Truth and Consequences: Life Inside the Madoff Family

Truth and Consequences

Little, Brown and Company

Chapter One

AN UNTHINKABLE TURN OF EVENTS

Catherine moved through the living room, trying to find her shoes. They were black patent-leather lace-up Gucci booties, and she planned to wear them to her fiancée, Andrew’s, office Christmas party that night, but everything she owned was hidden in boxes. The date was December 9, 2008. Two days earlier, she and Andrew had moved into an apartment on the Upper East Side of Manhattan, with floor-to-ceiling fishbowl windows and glossy parquet floors. Her toe caught something and she tripped; it was a stuffed bunny, left behind by her three-year-old daughter, Sophie. Picking it up, she tossed it into a wicker basket in her daughter’s room. She was running late and had two hours of professional hair and makeup appointments ahead of her. Being a part of Andrew’s family meant looking the part.

The night, she knew, was going to be important. The party would take place at Rosa Mexicano, and she hoped it would serve as an informal coming-out for the two of them as a newly engaged couple. She’d planned her look down to the last detail: A Derek Lam dress made up of a flimsy, sheer pink blouse tucked into a skirt with a slim black bodice, her hair blown out into soft, long waves. Her signature pearl studs were freshly polished, and her simple engagement ring gleamed. Andrew’s family, she felt, was gradually coming to accept her, and her presence at the party was a step in the right direction. But she wasn’t there yet. Not by a long shot.

Andrew had asked her to give it time. He wasn’t even divorced from his first wife, Debbie, and his family was famously insular. His parents, Ruth and Bernie, were pleasant enough but maintained a cool distance. Not only had they not thrown the two an engagement party, but they had barely congratulated either of them. Andrew’s brother, Mark, had made no secret of his feelings for Catherine, going so far as to carry out a whisper campaign against the relationship soon after she and Andrew had started dating. But the Madoffs were going to be her family now, and she was going to have to live with the lack of warmth. If she’d learned anything from her failed first marriage, it was this: Accept the man you fell in love with, not the one you hoped he might become.

The night before, Andrew’s two teenage daughters, Anne and Emily, had spent their first night with Catherine and Andrew in the new apartment. Anne had stormed in from school, carrying a bag from a neighborhood bodega with canned soup, Cheetos, and Milano cookies.

“Dinner’s ready,” Catherine called out to the pretty fifteen-year-old as she sailed past to her room.

“Oh, really? I didn’t think you were going to cook anything, so I bought my own food.” The door slammed, and Catherine looked at the bubbling tray of lasagna she had made, cooling on the counter in front of her.

She sighed. She couldn’t force the girls to accept her; that would have to come with time. For now, she would focus on her work for Dior.

For the past year, Catherine had worked as a brand ambassador to the storied fashion house, consulting on events, creating focus groups, and modeling jewelry and clothes at parties. It was fun, fanciful work that gave her a break from her more grueling duties as a business owner. She’d taken the beloved, ramshackle Manhattan fly-fishing shop Urban Angler and turned it into a sleek, modern Fifth Avenue destination frequented by Wall Street’s most powerful executives. It was, in fact, how she and Andrew had met; an accomplished fly fisherman himself, he’d become the largest investor in the shop. While working together in the trenches to save the business, they’d fallen in love.

That morning, Catherine had dropped Sophie at preschool and stopped by Dior’s offices for a wrap-up discussion about the previous night’s event. She’d returned to the apartment at 3:30 PM, just as Sophie was getting home. The three-year-old came bolting out of her bedroom, blond curls bouncing around her shoulders.

“Mommy, look!” She held up a pink, glittery ball and bounced it on the living room floor, where it ricocheted off one of the boxes. Catherine kissed the top of her daughter’s head and squeezed her shoulders. She’d seen her for all of five minutes; now she was running out the door again. There will be time for her, she told herself, feeling awash in guilt.

“I’ll be back in a few hours, Sophie. Be good!” she called. She’d been coparenting with Sophie’s father, Jon, for the past two years, but the growth in her consulting work had forced her to hire a babysitter for the first time in Sophie’s life. Waving good-bye to Josie, she disappeared into the elevator that took her down to the street.

Outside, the wind snapped as she gathered her trench coat around her. Sliding into the back of a cab, she leaned against the seat and closed her eyes. She knew it might be the only moment she had to rest all day. A minute later, her iPhone buzzed with an incoming text.

“We might not be going tonight,” Andrew had written. She hesitated for a moment before calling him on his mobile phone. Catherine made a serious effort never to call him during business hours unless it was an emergency. An occasional cheeky text around lunchtime was fine, but interrupting him while he chaired a meeting at the Lymphoma Research Foundation or worked with his team to structure an energy deal would be an embarrassment. Still, if they weren’t going to the party for some reason, she wanted to know before she embarked on two hours of beauty treatments while trying to get work done on her phone. Andrew picked up right away.

“Should I get my hair done or not?” she asked.

“Your hair?” He sounded distracted.

“For the party. Are we going?”

“Oh, yeah, yes, we’re going. I think. I have to run.”

She hung up and told the driver to continue down Park Avenue. Looking out the window, she felt a knot of dread form in her stomach. That text had to be about Mark. Andrew’s older brother had grown increasingly quick to anger over the past eighteen months, and the two men had frequent blowups at the office that often resulted in canceled plans.

The cab pulled up at the corner closest to Deja Vous, a tiny salon on 56th Street that Catherine had been frequenting for fifteen years. Her stylist, Eli, kissed her cheek and led her to the shampooing station. Catherine leaned back against the molded black plastic chair and felt a gush of warm water cascade over her head. For the first time all day, she felt her shoulders start to relax. Then her iPhone buzzed again. She opened one eye and peered at the latest text from Andrew: “We’re definitely not going tonight.”

Blood rushed to her head and she felt her chest tighten. “I came in for nothing,” she said into the air. Eli clucked sympathetically. Sitting up, her wet hair dripping onto her shoulders, Catherine punched in a quick message to Andrew: “Thanks. I could have spent those hours with Sophie.” Well, nothing she could do about it now. She canceled her makeup appointment at Nars, dropped her phone into her lap, and tried to relax as Eli finished shampooing her hair. An hour later, she emerged into the crisp winter air and made her way through the throngs of people—mostly tourists—crowding the street. She took a taxi home, eager to get out of her dress.

When she walked in the door, Sophie flung herself at her legs. Catherine scooped up her daughter, breathing in the scent of her freshly washed hair. Thanking Josie, she shut the door behind her, kissed Sophie, and deposited her on the couch. Placing her hands on her hips, she surveyed the room. The apartment was as she’d left it—a mess. Where to begin? Large wardrobe boxes partially blocked a doorway; lamps, exercise equipment, and kitchen appliances were tangled in a pile by the front door. Catherine stripped off her dress and shoes, changed into utility pants and her favorite Star Trek T-shirt, and gathered her freshly styled hair into a ponytail. Randomly selecting a box, she slit it open and prepared to get to work.

By six o’clock, Catherine had finished unpacking the glassware and household goods and had moved on to the dishes. As she was placing them in the kitchen cabinet, she heard the elevator doors slide open. Andrew walked into the foyer and then, uncharacteristically, turned and walked straight into their bedroom. Catherine paused, holding a plate in midair. Andrew wasn’t the type who liked to be crowded; when he was having a bad day, he preferred to be left alone. She turned back to the task at hand and continued stacking plates. Then she thought better of it, filled a glass with water, and took it into the bedroom.

Andrew was lying in the dark, on top of the white duvet that had been one of her contributions to their shared new home. He was still wearing his Brooks Brothers coat and shiny Alden loafers, the uniform he had worn almost every day of his twenty-year career at Bernard L. Madoff Investment Securities LLC. His eyes were closed, his hands clasped on his stomach, as though he were lying in a coffin.

All of the anger she’d felt earlier drained out of her. Placing the glass on the bedside table, she slipped out of the room. Clearly, whatever he was dealing with had nothing to do with Mark. A fight with his father, perhaps? It wasn’t out of the question. He’d worked for Bernie for more than twenty years, but his father still treated him like a child most of the time. More likely, though, he’d taken a big hit in the stock market. Wall Street was imploding all around them. Bear Stearns had collapsed in March, Lehman Brothers was in bankruptcy, and the markets were in virtual paralysis as the government scrambled to prevent further financial meltdown.

At the Dior event the night before, where New York’s society set had mingled with reality stars and other boldfaced names, Catherine couldn’t help but notice the irony: Everyone was decked out in glittering jewels and getting photographed while talking about what horrible shape the world was in. Catherine had found herself in conversation with the CEO of Dior, Pamela Baxter, and her friend Brooke Travis, Dior’s marketing director, about the topic du jour. “Andrew’s trading desk is actually breaking even,” she heard herself saying. “I’m proud of him for helping his guys manage the assets they’re trading, considering everything that’s going on.” As soon as the words were out of her mouth, she felt the slightest shift in their reactions, a cooling, a knitting together of perfectly groomed eyebrows. Berating herself silently, she’d clamped her lips together and stared into her glass of Moët et Chandon. Was it really a good idea for her to be bragging about her rich, successful husband-to-be when people were losing their jobs? Especially considering where she’d come from—did she even belong in this room?

Lately, she felt, she was always putting her foot in her mouth: A recent Vanity Fair article had featured comments by her friend Alexandra Lebenthal, who’d noted that many of her friends had lost half of everything they had in the 2008 financial meltdown and been forced to come to terms with how much of their social standing, marriages, and friendships had been based on their money. Now that the money was gone, did they really have a marriage anymore? Were their friends still their friends? She’d read sections of the article aloud to Andrew, who’d started to muse on his own friendships, then had abruptly stopped and said, “Don’t read me any more—it’s hitting too close to home.”

Pausing outside the doorway, Catherine glanced back at Andrew one more time. Maybe someone had died, then… but he would have just come right out and told her.

Catherine prepared dinner for Sophie, then ran her a bath. After Sophie went to sleep—curled up like an angel in her new big-girl bed—Catherine went into her office. Huge shopping bags full of memorabilia from high school and college awaited her. Catherine started to sort through them, trying to kill time. Then she sat back and thought, I can’t start this project tonight—this is a Sisyphean task. She decided to take a shower and clean off the newsprint staining her hands. The next time she looked at the clock it was 10:00 PM.

It had been four hours since Andrew had disappeared into their room, and still no sign of him. She finished applying Moroccan rose oil to her legs, slipped on a silk chemise, and tried to quell the flutter of anxiety starting to rise in her chest. Whatever it was, she now knew, it was bad. Perhaps as bad as a full-scale collapse of the firm. But wouldn’t Andrew have seen such a thing coming? Surely he would have been notified ahead of his coworkers and given a few days to prepare. It could have been as simple as a bad trade. Yes, that was probably it. Or maybe his dad had made a bad trade. She didn’t want to think about the alternative: a recurrence of Andrew’s cancer. He’d been extremely lucky to go into remission from mantle cell lymphoma, one of the deadliest and rarest forms of the disease. Taking a deep breath, Catherine tiptoed into the bedroom with caution and braced herself for whatever she was going to face.

