TribLIVE

| Business


 
Larger text Larger text Smaller text Smaller text | Order Photo Reprints

Madoff fraud still stings ex-clients 5 years later

About The Tribune-Review
The Tribune-Review can be reached via e-mail or at 412-321-6460.
Contact Us | Video | Photo Reprints

By The Associated Press

Published: Sunday, Dec. 8, 2013, 8:39 p.m.

NEW YORK — The last time Morton Chalek visited Bernard Madoff's office, the then-trusted investment adviser gave him the customary warm welcome.

“Hey, Mort, come on over,” Chalek recalled Madoff saying before giving him more good news about his portfolio.

The World War II veteran saw no risk investing with the affable Madoff. But two months after that last meeting, on Dec. 11, 2008, the headlines told him he'd been had.

With the fifth anniversary of the exposure of Madoff's Ponzi scheme approaching, Chalek lives with a disdain for Madoff that gnaws at him daily. He's among a legion of former investors struggling to move on after seeing their life savings go up in flames.

The man Chalek sarcastically refers to as “good old Bernie” revealed to the FBI that his firm was a Ponzi scheme of epic proportions. Account statements for thousands of clients showing $60 billion in assets — Chalek's account stood at $2.3 million — were fiction.

Of the $17.5 billion in principal that was real, most of it was gone. Authorities say it was paid out as fake profits or raided by Madoff's family and cronies.

A court-appointed trustee has so far recovered more than $9.5 billion to redistribute to burned clients through an ongoing claims process. Victims who invested through third-party “feeder funds” recently became eligible to make claims for an additional $2.35 billion collected through forfeitures, including funds from Madoff's wife, Ruth.

The victims have watched Madoff get a 150-year prison term in Butner, N.C., his brother and business partner, Peter, sent away for 10 years and five former employees go on trial on charges they were in on the scheme. The trial, which began in October, will resume on Monday.

Despite the recovery effort and criminal prosecutions, five-year-old wounds haven't healed. A judge received several anguished letters from former investors before the sentencing of Peter Madoff in December 2012, including an unusual appeal by a Madoff in-law.

Robert Roman, the husband of Ruth Madoff's sister, wrote that they, too, were victims of the fraud. But he sought mercy for the younger sibling of the vilified con man.

Chalek wrote the court to “vent his spleen over the Madoff fiasco.” In his letter, he described standing in line to enlist in the military after Pearl Harbor and flying 23 combat missions as a U.S. airman in Europe.

Once home from the war, Chalek pursued the American dream: He started a grocery on Long Island and got hired by an advertising agency in Manhattan that he ended up buying. He sold the business late in life at a price that he thought would take care of him in retirement and keep his family financially secure when he was gone.

In the early 2000s, Chalek met Madoff, who was a golfing buddy of a friend of his father's. Given Madoff's on-paper returns, the chance to invest was too good to pass up.

“It was always beautiful,” he said. “He was always the easiest guy to do business with. ... It went on like this for years.”

Since the fraud was exposed, Chalek says he hasn't been repaid one penny. The trustee has deemed him a “net winner” — meaning he and his family took out more from their Madoff account than was put in — a determination he's disputing in bankruptcy court.

 

 
 


Show commenting policy

Most-Read Business Headlines

  1. Consol Energy transitions as leadership changes hands
  2. Fed Beige Book survey: Growth picks up across most of U.S. but not in Pittsburgh region
  3. Region’s largest bank PNC posts 7% rise in 1Q profit
  4. Higher fuel costs help established airlines, hinder startups
  5. Heinz offers Pittsburgh workers a buyout if they are unhappy
  6. Programs help to nudge unemployment among veterans downward
  7. GlaxoSmithKline discloses  bribery inquiries
  8. Yellen stresses need for Fed to be flexible
  9. Gap outlines growth plans for China
  10. Factory output extends solid gains in March
  11. Mt. Gox bankruptcy protection rejected
Subscribe today! Click here for our subscription offers.