(CBS)
Posted on 01/30/2009 4:51:03 PM PST by Liz
CBS News Investigates: Brother Of Bernard Made Florida Real Estate Moves That Raise Questions About How Much Family Knew
When former financier Bernard Madoff was arrested last month and accused of swindling clients out of $50 billion, he insisted his family members were in the dark, even though some of them held key positions in his investment firm.
But now, a CBS News investigation by Chief Investigative Correspondent Armen Keteyian has uncovered evidence that raises questions about what Madoff's family knew - and when they knew it.
In Palm Beach, Fla., there are two lavish homes within 10 minutes of each other. The first, worth an estimated $9.3 million, belongs to Bernard Madoff. The other, said to be worth $4.6 million, is the Florida residence of Peter Madoff, Bernard’s brother and long-time business partner. The paper trail on these two residences calls into question what family members may have known.
CBS News has learned that Madoff and his brother, along with their wives, took steps two years ago -- around the time that federal regulators started probing Madoff’s business activities -- that could help prevent their Florida homes from being taken away from them, something possible under Florida state law. "Florida has very unique laws and has been described by some as a debtor’s haven," said John Pankauski, a Florida estate attorney. "People who may want to protect their property will seek the protection of Florida laws." Florida’s "homestead" laws, which are unlike what any other state has, in part allow homeowners facing legal judgments (or other financial issues) to protect their primary residence fully - keeping it out of the hands of potential creditors. One of the key steps in qualifying for the home-protection is seeking "homestead exemption," which provides homeowners with a tax break.
On May 10, 2001, Peter Madoff bought the home at 200 Algoma Road in Palm Beach, Fla., along with his wife Marion. Both were listed as owners at the time. Five years later, on Nov. 8, 2006, Peter transferred the title to Marion making her the sole legal owner of the home.
(CBS)
A month later, on Dec. 28, 2006, Marion applied for, and soon after received, homestead exemption. According to federal documents, during this time the Securities and Exchange Commission was in the middle of what turned out to be a two year investigation into Madoff’s company, Bernard L. Madoff Investment Securities LLC, for "fraudulent activities." The investigation began on Jan. 6, 2006. "Why are you transferring assets to your spouse? What caused that transfer? If you are transferring assets for estate planning purposes why wasn’t it done before?" said Pankauski.
An expert told CBS News that Peter Madoff would have almost certainly been aware of the SEC investigation at that time because he was the company’s chief compliance officer. "The chief compliance officer is really the point person the SEC is going to deal with," said Robert Heim, former assistant regional director of the SEC’s New York Office.
(Lucien Capehart) BERNIE AND RUTH MADOFF
Meanwhile, property records show Bernard Madoff’s Palm Beach mansion at 410 N. Lake Way has been in his wife’s name since it was purchased in March of 1994.
But, information obtained exclusively by CBS News reveals that it wasn’t until Dec. 10, 2006, that Ruth Madoff applied for homestead exemption. This was within weeks of when her sister-in-law Marion applied for the same exemption.
"That raises a red flag," Pankauski told CBS News. "When you have two spouses of two executives who are being investigated by the SEC going down to Florida saying 'hey, I want homestead status.' It draws into question why it was done. It’s highly suspicious."
Ruth Madoff’s initial application for homestead in 2006, however, was denied by the Palm Beach Property Appraiser’s Office because she was not able to prove at the time that her Florida home was in fact her primary residence.
CBS News has learned that on Sept. 18, 2008, about two months before Bernard Madoff’s arrest, Ruth reapplied for homestead exemption. Her request was granted just two weeks ago on January 12, 2009. Keteyian asked: "If it was discovered that during the course of a SEC investigation the Madoffs were moving assets, what would that tell you?"
"It shows that the people that are being investigated, in this case, the Madoffs, have a certain consciousness of guilt," Heim said. Peter Madoff's role in the scam, if any, remains unclear. But timing of the homestead exemption requests raises questions as to who knew what and when. CBS News contacted the attorneys for both Madoff brothers. They had no comment.
Among other things, Peter Madoff was a Chief Compliance Officer at his brother Bernie's firm. Peter was also a director of several securities associations and exchanges. Peter's daughter Shana, was Bernie' firm's compliance officer.
PETER AND MARION MADOFF'S FLORIDA HOME
(protected from creditors by Homested laws.)
As the No. 2 executive at Bernard L. Madoff Investment Securities LLC, Peter Madoff worked side by side with his older brother Bernard for nearly 40 years. Peter was viewed as Bernie's heir apparent so the brothers tried to avoid flying together when they went on skiing trips together. Now, they are keeping their distance. Peter has stopped coming into the office and isn't talking publicly about his role at the securities firm, where he headed trading operations. Peter's daughter also joined the family business. She worked primarily as a "compliance lawyer" at Madoff Securities' market-making arm at the time of her uncle's arrest.