In the dark, she could just make out Andrew, still lying on the bed, exactly where she’d left him. His eyes remained closed; he hadn’t moved from the position he’d been in hours before. She sat down on the bed next to him and resisted covering his hand with her own. Gathering her strength, she reminded herself not to make this about her own fears. It was her job to be there for him—and that was something at which she happened to excel. Whatever it was he had to tell her, she could handle it. She decided to be sympathetic but to downplay whatever it was he had to say. She cleared her throat and began. “We don’t need to talk now. Unless someone has died, or whatever is bothering you is health-related, let’s just talk tomorrow.”

Andrew stirred in the darkness and dragged himself to a sitting position. He leaned over and turned on the light. She now saw his face: His eyes looked flat and dull.

“No, we need to talk right now. Because you need to decide whether or not you want to stay with me.”

An arrow of fear pierced her heart. Whether or not she wanted to stay with him? Because, what—he was broke? There were fates far worse than moving to Brooklyn, pulling the kids out of private school, and trading vacations for extra hours at the office.

“Honey, don’t be ridiculous. What happened?”

“I just turned my father in to the SEC for securities fraud.” He closed his eyes and sank against the headboard. Catherine actually felt lighter, now that she knew what was going on. For years, he’d had conflicts with his father; Bernie had probably violated some minor filing rule. Andrew, being Mr. Law and Order, had turned him in.

“So he did something inappropriate… like Martha Stewart did?”

“My father told me and Mark that his business is just one big lie. It’s a Ponzi scheme, to the tune of fifty billion dollars.”

Catherine’s mind went blank. “Do you believe him?”

“I don’t know. It seems so outrageous, but I don’t think he was making it up.”

“Well, why wouldn’t I stay with you? What are the possible repercussions of this?”

Andrew turned onto his side and held her gaze. He pointed to the large bare windows that extended the length of the apartment.

“Tomorrow, there are going to be cameras in front of our building and reporters on the roof of the buildings across the street. I am going to be deposed and interviewed, and I might have to testify against my father. My lawyers don’t want me to say a word to you about any of this, but I can’t do that. So you need to call a lawyer and get your own legal counsel. You may be deposed and questioned about all of this, too. And until this is in the papers, you can’t say a word about this—to anyone.”

“Did you ever suspect this?” Floored, doing everything in her power not to fall apart, she asked a question she already knew the answer to.

“Absolutely not.” He sank back onto the pillow, exhausted.

Three years before, in the early stage of her business partnership with Andrew, Catherine had told him about a book called Deep Survival, by Laurence Gonzales. Given her upbringing—she’d been raised by a cash-strapped single mother in a small town—she had subsequently become fascinated with the topics of resilience and survival. Not only had she read dozens of other books on the subject, but she had also written a business plan for a company that built emergency plans for families in crisis. And one thing she knew about survivors from all of her reading was that survivors don’t think but act. Survivors do. So in that moment, she didn’t fall apart. She didn’t hug him. She didn’t cry, or scream about losing a life they might have had. She snapped into survival mode and focused on the most important immediate goal: How do we get to tomorrow?

The answer came to her almost immediately: curtains. She would put them up within twenty-four hours; everything else, she would deal with later.

Chapter Two

THE DEEP SEA CLUB

Fish are found in beautiful places, without fail. Coral reefs, pristine flats in the Florida Keys, a river in Colorado, an inlet in Alaska. Andrew learned to fish at four years old, using a child-size rod and a bucket of live shrimp for bait. He and his brother stood on a Florida dock for hours, trying to hook pinfish, snapper, and blue runners. They never tired.

For as long as Andrew can remember, the family owned a sport-fishing boat. Their first was thirty feet long, purchased when he was a baby. The next, forty-two feet, was bought by Bernie in 1970, as the securities industry was emerging from one of its most robust periods of growth. The favorite, according to Andrew, was a gorgeous, hand-built, fifty-six-foot Rybovich, a wooden fishing boat that was “a work of art.” The last was the Bull, an eighty-eight-foot Leopard cruiser with three staterooms, docked permanently in Cap d’Antibes, France. That was the boat the world read about day after day in the tabloid press.

On a sport-fishing boat, the physical space is small. Beds are organized in bunks; bathrooms are tiny. Water is often limited, so conservation is key. Bernie taught his boys to take a “boat shower,” which, when done correctly, requires less than five gallons of water: Get in, soap down, quickly turn the water off. Everything was battened down so it wouldn’t move in choppy waters. Family members packed essentials only. A sport-fishing boat, says Andrew, was efficiency at its highest level, its cramped quarters a fitting metaphor for the closeness of his family.

The family was, indeed, closer than most—and as the second and last son, Andrew completed it. Born in 1966, he grew up in Roslyn, a village on the north shore of Long Island largely populated by Reform Jews. The Madoffs were similarly nonreligious: Andrew went to Hebrew school for the shortest time he could and still get bar mitzvahed. Their home, a split-level, four-bedroom ranch built into the side of a hill on a third of an acre, reflected his parents’ upward mobility. They moved in when Ruth was pregnant with Andrew and stayed until the boys graduated from high school.

Andrew remembers his childhood as idyllic: riding his Schwinn Sting Ray bike through Christopher Morley Park with his best friend, Ari; playing stickball in the street with his older brother, Mark. There was no fear of predators then, nor was there the lure of computers. Kids stayed outside until their parents called their names from their front stoops. Ruth used to ring a bell that Andrew could hear from blocks away. Sports dominated his free time. Little League baseball, hockey in the Pee Wee League, fishing in the summer in Montauk, skiing in the winter.

Andrew looked up to Mark and describes their early dynamic as typical big-brother-little-brother stuff.

“We had fun,” he says, “except when I wouldn’t put his dishes in the dishwasher. Then he’d chase me around the house with a hockey stick and we’d go crashing into things, breaking furniture.” The two spent nearly all of their time together, playing Ping-Pong in the basement, using the garage door as a backstop for hockey and baseball. The glass in the windows was thin, and they were always breaking it. Mark was mischievously funny: As a boy he used to leave notes for the cleaning lady in his mother’s hand. “Dear Clara,” he would write. “Please clean out Mark’s drawers. Signed, Mrs. Madoff.”

From the beginning, the brothers were fiercely competitive. Mark was the better athlete, Andrew the better student. Mark didn’t try terribly hard in school, and it showed; typically, if Andrew had one of his brother’s teachers, he or she would be shocked that he was so willing to apply himself. In high school, both were on the hockey team. Andrew became captain in his senior year but feels that was more of a testament to his leadership than his skills: “I was at best a competent hockey player, but more than that, I knew how to get the team to play together.” Mark felt that Andrew “got away with” more with their parents. To even the score, if he caught his younger brother drinking or smoking pot with his friends, he would immediately report him.

“He was constantly ratting me out and I resented the hell out of him for doing it, and then pretending like he had nothing to do with it,” Andrew says. He recalls a coed party he held in the basement of their Roslyn home when he was thirteen. His parents were upstairs, oblivious; the kids turned out the lights so they could make out. Mark was having none of it: He kept coming downstairs and flipping the lights back on. “That was typical of him,” Andrew says, an affectionate smile creeping in. “He would try to spoil the fun as best he could.”

Mark was, according to Andrew, a bit of a mama’s boy from the earliest age. He was a fussy baby, and once he could talk, he could voice his displeasure. His parents’ nickname for him was Archie, from his habit of arching his back, sliding out of his chair, and ending up on the floor during a tantrum. Like Bernie, who couldn’t abide the feeling of elastic—Bernie in fact had special underwear made to avoid it—Mark was extremely particular about his clothing and couldn’t stand certain types of fabrics touching his skin.

“Put him near wool or anything itchy and he’d start screaming and crying,” Andrew says. Mark also had a nervous constitution, so much so that he used to scratch the palms of his hands until they were ragged and raw. His ex-wife and mother of his two eldest children, Susan Elkin, says that Bernie made Mark nervous—he felt he had to measure up, and never quite passed the test.

More serious problems emerged when Mark was eleven; he was diagnosed with stomach ulcers. The image Andrew has of his brother as a child, then, is of Mark constantly bending over, clutching his stomach, and moaning, “Ohh.” As an adult, Mark visited a raft of specialists. First he was diagnosed with an overactive thyroid, then Hashimoto’s disease—but nothing seemed to be the true culprit.

“I think one of the most satisfying moments of his life was when he was diagnosed with celiac disease at the age of thirty-nine,” says Andrew. “He finally had something to point to. Once he went on a gluten-free diet, his stomach problems disappeared. But by that time, he really relished agonizing over his health. That habit didn’t go away with the diagnosis.”

In high school, Andrew found himself in his brother’s shadow in a way he didn’t like. People would always refer to Mark as “the good-looking one,” something Andrew hated: “I pretended that I didn’t care, but I absolutely did.”

Later, when the scandal broke, Andrew found those same wounds being poked: Mark was described as the “gregarious” one, Andrew the “cerebral” one.

“At the end of the day, it was probably a lot worse for him to hear me referred to as ‘the smart one’ than for me to hear him referred to as ‘the good-looking one,’ ” Andrew admits. “Because even though that never felt good, at some point I became confident enough in my appearance to know that I wasn’t a complete toad.”

Despite their differences, the boys were close, partly a result of how much time they spent together. By the time Andrew and Mark were fourteen and sixteen, Ruth and Bernie were leaving them alone for days at a time. Bernie had purchased a small pied-à-terre in Manhattan, where he sometimes stayed overnight when he worked late. Ruth spent nights in the city as well. Andrew learned how to make baked ziti and tacos for the nights when his mother was staying in Manhattan.

Their parents were permissive. Andrew doesn’t ever remember being grounded or even scolded: “Whatever we did would have had to be pretty bad for them to get angry with us.” They were proud of Andrew’s grades but didn’t put pressure on either son to bring home a stellar report card. Nor was Ruth a “smother mother”—her parenting style, she jokes, is best described as “benign neglect.” “They were solid citizens and I trusted them,” she says. “If I wasn’t overbearing, it was because I respected their judgments throughout every year of their lives.”

During their frequent trips to the Bahamas, from the time Andrew was ten, the boys would often take their fifteen-foot Boston Whaler to a reef they dubbed the Yellow Bar, which rests in a famously dangerous part of the Caribbean Sea known as the Tongue of the Ocean. While their mother relaxed at the resort at Chub Cay ten miles away and their father fished for billfish miles in the other direction, Andrew and Mark fished by themselves, in water that dropped from thirty feet to six thousand without warning. The boys spent days dumping chum into the water and catching everything from grouper to sharks to mahimahi. They even raised billfish that would grab the bait and tow their tiny shrieking bodies and their boat wildly across the sea before the line would break and the fish disappeared into the depths of the ocean. When storms kicked up, the boys gunned it back to Chub to beat the rain and rough seas. They had no safety gear. They had no anchor.

