Bernie Madoff: Marion Madoff's 5/08 $2.8 Million "Loan" & Other Forfeited Assets
Somehow I missed the final list of Bernie's forfeited assets signed off by Judge Chin on 6/26/09. To me, the most interesting items on it are the loans and promissory notes made in favor of Bernie and/or Ruth.
In an earlier post, I speculated that Eric and Shana Madoff Swanson's $2.8 million East Hampton house purchased in 6/08 had been paid for out of the proceeds from Peter Madoff's $9 million loan from Bernie on 12/12/07.
Not so. Item 20(r) on the list is a $2.8 million transfer of funds from Bernie to Marion Madoff who is Peter's wife and Shana's mother:
r. A May 8, 2008 loan or other transfer of funds in the amount of $2,800,000 from Bernard L. Madoff to Marion Madoff;
Since the Swansons bought the East Hampton house the very next month, it's a safe bet Marion gave them the money to buy it.
The Swansons were married on 9/27/07 and the SEC's investigation of Bernie wrapped up two months later on 11/27/07. Bernie forking over $2.8 million to his niece and her husband, the former SEC investigator, less than six months later wouldn't have been such a great idea.
The East Hampton house will probably be siezed by the Feds within the next few months so this summer is the last opportunity for the Swansons to enjoy it. (The buzz has Shana under indictment very soon.)
The $9 million loan to Peter Madoff appears to be related to real estate investments. From the list:
o. A December 12, 2007 unsecured promissory note for $9,000,000 executed by Peter Madoff in favor of Bernard L. Madoff, due December 31, 2012, at 4.13% interest and all property traceable thereto, including a 50% interest in BDG Yaphank, LLC, and a 50% interest in BDG Leroy, LLC, held in the name of Peter Madoff and/or Essex Realty Development, LLC;
The BDG is Blumenthal Development Group, owned by Ed Blumenthal, a Madoff customer who thought he was a close friend of Bernie's. BDG Yaphank was registered in 12/05 and BDG Leroy in 10/07.
Essex Realty Development was registered in NY on 12/07 to Peter Madoff's home address but no registered agent was listed. WhitePages.com lists Craig Kugel, a former BMIS employee, as the contact for Essex.
Kugel was in the news a few months ago because he cosigned a lease for Bernie's 2009 Mercedes as a BMIS director at Peter Madoff's behest. Kugel then tried to get out of paying $58k in expenses related to the lease when BMIS went under.
According to the list, Bernie loaned $1.5 million to Kugel's father. David, a long time BMIS employee, in 2003 and then loaned him another million dollars in in 8/07.
(Craig Kugel owns the inactive domain, Kugel.net, and 22 other sites. He blocked access to Kugel.net and his wife's domain, litmanpllc.com, with robot.txts in the internet archives.)
In 6/08, Bernie loaned or transferred $780k to Eric Lipken, a 17th floor employee whose father, Irwin, was an accountant at BMIS for many years.
In the same month, Bernie gave $475k to JoAnn Crupi, another 17th floor employee. In 10/08, Bernie gave Crupi $2.2 million more which she used to buy a house in an exclusive community on the Jersey Shore. Interesting that the Feds did not put Crupi's $2.8 million on the list of assets to be forfeited.
Bernie loaned a total of $3.1 million to the Madoff Family Fund LLC in 2004 and 2005. The company was registered in NY in 4/01 and changed its name to the Madoff Family LLC in 2005. The company is distinct from the Madoff Family Foundation and its purpose is not clear.
In 2004, Bernie loaned $1 million to Steven [Stephen] Raven, CEO of Madoff Securities International Limited in London. Sometime in or after 2005, he loaned Raven another $300k. After Bernie's arrest, Raven was quick to issue a statement in which he claimed MSIL had nothing to do with BMIS despite the fact that it charged BMIS for millions of dollars in "research" fees and at least $250 million was transferred in and out of BMIS to MSIL in 2008.
One intriguing item on the list is a $1 million loan made to Allan Gary Klesch in 1999. In another post, a reader recently commented that Klesch's name is mentioned three times in a 7/09 Tatler article about MSIL (not available online). Klesch, an ex-patriate investor living in London, made his name by buying into distressed European companies in the '80s. His company, Klesch & Co., now focuses on commodites-related businesses.
Madoff's situation is very suspicious. It is entirely possible, particularly with a confederate in Europe who receiving odd "loans" that money has actually been used to set up a Hidden Treuhand, more easily arranged in Europe than here, unless your company has a subsidiary in one of of several specific countries, including: Liechtenstein, Austria, Germany, Switzerland, Dubai, etc.
