Bernard Madoff will spend the rest of his days behind bars ?but how are the victims faring? Alex Matchett hears from one about a life ended and a family torn apart
If you were trying to create a fraud that would involve the maximum amount of legal and financial com- plexity, this is the one you would come up with,’ says Diana B Henriques, author of The Wizard of Lies: Bernie Madoff and the Death of Trust. ‘There’s just no simple answer to any question, down to who is a victim?’
If this complexity is true in a legal sense, in an emotional sense victims certainly know who they are. Willard Foxton is a victim representing a generation of sons and daughters whose parents lost everything. In 2009 his father, former soldier William Foxton OBE, took his life after realising he had lost his life savings to Madoff.
Foxton, a TV producer and former journalist, wrote at the time that he wanted to throw his father’s medals in Madoff ‘s face.
In a London cafe he recounts the ‘raw emotional moment’ that made him write that: ‘It’s a row of medals like that wide, you know? It is gallantry medal after gallantry medal after gallantry medal — all the world’s worst places: Afghanistan, Iraq, Northern Ireland, the Falklands, Oman. It was real, when I said that I really wanted Bernie Madoff to really feel what he’d done to my family and really know about the man he’d stolen from.’
This story echoes those of other victims. Henriques recounts the incidents she uncovered in writing her book (which is soon to be a film starring Robert De Niro): ‘There were suicides, there were fatally broken hearts. I heard stories of adult children whose parents were in their eighties or nineties, who thought they had adequately prepared for all eventualities, finding themselves caught in this nightmare and just turning their face to the wall and giving up on life.’
There are stories of desperate resilience too.
Foxton relates the circumstance of a Madoff investor who ran a pest control company in Los Angeles: ‘He sold his business, he sold his family home, he moved up to northern California and just lived on the income from his life’s work. The moment that disappeared, he had to take a job in his early nineties in a supermarket so he could keep his wife in the nursing home she was in, and that’s the typical Madoff story.’
Foxton explains it is unsurprising Madoff remained undetected. He was revered as the facilitator of not just returns but also financial safety and, through his charitable clients, social standing.
One sceptic was humiliated at a New York dinner party, Foxton says: ‘The hostess of the party comes in and says: “Don’t you ever come to my house ever again if you’re going to say that kind of thing about Bernie Madoff. He is a pillar of the community. How dare an Anglobitch like you come in here and slate that man; he’s done more for everyone in New York than you’ll ever do.”‘
Foxton’s father bought into that illusion. Having ended his career as the provincial governor of Bamyan in Afghanistan, he was playing golf with some American army officers who told him about a sure thing — ‘He’s the head of Nasdaq and he’s the most reliable guy on Wall Street.’ He poured his pen- sion and home-sale windfall, a total of around ’2 million, into Madoff ‘s funds.
Foxton explains how his father, a man who had crawled across a minefield in Yugoslavia to save a child’s life, was mentally hit by the loss, allowing the pressure of one moment to overtake him. Despite his initial anger, Foxton’s response — eventually — moved through comprehension rather than retribution, leading him to make the BBC documentary The Madoff Hustle.
Others are still hoping for compensation as well as answers. This has taken the form of the Madoff Recovery Initiative, which Henriques calls a ‘remarkable Ponzi scheme recovery. As Ponzi schemes go, five cents [recovery] on the dollar is considered pretty good.’
She says those victims who invested $900,000 or less, around 20 per cent, have been paid in full: ‘They have received back what the law defines as 100 cents on the dollar.’ Those who invested more than $1 million are on course to receive around 57 cents a dollar.
But that’s not the same as getting the gross back. ‘If you had given Madoff $500,000 fifteen years ago and you saw it grow in your retirement account to $3.5 million to retire on, and then it all went up in smoke and you learn you’re getting your $500,000 back, you would still feel like you lost $3 million,’ says Henriques.
That’s particularly galling for those who took out mortgages against their portfolio or exited the fund with considerable profit and who are now being pursued by the Madoff Recovery Initiative.
For Foxton, financial compensation is not guaranteed: ‘I think the chances of a huge amount of money coming back are very slim. My kids or grandchildren might get some of it.’
His pessimism is founded in the fact his father’s investment was made from the UK via an offshore fund and an Austrian bank. Regardless, a Cayman Islands lawyer recently made him an offer of 30 cents on the dollar for his claim, representing a market for distressed Madoff claim assets that since 2009 has fluctuated between fifteen and 75 cents on the dollar.
Away from the trauma inflicted on families and individuals, there has also been a significant erosion of trust in financial bodies. Foxton mentions HSBC contesting its role as custodian bank in relation to his father’s investment: ‘Their legal position has always been being a custodian bank doesn’t mean anything — “That’s just a marketing term; it doesn’t actually put any duty on us.”‘
Another gripe is ‘the seven cow stomachs of the American legal system’ and the self-interest of litigators in continuing appeals and counter-appeals.
Henriques is also wary of the inability of jurisdictions to provide resolution: ‘This case just under- scores how ill-equipped the judicial and bankruptcy systems are to cope with a global cross-border fraud. Haggling between jurisdictions takes centre stage before the victims ever get heard, particularly between the UK bankruptcy process and the US bankruptcy process.
There have been similar disputes in Luxembourg, in France, in Ireland.’ Asked whether there has been an adequate response to prevent such a scam happening again, her answer is no.
The diversity of rulings and the uncertain responsibility still besets financial and family institutions. Fox- ton mentions family arguments over what to do with the claims and his doubt in banks: ‘I just don’t trust financial institutions at all. If I got ’200,000 I would probably have two gold bars under my bed. I’d never put money into something intangible, ever. I cancelled my pension. I do not trust.’
However, the almost $11 billion that has been recovered by the initiative does show sincere, and successful, efforts to reverse Madoff’s fraud.
Whether the return of initial investments can remedy the pain of those who lost so much is doubtful, but Foxton is poignantly philosophical: ‘I don’t hate Bernie Madoff — I think that’s probably quite hard for a lot of people to understand. I think he should be behind bars, I think he should pay for what he’s done, but I don’t hate him. His son killed himself over this and my father killed himself over this. We both lost family members over this fraud.’