“My memory of it varies a little,” says Ruth. “I thought they had a radio with them, and that Bernie was trolling with them in sight. Later, my daughters-in-law would joke about it when they took their kids to the dock in Montauk; they would say, ‘Don’t put Bernie in charge—remember the Yellow Bar!’ ”

Ruth did not always spend the day at the resort. She and the boys loved to search for shells at low tide. When the boys were eight and ten, Ruth, Andrew, and Mark, propelled by flippers, swam across a canal to a small cay. Once they arrived on the sandy bank, they filled their mesh bags with shells, wrestled in the scrubby grass, and soaked in the sun. But as they prepared to swim back, the tide came in. The water between the cay and the main island was fast, wide, and patrolled by sharks. The three of them struggled against the current. It was the first time in Andrew’s life that he wondered if he would make it out alive. It would not be the last. “We were lucky to make it to shore,” Ruth confirms. “I was scared to death.”

But Andrew’s memories of his childhood are mostly happy ones: “We were extremely close as a family; we did everything together. We spent a lot of time sitting around the dinner table, talking.” Bernie worked long hours, commuting via Cessna seaplane to his new offices at 110 Wall Street, but carved out plenty of leisure time to spend with his family. “He was present,” Andrew says. “Very loving, very supportive. He would come to hockey games, Little League games—whatever we did that was important to us, he made a point to be there.”

Despite his growing responsibilities, Bernie rarely worked on weekends and took every opportunity to travel with his young family. According to Andrew, they never stayed home: “President’s Day Weekend, Easter week, Thanksgiving week, Christmas week… whenever there was a holiday, we would go away.” The family traveled to specific places at specific times of the year. In the summer they went to Montauk; in the fall, to Florida; early winter was devoted to the Bahamas and late winter to ski trips with their closest friends, the Blumenfelds—who later became victims of Bernie’s Ponzi scheme, as did every one of their family friends.

One thing was not in question: The focus of Bernie’s passion was always his career. “He talked about it constantly,” Andrew remembers. “What he was working on, the issues in the business, what was happening in the industry. It wasn’t as though he couldn’t talk about other things, but what he said was interesting to us—so we didn’t.”

What Bernie said was interesting to everyone, it seemed. If Andrew’s father was talking, the room fell silent. “Some people always have to talk over other people; my father never had that problem. It was rare for him to have any difficulties commanding the conversation. He was very charismatic when he talked about work, with a larger-than-life professional persona, but was never loud, flamboyant, or talkative. He was the kind of person who spoke quietly: People leaned in.”

After spending several summers renting homes in Montauk, the Madoffs finally purchased land there in 1979, for $250,000. They spent an additional $500,000 to build a three-thousand-square-foot home on the property—the same one that, after the scandal, would sell for $9 million at an auction to benefit Bernie’s victims. The house itself was modest compared with nearby properties, with simple Crate & Barrel–style furniture, nautical artwork, and a few small bedrooms. It derived its true value from the pristine beachfront property it was built on, which allowed the family to indulge in their favorite pastime.

Both boys developed a passion for fishing as a meditative experience: the calm of the water, the silvery hue of a leaping fish, the red smear of a sunset. Eventually, they would become accomplished inshore and fly fishermen and travel to remote locations as much for the beauty as for the act of catching fish.

Bernie fished for the hunt. His sport was deep-sea billfishing, which required large tackle and big boats belching diesel fumes. To catch big prey, he had to travel miles out into the ocean, where, usually, nothing happened. Bernie often dragged his reluctant family along with him. “When people think of fishing being boring, that’s what they’re thinking of,” says Andrew. “You’re rocking back and forth, inhaling fumes, waiting for something to happen. I always found deep-sea fishing very unpleasant.” Ruth remembers playing with Legos with Andrew and Mark for “twelve hours at a clip. We got seasick, but we couldn’t not do it, because we lived on the boat.” In deep-sea fishing, the aim is to catch a marlin or another large fish, one that can be mounted on the wall with bragging rights. In Bernie’s career, he caught fifteen blue marlin—a big number for Florida and the Bahamas, where marlin aren’t common. His largest catch, at 14 feet and 634 pounds, set a record for years on the island of Chub Cay. When it didn’t fit through the window of his offices at 110 Wall Street, Bernie mounted it in the living room in Roslyn. It stretched the full length of the room.

Ruth says they took the boys along because “the M.O. of the family was that we were always together.” When they weren’t on the boat with Bernie, Ruth spent hours amusing the boys: watching them run around on the docks, putting up signs to wash strangers’ cars, and going clamming. “That was how we filled our days,” she says.

Once the boys got older, they stayed behind when Bernie went deep-sea fishing, and that’s when they went on other “incredible exploratory-type fishing trips.”

As teens, Andrew and Mark worked as dock boys at the Montauk Yacht Club, then known as the Deep Sea Club. From 7:00 AM to 7:00 PM, they’d wait for the boats to come into the marina and tie them up, pump gas, deliver ice, empty garbage cans, clean the fish people had caught, throw the carcasses in a Dumpster, and clean it the next morning. “When you dumped out the cans with fish guts in them,” Andrew remembers, “they were invariably loaded with maggots and flies. It was revolting, but somehow fun.” They spent all day, every day, outside. “Best job on earth,” Andrew insists. Once they discovered the more lucrative boat-washing business, the boys turned their attention to that. And like their father before them, who’d launched a successful business installing lawn-sprinkler systems in high school, the brothers quickly became successful entrepreneurs. Soon they had regular clients and were setting their own hours, at double the income they’d made as dock boys. In keeping with their permissive attitude, Ruth and Bernie never told the boys they had to get a job. Money, Andrew says, was a “nonissue.” What they earned during the summer went a long way, and if at some point during the year they became tapped out, they could simply ask their parents for some cash. But both boys were inherently sensible about money, and both liked to work. In addition to his work on the docks, Andrew started a small ferry service to take passengers around Montauk, and Mark worked at the Athlete’s Foot in Manhasset through most of high school.

Andrew doesn’t remember when he knew he was going to go into the family business. It seemed almost inevitable. His father first brought his sons in as summer interns. After spending half the season on the docks, they’d spend the other half in the office. Bernard L. Madoff Inc., as it was known before it became a one-member LLC, was in the business of market making. In the world of stock trading, market makers are the wholesalers. When individuals want to buy 100 shares of Apple stock, they go to their broker (Schwab, Fidelity) to do so. When those companies receive that order to buy those shares, they send it to a market maker, where the order is executed.

BLM served discount brokerage firms such as Charles Schwab, A. G. Edwards, and Fidelity and bought and sold stocks for the firm’s own account from other professionals. Andrew would watch his father buy and sell the stocks that he followed, talk about the companies, and share his opinions on whether they were likely to go up or down. Traders learn from watching other people trade and understanding how they make decisions. “For a certain personality type, it’s an extremely satisfying way to make a living,” says Andrew, “and I’m certainly that type of person. You have to be smart, good with numbers, and have a very good memory. But it also requires the ability to detach oneself. There’s a lot of money at stake, and if you think, I just lost the value of a car, or I just made enough money to make my house payment this month, you would last about ten minutes. It needs to be treated almost like Monopoly money, or you’d lose your mind.”

Andrew has been described by family members as someone who seems “cold at first—you have to warm him up.” Ruth recalls a family ski trip where Mark met her in the breakfast room and said, “Susan is mad because Andrew didn’t say hello to her this morning.”

Ruth said, “Andrew doesn’t speak to anybody in the morning.” Later that day, she shared a chairlift with Andrew, who wore his earphones the entire way up. “That’s rude; it’s a twenty-minute ride to the top of the mountain,” she said as the chair began its slow ascent.

“What?” Andrew said, taking out one of his earphones.

“Can’t we have a conversation?”

“What do you want to talk about?” Andrew put his earphone back in.

“He totally dissed me,” Ruth says, laughing.

Traders also need to be able to judge their actions objectively. When they make a good decision, it’s right there in black and white, in the form of trading profits, and when they make a bad decision, it’s equally obvious. “To be successful as a trader, you have to be able to say, ‘I made a good decision—I made money. I made a bad decision—I lost money,’ instead of constantly rationalizing and pointing fingers and blaming other things. Bernie’s personality, I thought, was well suited to that and so was mine,” says Andrew.

During his first summer at BLM, in 1985, when he was nineteen, Andrew worked in the market-making business—a separate entity from Bernie’s asset-management division two floors below—as a clerk, taking notes, recording trades, and reconciling the day’s activities at the close of the workday to figure out how much money the market makers who managed him had made. The only way to calculate profits and losses then was to keep track on a sheet of paper. At the end of the day, after data-entry clerks punched these hand-recorded numbers into the computer system and generated the market-making business’s inventory and profit-and-loss statements, Andrew would reconcile each report with his own manual calculations. Invariably, there would be discrepancies, so it was part of Andrew’s job to figure out why. Did the trade not get entered into the computer correctly? Was his math incorrect? The process of reconciling the trades by hand forced him to run through the series of transactions again and again.

“By doing that,” he says, “I learned an incredible amount about the minutiae of the business and trading and got a strong feel for precisely how and why we were making money as market makers.” The exchange-based options market had come into existence in the United States in 1973, so while Andrew was learning about it, it was a relatively young product. “I was fascinated by the concept of stock options and read books so I could teach myself as much as I could possibly learn.” A stock option is a contract that gives its buyer a right—the “option”—to buy or sell that stock at a specific price for a specific period of time. A type of derivative, the value of a stock option is derived from the value of something else, a stock. But since the option is cheaper than the actual stock, it gives speculators a less expensive way to bet on rising prices and hedge against falling prices. “There’s a lot of advanced math involved, and I picked it up very quickly,” Andrew explains. “I loved watching how stocks traded, and how the underlying options traded in relation to the price of the stock. There were all kinds of complicated strategies that you could put together using these options, and I was fascinated by the whole thing.”

In fact, he was totally smitten: “Any dreams I had of entering the family business were only cemented by my experiences over that first summer, when I learned about the market-making business and what the people who worked there, many of whom I had known for years, actually did for a living.”

The only other jobs he ever held, aside from his work on the docks, were a brief stint on the floor of the New York Stock Exchange and another on the floor of the American Stock Exchange, trailing traders. Then he returned to the family fold, where Bernie taught him everything he’d come to know. Or so Andrew thought.

Chapter Three

THE BOOK OF RUTH

Seaside is a sleepy beach town on the Florida Panhandle that seems to have survived, intact, from another era. Pretty, wood-framed cottages line the wide streets. Mom-and-pop shops promote their businesses with chalkboard signs. Teens stroll up and down the boardwalk in bikinis and flip-flops, buying ice cream and tacos from food trucks. In fact, Seaside is fairly new; built in 1979 at the dawn of the New Urbanism movement, a grassroots design effort that formed in the early eighties to promote walkable neighborhoods, the town was created as an experiment in urban living. It has since drawn the interest of architects and urban planners from all over the world.

Catherine, who had majored in architecture and urban planning, had planned a visit to Seaside for the Christmas holiday in 2008. When the firm imploded and she tried to cancel the vacation, she discovered it was too late to get their money back. Andrew and his kids stayed in New York, and she took two days to go on her own, learning about some other benefits of Seaside: “It was the anti–Palm Beach. Nobody’s rich. Nobody’s a Madoff victim. Nobody walks around glued to a BlackBerry.”

On the plane down to Florida that December, she’d allowed herself to indulge in some magical thinking: People are going to forget about this. It will blow over. Nobody cares down here. Almost as soon as she had the thought, she overheard two strangers making small talk in the row in front of hers. “You know what I’m really fascinated by?” Catherine heard a woman say to the man next to her in a sweet Southern accent. “That Madoff case!” Scrunching down into her seat, Catherine pulled her turtleneck up over her nose.

