Author of book on Bernie Madoff to speak in Lewes

Bernie Madoff captured the attention of millions as the story of how he bilked thousands of people out of several billion dollars unfolded.

Before Madoff was arrested, investigative reporter Erin Arvedlund began to dig into his past to find out who he was and how he ran a record-setting Ponzi scheme that netted $20 billion – or up to $65 billion – depending on who is telling the story.

Arvedlund said she was asked to write “Too Good To Be True,” after a publisher read her Barron’s report about Madoff in 2001.

“For the Barron’s story, I got a tip from a very good source. He said he had come across a hedge fund that never lost money, which is statistically impossible. It would be like batting 1.000. No baseball player has ever done that,” said Arvedlund.

Promoters of “Too Good To Be True” say Madoff was an indifferent student with little ambition who transformed himself into a star with a talent for trading, a reputation for innovation and an unmistakably erratic nature.

Arvedlund said she has never met Madoff but did manage to speak to him on the phone before her story ran in Barron’s.

She said early on, Madoff ran a legitimate brokerage firm, and there was no indication that he was also running a hedge fund.

“There were rumors around that he was running between $5 billion and $10 billion,” she said.

Arvedlund said she talked to people in the hedge fund community and to people at all the different trading floors because Madoff was reportedly dealing in options.

“Nobody on the trading floors, nobody at Goldman Sachs, at Merrill Lynch, Smith Barney, none of the big, commercial investment banks, had ever done a trade with him on the hedge fund side. That’s when all kinds of weird signs started popping up,” Arvedlund said.

She said investors loved Madoff and raved about him. “They said he helped put their kids through college. They couldn’t say enough good things about him,” Arvedlund said. But she said investors were reluctant to talk on the record because Madoff had instructed them not to tell anyone he was their money manager.

She said Madoff was paying exorbitant fees to third party marketers, firms whose job was to find new investment clients to feed the scheme.

Among those running feeder funds were Jeffrey Picower, Stanley Chais, Walter Noel and Ezra Merkin, all of them reportedly making $1 billion to $7 billion each.

“Madoff was paying them hundreds of millions of dollars to keep the money flowing in, which is the nature of a Ponzi scheme,” Arvedlund said.

She said the trustee in charge of figuring out who should get money back from Madoff’s mess is going after the feeder-fund billionaires, whose take amounts only to $13 billion. So, where’s the rest of the money?

“This is the funny money question. To my mind, the $65 billion isn’t a real number, even though that’s what Madoff claims he stole,” she said.

Arvedlund said minus all of the phony profits, and taking 10 percent or 11 percent over a 25- to 30-year period, the real dollar amount stolen by Madoff is closer to $21 billion.

She said she believes Picower, Chais, Noel, Merkin and others who were in at the front end of the scheme have the bulk of the money.

She estimates the Madoff family got only about $250 million to $300 million.

Arvedlund said a recent 475-page inspector general’s report found the Securities & Exchange Commission (SEC) had plenty of evidence and opportunity to bust Madoff, but never acted. Why?

“The fraud was so huge that I think the SEC just couldn’t believe that this was going on right under their noses,” she said.

Arvedlund said “Too Good To Be True” is selling well, and the publisher plans to release a softcover edition soon.

She will speak at 10 a.m., and at 6:30 p.m., Monday May 3, at the University of Delaware’s Virden Center in Lewes.

She will sign her book at Browseabout Books on Rehoboth Avenue, at 2 p.m., Sunday, May 2, and will be in the store again through 2 p.m., Tuesday, May 4.

Arvedlund’s visit to the Cape Region is sponsored by Fischer & Hutchinson Wealth Advisors LLC, with offices at 404 Savannah Road, Lewes.

For information call 302-644-3540 or go to fhwealthadv.com