Peter and Shana both attended Fordham Law School. So did Meaghan Cheung, one of the SEC investigators of Harry Markopolos' November 2005 complaint. Cheung and her superior Doria Bachenheimer, who signed off on the case, both have left SEC for personal reasons since September of last year, just a few months before Bernard Madoff confessed and was arrested.
Bernie's wife Ruth's signature is on some of the "investment" documents--apparently Ruth was Bernie's bookkeeper.
It would almost be worthwhile letting the Russian Mafia have a chat with this guy. The more we learn about his dealings, the slimyer he gets.
“...apparently Ruth was Bernie’s bookkeeper.”
Uht-Oh! Thanks for the tip. Our farm is going into my name only as soon as I can contact my lawyer. You never know when your Husband is going to turn out to be a crook, do ya? *SMIRK*
Didn’t O.J. Simpson move to Florida and take similar action on his residence....
LOL----methinks the Ruskis wanna have a tete a tete with Bernie (AFTER he tells where he hid their money).
I don't think Bernie should expect Russian hospitality .......like vodka shots.
Yup.
Ya nevah know.......
Why outsource? Let Gitmo do the job.
Well...after the Madoff group goes back to work in New York City.... Florida will emerge as a Red State.
Not a lawyer here, but “homestead” is a state-level status or construct and I would very, very seriously doubt if a state homestead would prove invulnerable to a Federal conviction or for that matter, even a state-level securities fraud conviction. Any legal opinion out there in FRland?
IMO, it is a necessary (but not sufficient) condition that Madoff do some serious time, like life, or the markets will not recover for years. He has to be frog marched or the system will lose massive credibility. Sorry Bernie, that’s the way it is, babe.
> I don’t think Bernie should expect Russian hospitality .......like vodka shots.
(grin!) but shots, definitely. Maybe scopalamine to begin with, to help him tell the truth, the whole truth, and nothing but the truth...
...although I suspect the Russian Mafia may have access to more up-to-date truth serums than scopalamine. It would probably depend on the mood Madoff finds them in.
NO!!
And I was under the assumption that Florida had changed their law since the rip off by the Enron creeps.
We can expect the FBI will take its usual time in sorting all this out.
Get back to me in 2111.
“We can expect the FBI will take its usual time in sorting all this out.
Get back to me in 2111.”
Yes BUT Bernie IS under house arrest in his 7 Million dollar penthouse in NY. Can you imagine? The same penthouse, the same view, the same 64” TV screen and movie theatre, the same dang boring chef...elites run the show.
From my long-ago business-law studies in Texas, I recall that homestead exemptions have to do with bankruptcy or state-level tax seizure (with some exceptions). What the Feds will do with it in a multifaceted criminal case is unclear.
“From my long-ago business-law studies in Texas, I recall that homestead exemptions have to do with bankruptcy or state-level tax seizure (with some exceptions). What the Feds will do with it in a multifaceted criminal case is unclear.”
Yeah, that’s pretty much my understanding of “homestead” in general, though I’m not familiar with FL law. [FL having no state income tax] I’d suspect (but do not know if) a Federal securities-fraud conviction (projecting, of course) would easily penetrate a state homestead declaration. Errr, especically if the Feds seized your bank account so you couldn’t pay an atty to mount a legal defense.
I think that if there’s a Federal-level asset seizure in this case, based on the fact that the assets were purchased with illegally-obtained income, a state homestead law will not impede the seizure. Maybe the Madoffs intended to try shipping their ill-gotten gains to the Cayman Islands and declaring bankrupcy.
Fuld deeded the house at 265 South Beach Road on Jupiter Island, north of Palm Beach, to his wife Kathleen on Nov. 10, according to records on the Web site of Martin County, Florida. Kathleen Fuld paid her husband $100 in the transaction, the minimum amount allowed to transfer a property.
The single-family home on 3.3 acres was assessed with a market value of $7,855,310 for the land and $5,459,840 for the house. The house is on the eastern side of the island, facing the Atlantic Ocean, records show.
“This is not a true sale,” said Laurie Delong, a customer service representative in the Martin County assessor’s office. “He more than likely quit-claimed this property over to her. That’s an instrument used when there’s no money involved.” Such transactions are typically done between family members for estate planning purposes or in the case of a divorce, she said.
Lehman spokeswoman Kimberly Macleod said Fuld would not comment on the transfer. Two Florida attorneys said Fuld may have made the move for estate planning purposes or to shelter assets from potential creditors under Florida’s homestead act.
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