But she was right about Seaside: That night, having a drink by herself in a local restaurant, she idly glanced at the television mounted above the bar and saw a news item about Bernie flash across the screen. The wine had already started to take effect, and the ruddy-faced, heavyset bartender had been cheerfully ribbing Catherine, his new Yankee friend.

“That’s my new father-in-law,” she blurted out, pointing to the screen. She was instantly embarrassed.

The bartender continued wiping a glass, slowly. “Huh. That so?”

“He just didn’t care at all what was on the news,” Catherine remembers. “It didn’t register. That gave me the sense of hope that yes, I might run into the lady on the airplane who wanted to pick apart every detail of my family’s life. But I couldn’t say that was the world. I couldn’t say that was the universe.”

She’d found home—or at least their next vacation hideaway for years to come.

It is in March 2011, two years and three months into her new life as one of the most maligned women in the Western world, that Ruth Madoff first travels to Seaside to join Catherine; Andrew; his fifteen-year-old daughter, Emily; and a friend of Emily’s from camp for a family vacation. Vacation for the Madoffs is now less about the luxury of relaxing and more about the luxury of escape—from the ever-prying media, the reproachful public, and most of all, the recent memory of their greatest loss yet: that of Mark, to suicide. They’ve rented a house a few blocks from the beach, a simple, Craftsman-style three-bedroom with basic furnishings and a small, pleasant deck on the second floor.

Tanned and wearing a white button-down shirt with a sweater thrown casually around her shoulders, Ruth is undeniably attractive, with smooth skin that hints at “work” and eyes that are the brightest blue, save for a splotch of red swimming in each, the result of a dry-eye condition. Her blond hair is cut in its signature bob but seems looser, more relaxed, and is a bit on the brassy side—as the world knows, she colors her own hair now. Slightly bent at the waist, she strides purposefully. In articles she’s been described as “frail,” but that’s hard to see. Greeting Catherine on the boardwalk with a huge smile, she says, “How aw you?” with a thick Queens accent. It is Catherine who has invited Ruth to join her and Andrew on vacation, and only the second time Catherine has seen Ruth in two years. If she is going to broker peace between the man she loves and the mother he once adored, negotiations might as well begin here.

Ruth is nothing like the cool, patrician blonde in her photos. She’s bawdy and funny and sharp enough to do the New York Times crossword, even on Saturday. She smokes five cigarettes a day, as she has for decades, and likes to tell jokes in her gravelly Lauren Bacall voice. She takes issue with her portrayal in Vanity Fair as a foulmouthed curmudgeon. Foulmouthed she can be, but she curses affectionately. Spotting a gorgeous woman walking along the beach, she says with a mischievous smile, “Look at how good she looks in that bikini… that bitch.”

Ruth’s interests are simple: She likes to take long walks. She spends her nights reading fiction she borrows from the library in Boca Raton or watching movies on her computer with Netflix’s Instant Play, anything to distract her from the haunting thoughts of her dead son. She lives for her grandchildren, all six of them, though she’s been denied access to Mark and Stephanie’s children since her husband’s fall from grace.

Repercussions from the scandal ripple through her life daily; Ruth was asked not to attend her granddaughter Anne’s high school graduation, for fear that her presence would distract from Anne’s big day. Anne had graduated at the top of her class at Dalton and had given the commencement speech before heading to Harvard in the fall. Ruth considered sneaking into the back of the assembly in a wig before electing to come up to New York a few days after the big event.

Fear rules her life: fear of being written about, yelled at, or even physically assaulted. She’s terrified of the press. Of airports. Of running into a victim. Forced to live on a meager income, she lives in a state of financial terror. She’s terrified of chipping a tooth, because she can’t afford to go to a dentist. Though she was originally allowed to keep $2.5 million by the Southern District of New York, she has only a fraction of that left. But Ruth has one fear that outweighs them all: being recognized. Once, at an airport, a security guard looked at her driver’s license and asked, “Are you related?”

“Unfortunately, yes.”

“How come you’re not flying first class?”

Ruth shakes her head. “The public impression is that I’m still rich, which couldn’t be farther from the truth.”

The day after she arrived in Seaside, she drove Emily and her friend to a little outlet mall on the outskirts of town. The girls wanted to go into J. Crew, and when they approached the counter to purchase a tank top, a salesclerk turned to Ruth and said, “Are you Mrs. Madoff?” Ruth shrank in horror, but the woman leaned in sympathetically and whispered, “I’m sorry for your loss.”

Ruth used the encounter as an excuse to say to Andrew, “You see? I can’t leave the house. I can’t go anywhere.” Andrew argued that it meant that public opinion was changing—at the very least, there were some people on the planet who didn’t want to see her broken and destitute, or worse.

At the rented house, Ruth spends most of her time cooking: In 1996, she co-authored a cookbook called Great Chefs of America Cook Kosher: Over 175 Recipes from America’s Greatest Restaurants, which is still available on Amazon. (Ruth is not an Orthodox Jew but loves traditional cooking.) Had she been given the opportunity to develop her own identity, rather than getting married at the age of eighteen, she might have become a foodie, someone who delighted at the discovery of hole-in-the-wall ethnic finds. But Ruth always deferred to Bernie, who had no interest in venturing away from local restaurants, where he was known by the staff and could count on being treated well.

Ruth is a wine drinker, a habit that has, perhaps understandably, escalated since her husband’s confession and her son’s death. In the early evening, she pours herself a glass and by dinnertime has entered what she has called her “rosé coma.” For a woman who has, since the scandal, wanted nothing more than to escape reality, she is now in the worst possible situation: thrust into the discomfort of the present moment again and again. She might be in the middle of telling a funny story, and something—a word or a phrase—will trigger a memory, and her face will crumple. She’ll dissolve into tears, weeping over her lost family.

The alcohol has another effect on her: She keeps forgetting things. It’s not that she is trying to cover anything up—it becomes clear from spending time with her that she is eager to help and wants to recover her memories—but the combination of trauma, age, and glasses of wine makes her function a bit like a dying battery: She’ll talk something through and have a crisp understanding, and then, a few hours later, it’s gone.

“What did I think about that again, Andy?” she frequently asks her son. One afternoon in Seaside, she comes down the stairs and thrusts a copy of a book into Andrew’s hand. “Look what I found!” she says, her eyes twinkling. It is Nora Ephron’s essay collection I Remember Nothing.

One of the most difficult things for Ruth to deal with, says Andrew, has been the searing hatred of the public, since his mother was always so well liked. It was one of her defining qualities, at the very core of her identity. Bernie was the person who grabbed people’s initial interest, but Ruth was the reason their friends stuck around.

Ruth drove to Seaside in a Honda Civic from her sister’s home in Boca Raton. The trip took seven hours, and she did it without stopping. It’s hard to picture this tiny, seventy-year-old woman cramped in a car, driving seven long hours by herself. But she will cross great divides to see her family. Every moment she has with them is precious.

One of the few times the corners of her mouth relax is when Emily comes bounding into the room, wearing shorts and a bikini top, and plants a quick kiss on her grandmother’s cheek. “Hi, Grandma, what are you up to?” she asks. Ruth’s happiness then is palpable: She offers her granddaughter the wide, white smile she conferred upon her family when they were whole. It stretches across her face, shining with love and delight. “Cooking for you, my love.”

As Ruth takes a stroll along the boardwalk early that evening, she cannot pass a child without stopping in her tracks and offering a smile. To one little boy’s parents she says, boldly, “What a beautiful child you have.” All her fear of being recognized melts away in the pure presence of a child.

But in no time, reality intrudes again. She pops into a little jewelry store to look for a birthday gift for Emily. Ruth reaches into a wicker basket full of stretchy necklaces and scoops up a handful of the brightly colored beads. Then she drops them, abruptly, as if burned, when she sees the tiny price tag affixed to the clasp.

“Thirty dollars!” she exclaims. She picks up a ring, a bracelet, examines them, puts them back on the shelf. Her jaw works as she seems to reconsider; then she returns to the wicker basket. “They’re really pretty…,” she muses, turning one of the necklaces over in her hand. Appearing to have made a decision, she strides with it to the cashier.

“Can you wrap it?” she asks. Suddenly her eyes fill with panic. “But what about my granddaughter’s friend? I can’t get a necklace for my granddaughter and not get one for her, too. Maybe I’ll ask my son to give it to Emily when they’re back in New York…” The salesclerk assures her that the girls will understand, even if she wants to present the necklace to her granddaughter herself.

Ruth shakes her head. “No, no, I couldn’t do that. It wouldn’t be right. I’ll ask Andy to give it to her later.” Carefully counting out thirty dollars plus tax, she slips the necklace, nestled in pink tissue paper, into her purse. She heads outside, into the balmy night.

On Ruth’s first morning in Seaside, she and Catherine go to a yoga class. Will people recognize her? They seem not to. Ruth gamely rolls out a mat and moves into every position the teacher names—Down Dog, Cobra, even Standing Split—only occasionally sinking into Child’s Pose to rest. The other students can hardly keep up with her; the strength in her arms is astonishing. As always, though, she takes every opportunity to put herself down: “I look like an idiot,” she says. “I’m terrible at yoga.” Then she adds the refrain that serves as a tagline at the end of nearly every sentence she will utter: “Oh, God.”

The world needn’t spend its time flogging Ruth Madoff. Her internal dialogue does it for them, on a continual loop: “I’m an idiot. I’m so stupid. That’s just dumb.” Later that afternoon, Ruth is sitting on the second-floor deck of the house, eating carrot sticks. Ruth has wanted to get some sun but doesn’t fail to point out the “crepiness” of her skin. “Terrible,” she says, flicking the loose flesh under her arm. “Oh, God.”

Bernie started criticizing Ruth almost as soon as they were married. Fastidiously neat even then, he pointed out every gaffe, every error, of his teenage bride. She couldn’t do anything right. “I didn’t know how to clean up,” Ruth recalls. “I used to have a teenager’s room, with what I wore three days ago under a pile of what I’d tried on for the day.” Well, naturally, given the fact that she was a teenager, not much older than her giggling granddaughter, who is goofing around with her friend downstairs.

Bernie would often snap at Ruth dismissively. When a teenage Andrew tried to defend her, Ruth would shake her head mournfully and say, “I don’t know what I’m going to do when you’re gone.” Over time, she came to understand her husband’s expectations and tried to meet them as best she could. Ruth was in charge of decorating their homes—she worked with her best friend, Susan Blumenfeld, on all domestic projects—no small task, once the Madoffs started acquiring boats and multiple residences. But Bernie was not content to defer to his wife’s judgment, often checking and double-checking the work she had ordered to make sure it was to his satisfaction. Ruth’s friends used to joke, “Here comes Bernie—get out your clipboard!” Ruth puts it more grimly: “I always felt like I was going to be fired.”

She didn’t complain enough about how he treated her, she says, and admits that it was probably her undoing. But it wasn’t as if she was afraid of him; he was “open and comfortable and relaxed in ten million ways. So it’s hard for me to tell.”