If money has been tranferred into a Hidden Treuhand it will not only never be seen again, there will be no way to locate it, sue to get it back, or even prove it exists.
To learn all about how Hidden Treuhands work, read "Hidden Treuhand: How Corporations and Individuals Hide Assets and Money" by Shelley A. Stark. This new book just hit the bookstore shelves and Amazon about a week ago.
July 26, 2009 5:54 PM | Reply | Permalink
Thanks for the warning. I read your TPM post the other day about Hidden Treuhands and was intrigued. I had never heard the term before and want to know more.
I noiced Truthout published a very short article by Shelley Stark about Truehands which mentions that Halliburton had one.
July 27, 2009 10:10 AM | Reply | Permalink
Yes, thank you for your response.
Truthout did publish a short article a year ago or so. Ms. Stark was still working on her book at that time. Her book is now available at Amazon.com and Barnes and Noble. I read it on line a few weeks ago, before the hard copies were released. It was a chilling experience for me to read this. I am not a financial wizard, (not my area of expertise), but even I could see what this could mean to the average American, and how American corporations and wealthy Americans might use this to their own advantage, perhaps to the detriment of those less wealthy.
It is a very important book as these financial shenanigans are a huge threat to American financial stability and wellbeing. I would like to see it be read by many and discussed on TPM.
I am already getting some hate mail for posting information about it on my blogs. One person was incensed I was messing up what was working well quietly in the background. He doesn't think the public needs to know about it. Never mind that American citizens' investments, retirement accounts or pensions are being used and abused by those who manipulate these Hidden Treuhands. Whether we like it or not, we are affected by what we don't know about. So, if for no other reason than self-protection, we must learn about it, given the opportunity. This is the opportunity.
I have posted the publisher/author synopsis and author bio today.
July 27, 2009 2:00 PM | Reply | Permalink
Registration required, cool headline anyway.
July 26, 2009 6:52 PM | Reply | Permalink
How old is this guy? Shit, did his parents train him to be a crook from his crib?
July 26, 2009 6:57 PM | Reply | Permalink
Nice find, asdf. Klesch supported more liberal off-exchange trading rules, something Bernie was very much involved with at the time.
I found a 1976 speech given by Klesch in which he promoted liberalizing ERISA to allow pension funds to invest in startup companies, i.e., take on more risk. Another position that Bernie would have favored.
Klesch's Treasury title was Director of the Office of Securities Markets Policy Department.
According to a 1994 NY Times article. about Klesch, he was involved in the restructuring of Penn Central Railroad while he was at the Treasury during the '70s.
He left DC in 1978 and moved to Europe to head Smith Barney's Middle East operations. By 1982, he had formed his own London brokerage firm, Quadrex, which specialized in eurobonds, etc.
Quadrex shut down in 1990. In 1994, he formed Klesch & Co., a small boutique trading firm that put together private investment deals to buy the assets of troubled companies. The firm was initially capitalized with $50 million of his own money.
At the time of the article, Klesch claimed to be managing $250 million of investor money.
Bernie may have first met Klesch in DC or he could have met him when he opened his own trading firm in London, Madoff Securities International Ltd., in the mid-80s.
July 27, 2009 9:50 AM | Reply | Permalink
Theories abound about what happened to the money "lost" by Bernie. A while ago I read (maybe here?) that the Madoff scam was unsustainable as a Ponzi for as long as it supposedly continued, so something else was going on.
While the statements you posted above are somewhat unrelated to the Ponzi fraud, they may identify the path the money took as it went from the feeders (and god knows where else)through Bernie to parts unknown.
We'll never know.
July 27, 2009 10:03 AM | Reply | Permalink
I just wanted to demonstrate that Klesch and Bernie had common business interests which could have brought them together.
No one has said yet what Bernie did with the money he took in intially. Did he invest it and if so, how much money did he make?
July 27, 2009 10:16 AM | Reply | Permalink
Bernie's billions in Libya? Is there an end to the irony?
July 26, 2009 7:04 PM | Reply | Permalink
Interesting. I've followed the Libya saga for awhile. I wonder how much Klesch is investing and who his investors are.
If Bernie stuck money in these kinds of deals, it is going to be difficult to find it.
I think the Feds need to have a serious talk with Klesch and Raven.
July 27, 2009 9:59 AM | Reply | Permalink
We can only speculate, but Klesch did grow his investment pool considerably and in a very short time. He must have natural charisma to draw in money like that. It's only a coincidence that Madoff collapsed immediately thereafter.
Klesch likely doesn't have much interest in speaking to the Feds.
Could you imagine what Bernie would say if he could talk?
July 27, 2009 10:10 AM | Reply | Permalink
Klesch was investing $8billion.
