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The Monster Mensch

What made Bernie Madoff, a man who helped revolutionize Wall Street and built a completely legal billion-dollar business, perpetrate the greatest fraud in history? And what led Ezra Merkin, born to immense privilege, to enable him?

Illustration by Riccardo Vecchio  

A little more than a year before he blithely confessed to masterminding the largest Ponzi scheme in history, Bernie Madoff attended the wedding of his niece. That Saturday evening, September 29, 2007, Shana Madoff, the daughter of his younger brother, Peter, his partner for almost four decades at Bernard L. Madoff Investment Securities, married a former official at the Securities and Exchange Commission, an irony that Bernie couldn’t quite keep to himself. He tossed an arm around the neck of one young guest and directed the young man’s attention across the dance floor, toward a clean-cut group sipping cocktails. “See them,” Madoff said, pale-blue eyes flashing incongruously in his kindly face. “That’s the enemy.”

There were a hundred guests at the Bowery Hotel, some of whom had their life savings invested with Bernie. Tables were set with tasteful linen and beautiful flowers. The event commingled business and family—for the Madoffs, business was family. Bernie Madoff liked to brag about what he’d built over nearly 50 years, disquisitions that often began with the phrase “We Madoffs.” His sons, Andy, 42, and Mark, 44, ran the trading floor on the nineteenth floor of the company’s multistory offices in the Lipstick Building on Third Avenue and 53rd Street, two floors above where Madoff supposedly managed billions of dollars of other people’s money. Peter Madoff, 62, was chief compliance officer and his inseparable right hand. The bride, Shana, 38, was a compliance lawyer. Bernie’s wife, Ruth, once his bookkeeper, still maintained an office there.

As the toasts began, Bernie headed to the terrace. He isn’t a toast-maker. He has a tic, a nervous schoolboy’s double blink, as if cleaning a windshield, and occasionally a stammer.

Outside, the night air was crisp with the first hint of fall. Bernie sat down and lit a cigar, his favorite, a Davidoff. He wore a black tuxedo and one of his antique watches, a Patek Philippe or a Rolex no doubt, fastidiously matched to one of his several wedding bands. He sat at the center of a small cluster of well-wishers, big shots themselves who were paying their respects to an unlikely Wall Street titan. Unassuming Uncle Bernie, as people called him, was a legend. In the seventies and eighties, he’d helped revolutionize how stocks were traded. Along the way, with apparent effortlessness, he’d turned money manager, rising to become, by the evidence of detailed statements he regularly sent to his legions of investors, one of the more successful ones in the world. On paper, he’d built fortunes for some of the admirers who now crowded around him and for much of the guest list. Bernie basked in the praise. He loved that wealthy people counted on him, loved the adulation. “It ennobled him,” one friend says. At the same time, he sometimes let slip a hint of contempt for those he took care of, as if they didn’t appreciate him enough. After all, he was the one who paid the kids’ tuitions and the country-club dues of the fancy guests who now drank his booze—Bernie’s labors had indirectly financed that too.

On the terrace, blue smoke drifted in the air. Bernie, meditative for once, told a guest that he couldn’t quite believe he was at a wedding at the Bowery Hotel. His grandparents had made their lives on the Lower East Side, a stone’s throw from where he sat with his tux and his multi-thousand-dollar watch. He’d lived with them for a while, and that evening, he recalled how poor and run-down their neighborhood had looked. He gestured in the direction of the Lower East Side. “I fought my way out of there,” Bernie told a guest. “I had to scrape and battle and work really hard.” There was an edge of anger in his voice—he’d suffered so others could live easy.

A little more than a year later, at about four in the afternoon on December 11, J. Ezra Merkin was called out of a meeting in his hedge fund’s offices at 450 Park Avenue to look at the Wall Street Journal online, where the outlines of Bernie Madoff’s story had been posted. He felt like dynamite had gone off—he couldn’t get his bearings. He felt as if he couldn’t hear. Merkin’s largest fund, Ascot, which invested the money of a large swath of the Upper East Side Jewish elite, along with that of illustrious schools and charities, had been completely invested in Madoff—some $1.8 billion.

Merkin’s funds were among the largest of Madoff’s so-called feeder funds, and the ones with the deepest roots in New York City. (Walter Noel’s Fairfield Greenwich Group was the largest; Noel had invested $6.9 billion with Bernie.) In letters Merkin sent to his investors, he said he had no choice but to unwind his funds. He was shutting down not only Ascot but Gabriel and Ariel, his two other large funds, which had invested perhaps a third of their money in Madoff. In a letter written the same day the story broke, Ezra told investors that he, too, was a victim. “I have also suffered major losses,” he wrote, signing it “very truly yours.”