The two met in 1954, when Ruth was thirteen and Bernie was sixteen, during a party in a friend’s finished basement set up to look like a nightclub, with tables and a jukebox. She spotted the tanned, blond lifeguard across the room and was instantly smitten. “I flipped out,” she says. Bernie also liked what he saw, a bubbly, ponytailed blonde wearing the style of the day: a crewneck sweater revealing a crisp white Peter Pan collar and cuffs, a red pleated skirt that fell just below the knee, and white Capezio shoes. He asked her to dance, and they spent the rest of the party flirting and talking. That night, he walked her home with the girl he’d brought, dropping his date off first. At Ruth’s door, he asked her to the movies—a group date, of course, as was the norm.

From that moment on they were inseparable. All summer long, Ruth hung out by Bernie’s lifeguard chair in her ruffled, pink-and-white-checked one-piece bathing suit. They went to the movies, frequented a “dumpy hamburger joint,” and annoyed her parents by watching TV for hours in her family’s tiny living room. Occasionally, they’d spot each other on the Long Island Railroad on their way to school and wave. Their only sexual contact occurred when they managed to steal into her parents’ finished basement and neck. But again, as was the norm for the day, that was as far as it went.

“In those days, the only solution was to get married,” Ruth says, “which was one of the reasons people did it so young.”

So marry they did, on November 25, 1959, at Laurelton Jewish Center, in Queens, when Ruth was just eighteen and Bernie twenty-one. Ruth’s parents offered to give the young couple $10,000 instead of a party, to start their young lives. Ruth and Bernie wanted to take the offer; Bernie’s parents insisted they have a wedding. So Ruth borrowed a dress from a friend who’d just gotten married, a white gown with a heart-shaped neckline and a full skirt, and married the man who would both make and ruin her life. The only hiccup was a fight Ruth had over flowers with her father, who barked, “Why are you ordering those? They die the next day.” A quick honeymoon at the Concord Hotel, in the Catskills, followed, with mammoth portions of kosher food and a Saturday-night show with a singer. By Monday, Ruth and Bernie were back at school, at Queens College and Hofstra, respectively.

It’s not unusual for a teenage girl to fall fast and hard for her first love, but Ruth, perhaps, had a greater motivation to latch on to Bernie.

Born on May 18, 1941, in Crown Heights, Brooklyn, Ruth Alpern spent her earliest years at 240 Sullivan Place, a two-family house in a largely Orthodox neighborhood. “All you had to do was step out the door and there was someone you could play with,” Ruth recalls. With little traffic, kids played stickball and marbles in the street and ran after rumbling trolley cars. Ruth remembers a milkman arriving via horse and wagon in 1947, during a snowstorm; the horse died in the middle of Sullivan Place and lay in the street for days, frozen solid. The whole family shared a bathroom, and in those early years, she and Joan were close. But once Joan went off to college, the two drifted apart and never shared that closeness again. That is, until the scandal broke and Joan became one of the only people willing to take Ruth in, even though it was Ruth’s husband who had decimated Joan and her husband’s finances, forcing them out of retirement and back to work as cabdrivers in their mid- and late seventies.

But that wouldn’t happen for decades, of course, and Ruth remembers a mostly happy childhood. The family wasn’t religious but belonged to a local temple on Eastern Parkway, where Ruth went to Hebrew school. Ruth’s father, Saul Alpern, was an accountant: “very straight, very serious.” Her mother, Sara, was also serious, because she’d had a terrible childhood. She’d grown up in Russia in a “hovel” and was ashamed of her mother, Ruth’s grandmother, who’d been abandoned by her husband and was forced to make a living by washing lice out of children’s hair. Sara’s mother used her to try to lure her husband back to Russia—it never worked. Several times they saved up enough money to make their way to the United States, only to be rejected by Sara’s father and sent back overseas.

Sara flouted convention in more ways than one: She didn’t marry until she was in her late thirties; went to New York University and got a degree in social work; then got a job. She was also in group therapy, which was quite revolutionary for the early 1950s. Ruth’s father was more conventional, though he also married late in life. Ruth adored her father, who was older than any of her friends’ parents, but when she turned twelve—and likely started to develop—he abruptly pulled away from her, refusing any further affection. He’d done the same thing to Joan. Only one year later she met Bernie, and it was in that frame of mind—rejected by her father, left alone in the house due to her sister’s departure for college—that she fell in love.

In the beginning, marriage was harder for Ruth than she’d anticipated. She was stressed about studying and trying to make her picky new husband happy. With her mother as a role model, she enrolled at Queens College with a major in psychology. But her ambition didn’t extend much beyond graduation; she was a mediocre student. Bernie had spent six months at the University of Alabama but then, missing Ruth, returned home and enrolled at Hofstra. Ruth was trying to graduate early so she could get a job and put Bernie through law school. That plan fell by the wayside when Bernie dropped out after one year to start his own brokerage firm.

Bernie’s father, Ralph, wholly disapproved of his son’s decision to leave law school and start the firm. “He was wild with anger,” Ruth recalls. “He was a product of the Depression and felt very strongly that [Bernie] should have a specific degree that would lead to a job.” Ralph had already seen his family through a series of financial hardships: In 1951, the company he’d started, Dodger Sporting Goods Corporation, was forced to file for bankruptcy when it was unable to fulfill its biggest order, for the Joe Palooka punching bag. Costs for the steel required to make the toy were astronomical then, thanks to the Korean War. He later launched a one-man brokerage firm called Gibraltar Securities; that failed, too.

Bernie was determined to be a bigger success than his father, but he wanted to do it his way. So on January 19, 1960, with $5,000 he’d saved from his lawn sprinkler business, he opened the doors of Bernard L. Madoff Investment Securities, at the age of twenty-one.

Ruth pitched in a few days a week when support was needed, doing “anything that needed to be done.” If the air conditioner went on the fritz, Ruth called the repairman. She answered phones and made copies. When things were slow, she sat in the front room of the office, playing solitaire. In 1963, Ruth left the firm and did not work there again until 1980, when she set up the bill-payment system and handled payroll until a bookkeeper was hired. She also used the offices as a place to work on her cookbook and master’s degree, and to manage her homes, foundations (she sat on the boards of Queen’s College and the Gift of Life), and personal finances. She especially loved going to the office to see her sons, who often had new photos of their children on their desktop computers. Occasionally she would go to lunch with a trader, though, she says, most ate at their desks. “I liked going there,” she says.

In 1964, when Ruth was pregnant with Mark, the young couple moved to a two-bedroom apartment in Great Neck, Long Island, with a terrace over the garage. They moved again a mere two years later, when she was pregnant with Andrew, to a house they purchased for $35,000 and would occupy for more than twenty years, in Roslyn. The living room was decorated with a coffee table, two club chairs, and plaid couches; the overall effect was “that of a doctor’s office,” Ruth says. Their furniture was Early American pine, much of it built by a craftsman from Great Neck. He made chairs and tables that resembled other things: a chair in the shape of an apple, for example. “Looking back, it was horrendous,” Ruth says, laughing. “But I loved it at the time.”

Now a young mother, Ruth again found herself struggling. “Those were not good days,” she says. She found the suburbs monotonous and lonely and had trouble managing two small children, one of whom was colicky, and a house. “Nobody ever told me raising young children was difficult, and in those early years, you were not allowed to say such a thing.”

In Roslyn, there was no place to go in the dead of winter; “Mark would wake up at six-thirty, then Andy would start, and I would think, I’m never going to make it through the day.” With two children under the age of three and a husband working long hours, Ruth was simply overwhelmed.

Then, as often happens, life got easier; things worked themselves out. The boys grew older and started school full-time; Ruth started to make friends in her community; and Bernie’s business began to flourish. He moved his offices to a bigger space, at 110 Wall Street. Occasionally, Ruth would book a sitter for the kids and she and Bernie would go out for a “big time” in the city, eating at a restaurant in Chinatown and seeing a movie. This is the time Ruth remembers as the happiest of their lives: They were an upwardly mobile, tight-knit family of four. The boys adored their parents. Bernie’s business was growing, and there were no bickering daughters-in-law yet or demanding clients. No sign of what was to come.

Chapter Four

TROUBLE IN PARADISE

Mark Madoff entered the University of Michigan at Ann Arbor with a plan: He would major in economics and join his father’s firm directly upon graduation, bypassing business school. In the first week of his freshman year, he met the woman who would become his first wife: Susan Freeman. A pretty blonde from a good Jewish family in tony Rye Brook, New York, Susan had been asked by her parents to look up a nice young man who was the son of mutual friends. She’d already come across his picture while flipping through the high school yearbook of a friend from Roslyn. “That’s the guy I’m supposed to meet,” she’d mused, taking note of his good looks.

When she met him in person she was even more impressed—in fact, she was instantly, irrevocably smitten. Mark Madoff looked like a movie star, with an athletic build, longish blond hair, and a strong jaw. After he mumbled a hello and ambled down the hallway of their dorm, Susan turned to her mother and said, “I’m going to marry him someday.” She just knew, she says.

If Mark felt the same way, Susan says, he wasn’t able to show it. Never comfortable in his own skin, he would stare at the floor when introduced to someone. Once Susan and Mark started dating, her mother tried to give him some friendly advice: “Mark, if you’re going to succeed in business, you’re going to have to learn to look people in the eye.”

Despite his shyness, Mark possessed a sophistication and a worldliness that far surpassed that of his young friends. By the age of eighteen, he’d spent a significant amount of time in Europe, eaten in a wide variety of five-star restaurants, and slept on sheets that boasted a very high thread count. “Mark taught us everything,” Susan recalls. “He knew about fashion, food, wine. He taught us about Girbaud jeans.”

The two dated throughout college with a few small breakups in between. They were, says Susan, “copacetic.” Both liked to be in bed by 11:00 PM. Neither liked to party. Susan had grown up with a father who had a terrible temper; Mark, by contrast, was “incredibly calm.” He was, she says, very much a peacemaker: “When he did get angry, you knew he’d been pushed to the limit.”

“Our relationship was a little bit explosive in those days,” she remembers. “I had this crazy temper: I was always yelling at him, fighting and throwing things. Mark was a very sensitive and vulnerable guy, and I think because he knew that about himself, he kept his emotions at bay in romantic relationships. I was always trying to rile him up because I wanted an interaction. Andy thought I was horrible; he wanted Mark to break up with me.”

“I had never met anyone as volatile as Susan,” Andrew says. “In my house, we would say that everything was out in the open—but it really wasn’t. With Susan, it actually was. She would yell or throw a hairbrush at him. And I couldn’t understand why he would let himself be treated like that.”

Mark’s nervous constitution followed him to college, the stomach problems that had plagued him as a child returning in force. Susan’s reactions to his ailment evolved from sympathy to annoyance as his doubling over became a constant occurrence. Mark tried to control the uncontrollable by becoming, Susan says, “incredibly routinized.” In his closet, his shirts were lined up from blue to pink. His dorm room was spotless. At one point, when nothing was helping his stomach, Mark visited a naturopath named Dr. Peter D’Adamo, who would later write Eat Right 4 Your Type, a diet plan based on blood type. On the doctor’s advice, Mark stopped eating carbohydrates. He didn’t veer from the diet, falter, or cheat even once: If he and Susan stopped by a deli for a sandwich, he would order nothing but meat. When Dr. D’Adamo told him he needed to start exercising, Mark got up every day at 5:30 AM and ran. He did it for a year.