July 27, 2009 10:34 AM | Reply | Permalink
LAP Inks $8b Libya Deal
25/02/2008 11:48:00
Libya Africa Investment Portfolio (LAP) represented by Mr. Abdulfatah Sharif signed on 19 February 2008 in Tripoli a joint agreement with Klesch & Company to invest in building an industrial complex of anew 300,000 barrels per day oil refinery and 725,000 tonne per year Aluminum Smelter in Libya at an estimated cost of $5 billion.
Gary Klesch, the head of the company said that he could not disclose where the complex would be built, but he went on to say that the Libyan government would make an announcement "in due course".
http://www.tripolipost.com/articledetail.asp?c=2&i=1682
July 27, 2009 10:49 AM | Reply | Permalink
Okay, that article makes it more clear that Klesch's group is doing all of the financing although the deal is $5 billion in the article and $8 billion in the headline.
In any event, Klesch & Co. has to be politically connected in a big way to have landed that deal.
July 27, 2009 11:27 AM | Reply | Permalink
Anyone speak http://www.newbiz.com.ua/articles/1000-fond/3?
July 26, 2009 8:10 PM | Reply | Permalink
Bernie can talk if he wants to. He spent three hours chatting with the SEC inspector general last month.
I'd really like to read that Tatler article that mentions Klesch three times. I'm sure that was for a reason.
Sometimes, these articles have a way of discreetly ending up on the internet on an out-of-the-way website so I'm keeping my fingers crossed.
Klesch's note was dated 1999. In 2000, Bernie significantly expanded his London operation by adding more staff and injecting $60 million into the business inthe form of a loan. Not that one necessarily has anything to do with the other.
Maybe Bernie sent an investor to Klesch and the million bucks was a "commission" or thank-you.
Ditto for Stephen Raven.
July 27, 2009 10:33 AM | Reply | Permalink
Makes one wonder what percentage of private sector investment money is dirty. Have we reached critical mass?
July 27, 2009 2:21 PM | Reply | Permalink
greed isnt always good.
the only interesting thing left to me is why no discussions about where all the money is?
this guy or his helpers could not possible have moved this money around without leaving a trail.
so why arent we being told where it is???
July 27, 2009 2:57 PM | Reply | Permalink
Re $1.3 million in "loans" to Stephen Raven - Time magazine had blurb in June 2005 about the NASD connecting to the London Exchange which mentions Raven's role:
I wonder if the million dollars plus was a payment of some kind for Raven's help in pushing the deal through.
July 27, 2009 5:26 PM | Reply | Permalink
From this article in the London Sunday Times, Raven appears to have been in some financial trouble.
He took out a second mortgage on his home that he owned for 23 years and borrowed a million dollars from Bernie in 2004. Then he borrowed another $300k in 2005 or some time thereafter.
After losing his job with Bernie, Raven was forced to sell his house.
Raven is 70 years old. He should have had some money put away but it doesn't look like it.
Raven may not have been in a position to stand up to Bernie on any issues.
July 27, 2009 5:48 PM | Reply | Permalink
Good to see you and your readers are following the Klesch trail. This guy's reputation in the London Eurobond markets was notorious. If you have not managed yet to access the Tatler article please e-mail me a mailing address and I"ll send you a hard copy. As you say the article is significant in just mentioning Klesch - sadly there isn't much more of substance regarding him than I have already noted. Now that washed-up Raven is in the frame, I pass on that the Tatler source claims he refused Bernie's order to transfer $168million out of the London office to the US just as the ship was sinking, but finance director Chris Dale was persuaded by Bernie to sign off on a transfer of $150million behind Raven's back. The UK's lacklustre luckless Serious Fraud Office is quoted as saying the Madoff London office "played a significant role in the operation of Mr Madoff's scheme"
July 29, 2009 12:53 PM | Reply | Permalink
Thanks, fonzie. Is it possible for you to scan and email the article?
Raven may have been concerned that MSIL in London would never see the money again, leaving MSIL without enough money to pay expenses.
According to this London Times article, two billion dollars was transferred between London and NY in 2008.
According to a Reuters article today, Bernie claimed he still had $20 billion in early 2006. I wonder if any of that money flowed through London.
Here's an oddity. After Bernie's arrest, Stephen Raven issued a statement to the effect that MSIL was not involved with BMIS in NY and it only conducted proprietary trading on behalf of the Madoff family.
But in the 2003 version of the Madoff website, MSIL is touted as providing brokerage services to a wide range of international customers. Combined with BMIS, Bernie claimed to be offering 24-hour service.
In later versions of the site, the bit about MSIL was substantially edited.
The 2007 MSIL financials are posted here.
July 30, 2009 11:09 AM | Reply | Permalink