility for a series of phony transactions between New York and London that funneled millions to Madoff family accounts.

That case is sealed so far, but in a press release, the trustee’s legal team suggested the case has turned up new evidence of criminal behavior by the Madoff brothers.

Talking about the “money flow” between Madoff offices, John W. Moscow of Baker & Hostetler said: “The London company’s purpose included acting as a cover to conceal the true nature and source of the monies stolen from BLMIS’s (Bernard L. Madoff Investment Securities) customers and returning it to BLMIS’s market-making and proprietary trading businesses, run by Madoff’s sons Mark and Andrew.”

In a statement Saturday, Martin Flumenbaum, the Paul Weiss lawyer who represents Mark and his brother Andrew, made no reference to the recent civil cases against the Madoff family.

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Flumenbaum said: “Mark Madoff took his own life today. This is a terrible and unnecessary tragedy. Mark was an innocent victim of his father’s monstrous crime who succumbed to two years of unrelenting pressure from false accusations and innuendo. We are all deeply saddened by this shocking turn of events.”

Ira Lee Sorkin, the lawyer who had represented Bernard Madoff, told The Daily Beast: “This is a tragedy on so many levels.” He declined to elaborate.

The bankruptcy trustee and Justice Department prosecutors remain far from convinced that either Mark Madoff or his brother Andrew are innocent. Investigators believe that even if the brothers did not know much about their father’s Ponzi scheme, as officers of the firm and recipients of tens of millions of dollars from their parents, they may have committed a series of crimes including tax fraud, falsifying records, wire and mail fraud.

Mark Madoff was once regarded as a jovial, smooth, entertaining executive, the University of Michigan graduate lived the Life of Riley at the family firm where he earned more than $5 million a year and carried a series of executive titles, including co-director of trading. He had a fancy house in Greenwich, a great summer spot in Nantucket, enjoyed deep-sea fishing off Montauk, L.I. with on his father’s fleet of fancy boats.

His protestations notwithstanding, many of Mark Madoff’s worldly possessions already had been pried away by attacks from the bankruptcy trustee who kept digging up evidence for federal prosecutors to contemplate as they trained the crosshairs on Madoff’s family.

In a lawsuit filed earlier this year, Picard’s legal team said:

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Medical examiner staff remove the body of Mark Madoff from the apartment building in which he lived, Saturday, Dec. 11, 2010 in the Soho neighborhood of New York. (AP Photo/Mary Altaffer)

“The Trustee has thus far identified a total of at least $66,859,311 that Mark Madoff received improperly from BLMIS. Mark Madoff lived a high-end lifestyle with homes in Manhattan, Nantucket, and Greenwich, Connecticut. BLMIS funds paid for all aspects of his lavish lifestyle from the purchases of his high-end homes to the mattress and box spring he slept on, the television he watched in his home gym, and the outdoor shower in his home. In addition, BLMIS provided Mark Madoff with astronomical compensation—between 2001 and 2008, he was paid $29,320,830, including bonuses of $4.8 million in 2006 and over $9 million in 2007.”

Mark Madoff also faces serious legal issues with his charity, as The Daily Beast’s Lucinda Franks detailed last year. The foundation’s tax returns list a series of stocks and transactions investigators believe may have never happened.

As the trustee put it recently: ‘Consistent with his level of financial experience and sophistication and his supervisory position at BLMIS, defendant Mark Madoff knew, or should have known, that the amounts withdrawn from his and his children’s accounts were the product of fictitious and backdated trading activity, and that the benefit received was derived from transactions that never took place. Defendant Mark Madoff ignored the obvious red flags that the profits reflected in these account statements were the product of fraud and deception, to the detriment of BLMIS and its other customers.”

No funeral arrangements have been announced.

Allan Dodds Frank is a business investigative correspondent who specializes in white collar crime stories. He also is the former president of the Overseas Press Club of America, one of the many journalism organizations that protests the arrests of journalists abroad and repression of freedom of speech.