Susan says that Mark felt he couldn’t measure up to his father. Though he was grateful to have been born into a family where he reaped the benefits of his father’s successes, he knew that no matter what he did, he would only ever be Bernie Madoff’s son. He desperately wanted to please him.

If Mark respected his father, he absolutely adored his mother. “What college kid talks to his mother every single day?” Susan asks. Susan, who was also close to her parents, fell into an easy intimacy with Ruth and Bernie, spending every summer weekend with them in Montauk. She was allowed to sleep in Mark’s room, and Andrew’s high school girlfriend was also allowed to stay over. Ruth used to joke, “I feel like I’m running a brothel!”

In 1984, Andrew headed to college at the Wharton School of the University of Pennsylvania, an undergraduate business program. He majored in finance and, like his brother, planned to join his father’s business right after graduation. Ruth, suffering from a serious case of empty nest syndrome, was eager to move to Manhattan. During Andrew’s senior year in high school, she and Bernie started to look for an apartment in earnest. Their broker showed them a beautiful duplex on the top floors of a quiet building on 64th Street, and as so often happens with Manhattan real estate, they reached beyond their original budget of $1.2 million to buy it for $1.6 million. Had they been able to hold on to the property, they would have turned a nice profit despite the burst of the real-estate bubble: In 2010, it sold at auction for $7 million.

Ruth calls the home that later became her husband’s first prison cell an “upside-down” apartment: The bedroom, study, sitting room, and his and hers bathrooms were downstairs, and the living room, dining room, and kitchen, upstairs. After a renovation, Ruth and Bernie hired celebrated decorator Angelo Donghia to design the interior; he gave it a formal “English country” feel, with heavy armoires, trays with crystal decanters, and a poufy velvet sofa that would reveal a huge dent whenever someone who’d been sitting on it stood up. Andrew remembers his father constantly puffing up the cushions. The jewel of the apartment was a four-thousand-square-foot wraparound terrace that Ruth and Bernie never set foot on. “There was no overhang, so it got too dirty,” Ruth recalls. “You’d clean it one day, and the next it’d be covered in soot.”

To get a clear picture of what life as a Madoff was like, it is necessary to put the family’s wealth into perspective. In the world of successful multibillion-dollar hedge fund managers with multimillion-dollar art collections, stables of Thoroughbreds, and garages housing dozens of luxury cars, they lived a wealthy but grounded life.

Catherine notes, “They weren’t crazy rich; in my experience, they were ‘medium rich.’ Of course they had plenty of money, more than I would ever have, but Ruth drove a ten-year-old Mercedes station wagon and bought T-shirts at the Gap.”

Indeed, before the 1990s, when they began flying private, the Madoffs often flew coach. Though they owned several properties, most were unremarkable by the standards of the Forbes 400. Their 1,300-square-foot one-bedroom pied-à-terre in France was considered downright humble by Bernie’s wealthy clientele.

When Bernie’s client and friend Norman Levy wanted to build a 150-foot yacht, Bernie consulted on the construction. The final result was “absolutely beautiful,” recalls Andrew, but when Norman died and left Bernie in charge of his estate, Bernie didn’t attempt to buy the boat.

“He wouldn’t even talk about it,” Andrew recalls. “I thought it was because he was so attached to Norman that he couldn’t bear to look at the boat. Now I wonder if there was a certain level of opulence above which he could not live, or it was going to raise alarm bells. But I never thought, Aha, he’s a criminal.”

Ruth herself didn’t realize quite how wealthy she’d become—not only because Bernie didn’t share with her the full scope of his holdings (or with anyone, as the world is now all too aware), but because everyone around her was affluent. Many of Bernie’s clientele enjoyed the same financial comforts as the Madoffs had, including their closest friends.

What Ruth and Bernie really lived was a normal upper-class Jewish life. Not a part of high society, they spent most of their leisure time going to dinners and movies with friends. Every now and then they would be invited to a formal dinner in Europe, which Ruth would dutifully attend, though she admits she “wasn’t crazy about making small talk” with people she didn’t know. Always lurking beneath the surface were their modest roots: Ruth remembers a luncheon in London where a waiter leaned in with a platter of crab and Bernie reached for the porcelain crab ornament instead of the edible crustacean. “The English people at the table didn’t laugh,” Ruth recalls. “But Bernie and his tablemate were roaring.”

By the time Andrew went to work for his father, in 1988—Mark had started at the firm two years earlier—Bernie had moved his business a final time, to the now-infamous offices that occupied the seventeenth through nineteenth floors of the Lipstick Building, at 885 Third Avenue. Around that time, the family started to travel to Palm Beach, flying down on a Thursday to a small apartment, then returning to New York on Sunday.

It was always Bernie who pushed their life to the next level. He wanted to join the Palm Beach Country Club—something Andrew realizes, in hindsight, was a mercenary effort on Bernie’s part to ingratiate himself with affluent people he hoped to lure into his scheme. “He actively recruited investors from these pools,” Andrew says, noting, “he couldn’t have done that eating at Alabama Jack’s with my mother.”

For her part, Ruth didn’t want to join, protesting that there was a perfectly nice golf course at the Breakers. She was trying to avoid the Palm Beach social scene, she says: “I didn’t want to spend two out of three nights in Palm Beach at black-tie events. You’d play golf with these people, see them at lunch and at a party that night; then you’d go to another party with the same people the next night. Or someone would call and say, ‘I’m having a dinner party on April fourteenth.’ You’d say, ‘Oh, too bad, we’re not going to be in Florida that weekend.’ They’d say, ‘That’s OK, I’m having another one next Friday.’ They’d have three in a row to make sure everyone was covered! I wasn’t going to do it. Bernie would say, ‘Just lie.’ ”

Mark and Andrew were bored in Palm Beach. The fishing wasn’t great, and what they wanted to do in the winter was ski. “Who wants to go on vacation with their parents, anyway, unless it’s to save money?” Ruth says. As always, Bernie eventually got his way: In 1990, they joined the club.

Andrew moved into a one-bedroom bachelor pad bought for him by his parents in the fall of 1988, in his brother and sister-in-law’s building on East 49th Street, Sterling Plaza, in Manhattan. It was a building developed by Mets co-owner Fred Wilpon, which was in keeping with the Madoff penchant for doing business with friends and family. Mark Madoff had married Susan Freeman on a clear day in September 1989, at Fresh Meadow Country Club in Long Island. It was a lovely but not lavish wedding. Andrew had recently started dating Susan’s assistant, Debbie West, whom he’d met on a blind date arranged by Susan. Andrew had taken Debbie to dinner at a restaurant on the Upper East Side, and they’d “talked and talked and talked.” Andrew, who wasn’t a chatty type, found that she put him at ease. He was drawn to her sparkling intellect and independence. She’d lived in Italy and graduated from college in three years. And she was the polar opposite of the women he’d been dating, carefree party girls who were hardly wife material. A year later, they were engaged. They married at the Union League Club, in New York City, on January 18, 1992.

Both sets of grandparents were in the waiting room when their first grandchild was born: a boy, named Daniel, to Mark and Susan, on April 24, 1992. Ruth calls the night of his birth “the most extraordinary experience I ever had in my life.” When she and Bernie got the call that Susan was in labor, they were in Florida. At two in the morning, they rushed back to New York on a private plane. Everything that was difficult about being a mother evaporated in the presence of her new grandson: “All those silly jokes that everyone tells about having your first grandchild; they’re true. I remember reading an article where someone talked about clipping a baby seat to an eighteenth-century dining room table, when before, he wouldn’t even let his kids eat there. It was hilarious; I could totally relate.” Bernie doted on his first grandson, too.

By then, Bernie was engaged in an affair with Sheryl Weinstein, then president of Hadassah, a Jewish women’s volunteer organization, who later wrote an embarrassing tell-all called Madoff’s Other Secret. They’d met a year earlier. But Ruth was oblivious to this fact, as was everyone around her. She was utterly focused on the baby and impressed with Mark’s parenting skills, calling him “the most devoted father you’ve ever seen.” Unlike the men of her generation, who waited outside, chomping on cigars, while their children were born, Mark was not only in the delivery room but later would race home from work at 6:30 PM to change dirty diapers, give Daniel a bath, and walk his fussy son around the apartment for hours. When Andrew and Debbie’s first daughter, Anne, was born a year later, he displayed the same slavish devotion. Two more grandchildren followed: a daughter for Mark, named Kate, born in 1995, and a daughter for Andrew, Emily, who arrived in 1996. The brothers’ lives revolved around their children.

With both sons settled and no major domestic projects on the horizon, Ruth returned to school to get a master’s degree in nutrition at NYU. Her goal was to set up a private practice once she graduated. But by then, she and Bernie were frequently traveling to Europe for business and pleasure, and she couldn’t commit to a job. “The timing was off,” she says. It became one of her biggest regrets.

When she was in school, she recalls, she was happy. She liked having a place to go and classes that took up part of her day. Lack of structure was “always a huge problem” for her. She had a sewing machine; she knitted; she decorated and did crafty things. But none of that was her passion; she was just killing time. “If I’d had a separate life, and hadn’t been so dependent on a man, I would have been stronger, I think…” Isolated within the deceptive embrace of her husband, Ruth allowed her extended family to drift away. In deference to Bernie’s wishes, they didn’t socialize with her sister, Joan, aside from the occasional family gathering. The same went for his sister, Sondra, who lived a mere hour’s drive away. “He never wanted to do anything he didn’t want to do—and for the most part, he didn’t ever want to see family,” Ruth admits. “He felt his time was precious; he was somewhat selfish on that score.” Was he troubled by the prospect of seeing a close family member he knew he was fleecing? Perhaps. More likely, he was insisting on a narcissistic need to have things his way. Always his way.

The Madoffs acquired more luxuries. He bought his suits at Kilgour, French & Stanbury and his shirts and underwear at Charvet. Because his weight fluctuated, he had to have his clothing taken in and let out, no small enterprise, since it was custom-made in London. He stored two steamer trunks at the Lanesborough Hotel in London and the Plaza Athénée in Paris so that polished shoes and cleaned and pressed suits and shirts were available when he arrived. In 1994, Bernie and Ruth purchased a house on the shores of the Intracoastal Waterway in Palm Beach for $3.8 million to make room for their children and grandchildren. It boasted terra-cotta floors; a large, wraparound double veranda; and an eighty-foot dock, where Bernie parked the Rybovich that he had bought in the 1970s. (The home later sold for $5.65 million, considerably less than its $8.5 million asking price.) Before they decorated, they rented vinyl La-Z-Boy recliners complete with drink holders, and “it was one of the best times we ever had in Palm Beach,” says Ruth.

As Bernie’s lifestyle grew more extravagant, his ruthless perfectionism gathered strength. He complained about the mess made by the grandchildren: sticky fingerprints, wet towels, crumbs on the floor.

“You’re crazy! Leave them alone,” Ruth would plead, fearful her sons were going to stop coming to visit. The adults weren’t immune to his quirks, either: “Don’t touch that!” Bernie would shout if someone curiously fingered a vase. Mark would snap, “Goddamn it, Dad, you want me and Susan to come here, but you make life miserable for us.” It got worse as he got older, Ruth says: “He ruined our time.”

Ruth found it easier to comply with Bernie’s rules, saying, “What was the difference? It wasn’t any big deal. I just made sure to keep my closet door closed.” Andrew and Mark would try to laugh, or ignore their father. Then Bernie would have to lie down, he was so upset.

At work, he was no less fastidious. The walls of the office were oval, due to the unique shape of the Lipstick Building, and vertical blinds hung around the entire perimeter of the rooms. If someone pulled up a blind, often one of them would go crooked. Or they might not be at the exact same angle after someone had turned them to open them and the cleaning person turned them back that night. So Bernie would spend a certain amount of time each day crawling along the ledge at the edge of the windows, lining up the blinds. “People got used to seeing him doing that,” Andrew recalls. “Nobody, of course, was capable of doing it to the degree of precision he required.”

Then, of course, there was the underwear that Bernie had custom-made due to his aversion to elastic; it had buttons up the side. He gave Andrew a few pairs to try out. “This is ridiculous,” Andrew said. “You can’t wear this underwear. It doesn’t have elastic. It doesn’t stay up.”

The brothers rolled their eyes at their father’s quirks but tried not to give him too much grief: After all, they were the beneficiaries of his significant largesse. Neither one had a trust fund, so any money they made came from their salaries. But Bernie’s generosity was legendary. As Susan remembers it, Mark would say, “OK, Dad, we found a house, it cost this much money.” And just as it did with the bicycles and ice cream cones of their childhood, the money for the house would appear.

Susan and Mark bought a charming house in the backcountry of Greenwich, Connecticut, with Ruth and Bernie’s help. The elder Madoffs would send them tickets to come visit them in Florida. Once or twice they flew the young couple to Italy on a private plane; another summer they sent them to France. Or Mark and Susan might go to Aspen, with or without Ruth and Bernie, all expenses paid.

There were blips, little annoyances. Mark would complain to Andrew that Ruth and Bernie wouldn’t babysit their kids when they went away, that Susan’s parents were always stepping in. But he wouldn’t say a word to his father. A first-born and a pleaser, he “revered” his father, according to Susan. He would not question him. “And he would not, I don’t think, have said that his father was a bully. Clearly, he knew his father picked on people. But Mark would just say, ‘Oh, my dad’s crazy.’ ” He would seldom get mad at his father. And Bernie adored his sons. He might grumble at the beginning, says Susan, but ultimately he would give them anything they wanted.

Andrew and Debbie bought a summer home in Old Greenwich; every weekend they would show up on Mark and Susan’s doorstep with their infant daughter, Anne. She and Daniel were best friends from the time they could walk and talk. In those years, says Susan, the young couples were extremely happy. They spent time in Montauk together, traveled together, were all best friends.

But when the kids got a little older, problems started to arise. The brothers had completely opposing parenting styles. Andrew and Debbie were super hands-on, very protective. Susan and Mark were more relaxed. It was mainly a problem in Montauk, says Susan, when the couples were all together in a small beach house with no rugs or upholstery to absorb sound. “You could hear a pin drop from one end of that house to the other,” Andrew says.

Every day, Anne went down for a nap from 12:00 PM to 3:00 PM. Daniel had no regular naptime; his parents put him down when he was tired. During Anne’s naptime, Andrew and Debbie would spend the whole time shushing Susan, who was “walking around and slamming doors,” says Andrew. Another ongoing issue was snacks: Daniel was allowed to have four cookies; Anne could have only two. Neither set of parents would compromise and give the kids three.

Each brother had reservations about—and, at times, out-and-out dislike for—the other’s spouse. Mark and Susan had a volatile, tempestuous relationship. They would get into huge screaming fights in front of the family, leaving Andrew stunned. “In the early years of our marriage, I was impulsive and excitable, very emotional,” Susan recalls. “I remember Bernie saying to me, ‘That’s part of your charm.’ ” If she expressed dismay with Andrew, Mark would say, “I don’t want you getting into a fight with my family, OK? I work next to them every day.” Mark, for his part, thought Debbie was too controlling.

Soon, the tension transferred from the brothers to the wives, and Debbie and Susan stopped speaking. Grateful to have the attention off their own relationship, Mark and Andrew allowed their wives to fight the battle secretly brewing between the two brothers. The family continued to vacation together, but one of the couples might stay at a hotel, Andrew remembers. He and Mark continued to work next to each other every day, “compartmentalizing, as is the Madoff skill. We just sectioned off our personal lives from our relationship with each other, never discussing what was happening with our wives. There was no pressure to see each other socially, since we saw each other every day at work.”

Was anyone in therapy? “No, definitely not,” says Andrew. “As a family, we would have insisted, ‘It’s all out there.’ And there was a lot of stuff that was out in the open and talked about. But the deeper, more serious issues festered beneath the surface.”

Ruth stayed out of it. “Sometimes it got sticky with the wives,” she recalls. “But you can’t take a side, so I never did.” Her refrain became “I don’t want to get involved.”

“The Madoff way of doing things was incompatible with marriage,” admits Andrew. “There were no boundaries—everyone was in everyone else’s business. And there was a sense that Mark and I were married to the job, the firm, each other. The wives always felt like, where do we fit in here?” Andrew and Mark pretended that nothing was wrong, working side by side without ever discussing their problems. As was the norm for the Madoff family, they all insisted they were happy. All conflict was quietly ignored.

Chapter Five

WORK/LIFE

On August 1, 1988, after a month spent backpacking around Europe, Andrew officially reentered the family business in the market-making division, no longer as an intern but as a full-time staffer. Bernie had already transitioned from working with his brother, Peter, in market making to running his asset-management business full-time, two floors down from where Andrew sat. It was an auspicious time for Bernie to change roles: In the 1970s he had orchestrated an industry-wide innovation, the creation of a centralized clearance and settlement system through the Depository Trust & Clearing Corporation. In the early 1980s, he developed the controversial practice of payment for order flow—paying brokerages a few pennies per share for steering orders to him. Originally decried as bribery, payment for order flow not only received a congressional seal of approval but also became an industry standard practice. It was now time for him to make a mark in new territory. In Bernie’s absence, Peter would go on to create a system that automated the buying and selling of stocks for firms that catered to retail investors. These “automatic execution” systems brought prominence to the name of Bernard L. Madoff Inc. Although Bernie was not directly responsible for them, he was the one invited to attend conferences and make guest appearances on TV.

Mark had started at BLM two years earlier, as a trading assistant. Coming into a family business as the boss’s son certainly had its advantages, but it also came with drawbacks. Bernard L. Madoff Investment Securities had no mechanism by which employees could ever have equity in the business—which is almost unheard of on Wall Street. Most firms were partnerships where employees could eventually become partners, or public companies in which they could receive stock options. A handful of firms were sole proprietorships or LLCs, like BLM, but they had all been snapped up by bigger firms as the industry consolidated. Andrew’s coworkers would never own a piece of the family pie, and they resented the fact that he might, by simple virtue of his last name. The only way to prove himself, he knew, was to become a successful trader.

Trading is an intense occupation, requiring an enormous amount of focus. It involves a lot of information processing and the ability to make important decisions quickly and easily. Right out of the chute, Mark was good at trading but never really liked it. A worrier, he agonized over every decision he made. Andrew was the opposite. Unafraid of big risks and positions, he traded aggressively. He was consistently successful on the desk, making millions of dollars for the firm by employing arbitrage strategies in companies like Intel, Iomega, Pepsi, and Johnson & Johnson. There were only a few notable blowups, such as the time he famously—and disastrously—shorted Bell Atlantic in the 1990s and threw up in the garbage can under his desk. Within three years, he was promoted to full trader and got his own “pad,” or list of stocks he was responsible for. With about a dozen traders on the desk, competition for the best stocks was fierce. Andrew, of course, knew he had an unfair advantage as the boss’s son: “There was an enormous amount of pressure on both Mark and myself that we’d better trade profitably.” Andrew rose to the challenge, trading more profitably on a per-stock, per-share basis than any other employee at the firm. But as he honed his skills, he came up against a problem that threatened to cut him off at the knees.

All trading firms have a culture, born from an inverse relationship between profitability and compliance. Blue-blood, traditional, regional brokerage firms such as A. G. Edwards in St. Louis, Olde Financial Corporation in Detroit, Alex. Brown in Baltimore, and Fidelity in Boston—firms that had been around a long time and had reputations of being run by good, honest people—leaned toward the conservative, taking the minimum profits from the trades that they executed. At the other end of the spectrum were the penny-stock firms on Long Island and in Boca Raton, as well as some of the biggest names on Wall Street: Goldman Sachs, Morgan Stanley, Merrill Lynch. The legal limit for the markup a firm was allowed to make on a trade with a customer was 5 percent of a trade’s value. But 5 percent—or $5 on a $100 trade—would be a massive profit, and firms often didn’t go that far. A firm might make a trade with a client and take more money than was appropriate. Yet the temptation to go further than they should was often too much to resist. In the midnineties, a scandal arose around this very issue: Big firms like Merrill Lynch, Smith Barney, and Lehman Brothers were accused of colluding to fix prices on the NASDAQ to cheat their clients. All settled with the Securities and Exchange Commission, signing a consent order that didn’t admit to their guilt but agreed to new restrictions, such as having their phone conversations taped. It changed the entire industry.

BLM was one of the few firms that didn’t get caught up in the scandal, because Bernie and Peter had designed its trading systems to favor efficiency and speed over profitability. The outer limit for a profit on a trade with its clients was 12.5 cents per share, and it was often far less than that. That, says Andrew, was very good for the firm’s reputation but a real challenge in terms of making the business profitable. Still, Andrew loved the respect he received when he visited other firms around the country: Yes, you’re a New York firm, they would tell him, but you’re not like other New York firms. BLM’s sterling reputation allowed it to pick and choose its customers.

Andrew always understood that there were two businesses and that they were separate. On the nineteenth floor, where he worked, Peter was the ultimate boss of the market-making and proprietary-trading businesses. One floor below were the systems and operations people who supported their business. And on the seventeenth floor was Bernie’s asset-management business—the scene of his infamous fraud. There were separate personnel, separate floors, separate computer systems, and almost no interaction between the businesses at all, with the exception of the office Christmas party and the company weekend in Montauk.

While Bernie was free to run his asset-management division as he pleased, with little or no government oversight, the market-making division, by contrast, was closely monitored. All brokerage firms were given a score by an auditing firm called Transaction Auditing Group, based on its execution quality—meaning its level of compliance. Those scores were intensely, competitively monitored. Out of dozens of firms, BLM ranked number one, year after year. “Any time we weren’t number one it was a crisis,” Andrew says. As trading systems changed and adjusted, firms cropped up that were willing to push the limits of regulatory compliance, giving them the ability to grow more, build bigger systems, and market more aggressively. That frustrated the brothers to no end. At a certain point, their limitations on profitability were “ludicrous,” says Andrew. “Every time we made a highly profitable trade, our father or uncle would say something was wrong and we needed to modify the system. If we weren’t making any money at the end of the day, what was the difference if we were number one in the TAG ranking?” He remembers arguing, “It shouldn’t be our goal to be the least profitable firm on Wall Street.”

With the benefit of hindsight, Andrew now realizes that his father’s entire fraud hinged on the firm’s sterling reputation. He could never afford to have anything less than “pristine perfection” in the quality of the business he was running, so that when regulators came in to examine the trades, they never found anything untoward. And they never did. But the price to pay was a dramatically reduced level of profitability.

If the other traders on the BLM desk found fault with the system, they didn’t complain with their feet; people worked there for decades. They made a “good, not a great living,” says Andrew. “By Wall Street standards, they were not the best paid.” In the 1990s, a BLM trader could follow the drill, keep his head down, and make a couple of hundred thousand dollars a year. It was a low-stress job that came with fantastic job security. When the tech bubble burst in 2000, the firm carried a bunch of traders rather than letting them go. And as technology became more integral to the trading process, making their jobs obsolete, BLM held on to its traders longer than anyone else.

Few traders made over $1 million a year, with the exception of Andrew and Mark, who, at the height of their salaries, each took home $3 million. Considering the positions they eventually held—head of equities and sales, respectively—that still wasn’t excessive by Wall Street standards. They could have made millions more in the same positions at a larger firm, but at this stage in their careers, they hoped to one day inherit the business. And Andrew wasn’t at all unhappy with his salary. “Three million dollars a year is a ton of money,” he says.

Bernie was not abusive, Andrew says, but he could be mean. He would say things like “You’re welcome” before Andrew had a chance to say “Thank you,” and “In case you forgot, it’s my name on the door.” He had a strong personality and a way of seeing his point of view as the absolute truth. If someone didn’t agree with him, they were “deluding themselves.” It was one of Bernie’s favorite phrases.

Andrew was the person who disagreed with him most often. “Pick a topic; I was the one who was going to be in his face about it,” he says. The two almost always agreed on big trades—and if Andrew was trading on a scale that required Bernie’s permission, he “wasn’t so quick” to argue. Bernie was boss. But if he was making a strategic decision—changing the way one of their systems worked, for example—they would butt heads. As the eighties had turned into the nineties and then the 2000s, the computer systems grew more extensive and the technical elements had gotten away from Bernie. His brother Peter was the one who had built all of the firm’s trading systems, but after his bout with bladder cancer in the late nineties, much of his responsibility for overseeing the firm’s technology platform had been ceded to Andrew. Andrew was the expert in that arena, but if he didn’t agree with Bernie’s conclusions, he was “deluding” himself.

Less irksome to Andrew, but still annoying, was his father’s refusal to change the name of the firm from Bernard L. Madoff Investment Securities to Madoff Securities. He wanted his father to acknowledge the growing role he and Mark had taken on in the intervening decade, not to mention his uncle’s key contribution. It was Peter’s role in the market-making business that had cemented Bernie’s name on Wall Street. Stubbornly, Bernie insisted it had to be “my name on the door.” They’d argued about it numerous times. A golden opportunity to change the name arose in 2000, when Bernie reorganized the firm from a sole proprietorship to an LLC. Letterhead stationery, business cards, pads, legal documents—all had to be changed to reflect the firm’s new status. Andrew and Mark once again asked their father to change the name of the firm. He refused; they fought and finally gave up. Andrew now realizes that it was, perhaps, a misguided attempt on Bernie’s part to protect his family by labeling the firm as exclusively his, but in the absence of that knowledge, Andrew simply saw it as a slight.

In 1997, Andrew decided to expand the firm’s market-making operation to include the trading of NASDAQ-listed securities. Before that, the firm had specialized in the “third market” trading of NYSE-listed securities. This expansion required significant changes to the firm’s trading systems and was an enormous undertaking. By 2000, after some ten years on the desk, Andrew was managing the entire trading desk. His favorite trades involved arbitrage, anything having to do with complicated math, multiple securities, options, convertible bonds, and warrants and rights. For a long time, he was able to do all the numbers in his head; once that was no longer practical, he built spreadsheets and models that set the stage for the trading systems he would later have built for the entire desk. Andrew found he had talent for maintaining his composure during huge market dislocations, like the one that occurred after 9/11. If a trader got into trouble or burst into tears and walked off the desk, Andrew would immediately sit down and pick up where the trader had left off. He continued to trade until 2002, when he became head of equities. From time to time during Andrew’s early years with the company, Bernie would ask Andrew if he was happy and insist, “You don’t have to stay in the business if you don’t want to.” Later, those words would become enormously important when Andrew called his father’s bluff and tried to leave. But early on, there was no pressure for him to stay at the firm. When Andrew asks himself if his father manipulated him into going into the business, the answer, he says, is no. Staying there later on was another matter.

For the duration of their careers, Mark and Andrew sat side by side on the trading floor. As a team, they worked together well. Aware of each other’s strengths, they divided up their responsibilities accordingly. Andrew built the trading systems; Mark built the sales team. But as their careers as traders developed, it was now Mark who found himself in his brother’s shadow. Once the brothers were in a professional setting, the labels that had so plagued Andrew in high school—he was “the smart one,” Mark “the good-looking one”—were no longer subjective. They were quantifiably measurable, determined by who was the better trader. And that had to do with who made the most money. Undeniably, that was Andrew.

As a result, Mark gravitated toward being a manager and a customer guy. Oftentimes, women ran the retail order flow desk at BLM’s client firms. They loved the handsome young salesman who visited them and would send him all their business. As manager, though, he had a horrible temper and a very short fuse. The systems Andrew had built to manage and analyze risk were complicated; Mark didn’t always understand the math that supported the model. Whereas Andrew wanted the people who worked for him to be as smart as possible, Mark felt threatened when challenged by a trader. “He would bully them in a way that was embarrassing,” Andrew recalls. “He would just get so angry, screaming at them, insulting them, even threatening them. Once he started shrieking, there was no stopping him—you just had to let him go. People would watch him fall apart and roll their eyes.”

Andrew tried to win arguments intellectually, telling the person who was challenging him, “This is why you’re wrong.” Mark would say only, “You’re an idiot, because I said so.” It wasn’t so different from the way he saw his father humiliate and bully the people who didn’t share his worldview. But lacking the name on the door and the clout that came with it, Mark was far less convincing with this approach.

The division between BLM’s two businesses—or perceived lack thereof—lies at the heart of the vitriol, accusations, aspersions, and doubt cast on Andrew and Mark, because few can understand how they could have worked so closely with their father for so many years without an inkling that a massive fraud was unfolding two floors below them. There were, in fact, a number of factors in play.

According to Andrew, the sudden and early loss of Bernie’s parents left him reeling, and, ultimately, terrified about his own mortality. Ralph Madoff succumbed to a heart attack in 1972, at the age of sixty-two. Two years later, Sylvia Madoff died during an asthma attack; she was also sixty-two. Conversations about Bernie’s health were verboten. He refused to get yearly physicals and, when he was sick, had to be dragged to the doctor. Sometime around 1999, he was diagnosed with a minor blood disorder. That was as far as it went; he refused to pursue it. “How many times could I say to him, ‘You have to take better care of yourself; you need to go to a doctor’?” Andrew asks. “He would say, ‘I’m not doing it.’ And at the end of the day, that was his choice.” Bernie’s refusal to so much as address his mortality led to the “granddaddy of all problems” for Andrew and Mark: the lack of a succession plan.

When the two young men started at the firm, each fresh out of college, with no business-school degree or significant outside work experience, it was only natural that they would take their father at his word when he explained the way the business worked. Certainly, they knew he ran an asset-management company on the seventeenth floor. But with an entire business to learn about on the nineteenth floor—and they were aspiring traders, not financial planners—they didn’t have an interest in asset management. As they grew older and became more involved in the business, they started to ask questions. What were the actual logistics of running the firm as a whole? The elements of the overall, day-to-day operations as they encompassed all business divisions? Most important, what was going to happen when Bernie passed away?

“Peter will run the business,” he would tell them. There was a formula for a split: Peter would get half, Ruth the other half, and when their mother died, they’d get her piece. “But there are elements of the day-to-day operations we’re not familiar with,” Andrew would protest. “Everyone is going to walk in here saying, Now what? And I’m not going to sit here at forty years old and look like a knucklehead.”

Ironically, Bernie often worried about the firm’s vulnerability to the loss of certain key executives, saying, “What if so-and-so gets hit by a bus?” And in 1997, the firm’s bookkeeper, Sylvia Hendel, indeed was killed by a bus. But Bernie still refused to address his own mortality.

Mark would push his father, too: Susan, his ex-wife, remembers more than one dinner-table conversation where Mark said to Bernie, “Dad, the trading room can’t make money forever. You’ve got to let us in on the arbitrage side of the business.” Bernie would “get angry very quickly,” Susan recalls. “He’d say, ‘Listen to me. I gave you guys the trading operation. It’s yours to make what you want of it. This is my business, and it’s gonna die when I do.’ ” She remembers that conversation as “an incredible point of frustration that came up again and again.” Although Catherine was romantically involved with Andrew for only a few years before Bernie’s arrest, she witnessed the same kind of scenes.

Mark would try another tactic with Bernie: “We need to know everything if we’re supposed to step into your shoes. You could be in a plane crash, get hit by a bus, or have a heart attack—it could happen.” At that, Bernie would start to get emotional. Parents dying before their time was a topic that was too close to home for him. The brothers, hyperaware of Bernie’s sensitivity about his parents’ death, would back down.

But not for long. “When are you going to teach me how to do this?” Andrew would ask. “Don’t you think I can do it? Haven’t I proven myself?”

It was a constant source of embarrassment, he says, when clients would inquire about their accounts with the asset-management business. “How are we doing this month?” someone might ask as he passed through the trading room on their way to the office Bernie still maintained upstairs. Or Andrew would meet a new person at an industry event, and they would say, “Oh, you’re related to Bernie Madoff? What’s happening with my account?” Or a call would come into the trading room: “Hi, this is Irving Schwartz, I’m missing a dividend check…”

“I have no idea,” Andrew was forced to respond. “Ask my dad. Let me transfer you downstairs.”

Later, Andrew would find himself shouting at Bernie: “You’re going to teach me what you know or I’m leaving the business! This is unacceptable; I won’t live like this!” Then Bernie would offer answers for “certain elements,” promising, for instance, that one piece would be handled by Frank DiPascali, his lieutenant. “But I’m not giving you details about that,” Bernie would say; “you’ll get them when you need them.” Andrew, growing apoplectic, would reply, “So what happens if Frank decides to screw you? I don’t even know how much money you’re worth. Is it a billion dollars, two billion, three? I don’t have a clue. What if Frank lies? What if there’s really three and he says there’s two? And takes a billion dollars and disappears into the sunset?”

“Calm down, it’s all written down and in a safe-deposit box,” Bernie would insist. “When the time comes, you’ll speak to our attorneys; they’ll handle it.”

“So what about the investment part of the business?” Andrew wanted to know. Bernie had an answer for that, too: “We’ll wind it down and people will get their money back.” The warning note in Bernie’s voice made clear he was finished talking. There the conversation would end.

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Excerpted from Truth and Consequences by Sandell, Laurie Copyright © 2011 by Sandell, Laurie. Excerpted by permission.
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