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Madoffs Shared Much; Question Is How Much?

To friends, they were “Bernie-and-Ruth” or “Ruth-and-Bernie,” a pair so inseparable that you wouldn’t mention one without the other. After nearly 50 years of marriage, they worked in the same Midtown Manhattan office, they traveled together, and they dined together night after night, just the two of them.

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“They came once or twice a week, for about 22 years, and for the last five I could count on one hand the number of times they came with another couple,” says Giuliano Zuliani, owner of Primola, an Italian restaurant in Manhattan. “They always wanted a quiet table in the back, just the two of them.”

But little about the love story of Ruth and Bernard Madoff looks enviable today.

On Dec. 10, according to a court filing by the Madoffs’ lawyer, Mr. Madoff admitted to his wife and their two sons that his multibillion-dollar hedge fund was an elaborate Ponzi scheme. If that is true, Ruth Madoff learned of her husband’s crimes as suddenly as the rest of the world. One day, she was married to a stock-market genius, the next she was married to one of history’s great con men.

That, anyway, is the official Madoff version of events. At this point, as a mess that Mr. Madoff himself is said to have estimated at $50 billion lands in litigation, the main characters aren’t talking. In the absence of direct answers, all that’s left is the sort of psychological puzzle that belongs in Act II of a David Mamet drama, right before we find out who are the players and who are the played.

Was Mrs. Madoff really blindsided? In the social circles where the couple once traveled, both possibilities are unnerving — that Ruth Madoff was in on this, or that she wasn’t. If she isn’t a confederate, after all, then she arguably should be counted among Bernard Madoff’s victims. Either way, wittingly or not, she was an essential asset to her husband, humanizing him and drawing people into his orbit.

“All I will say on the subject is that it’s hard to imagine that she could live with the guy for 50 years and have no inkling,” says Donald Rosenzweig, a childhood friend of Ruth’s and an investor in Madoff Investment Securities. “Could she attract people to him? Yes. Was she out there shilling for him? I doubt it. But maybe.”

Federal prosecutors have not charged Mrs. Madoff with any crimes, and though she is currently living with her husband, who is under house arrest in their Upper East Side penthouse, she can come and go as she pleases. She has surrendered her passport and agreed to a deal with the United States attorney’s office that freezes her assets and grants her an undisclosed monthly allowance for living expenses, the cost of security for the couple and legal fees. The conditions of bail for Mr. Madoff include a $10 million bond secured by homes in Mrs. Madoff’s name.

The Legal Tangle

Ira L. Sorkin, a prominent white-collar defense lawyer who represents Mrs. Madoff and her husband, declined to comment. That the Madoffs now share a lawyer suggests she is not currently in any legal peril, lawyers say, because if prosecutors were to hint that she was a target of this investigation, she would most likely need her own representation.

But negotiations over a possible plea deal with Mr. Madoff are not over. If they stall, prosecutors could threaten to indict Mrs. Madoff as leverage.

“This is tender territory for prosecutors, because you never want to seem like you’re overreaching,” says Sean O’Shea, a lawyer who was chief of the business and securities fraud unit of the United States attorney’s office in Brooklyn. “But this is the scam of the century, so the prosecutors will leave no stone unturned. It’ll be hard for them if they have evidence against Mrs. Madoff to leave her on the sidelines. But they won’t threaten her in order to get him without very good proof.”

The Madoffs grew up in the same Queens neighborhood, Laurelton, then a lower-middle-class and predominantly Jewish area, not far from what is now Kennedy Airport. Ruthie Alpern, as she was then known, was a poised and chatty blonde with an updo and a winning smile. As a senior, she was voted “Josie College,” a ’50s-vintage yearbook honor that pegged her as preppy, bright and going places.

“She was cute and she had really good manners,” said Millie Beck, a classmate. “Always very sweet, very lovely. Kind of all-American looking.”

It’s a look she made an effort to maintain. One of the duties of a manager in Mr. Madoff’s London office was to provide Mrs. Madoff with a steady supply of Boots No. 7 Protect & Perfect Beauty Serum. Her tastes in clothing run toward Bergdorf and Barneys, but she isn’t a flashy or pretentious dresser. She wears a simple wedding band, rather than the oversize diamond that is the ring of choice among New York’s moneyed elite.

The warmer of the two

It sounds strange to say of a woman whose name is on the registration of a 38-foot yacht and who hopscotches among homes in Manhattan; Montauk on Long Island; Palm Beach, Fla.; and Antibes, France, but by the standards of her peers, Mrs. Madoff lives a relatively modest life.

‘Added to His Credibility’

She is more outgoing and warmer than her husband, business associates say, freeing Mr. Madoff to play the avuncular wizard. And that is just part of the role she has played in the success of Madoff Investment Securities. Her mere presence helped make Mr. Madoff the most reassuring of archetypes, the devoted husband, which had a way of pre-empting questions about his integrity.

“Look, I’m an ex-litigator and I can usually smell a crook a mile away,” says Frederick Adler, a Palm Beach entrepreneur who invested a modest sum with Mr. Madoff in the ’90s and withdrew the money when he pulled out of stocks altogether during the tech bubble in 2000. “But I didn’t get any odor from him, and I’m sure she helped. He’s got this pleasant, sweet wife of 30 or 40 years. Not some young chick. It somehow added to his credibility.”

Three years younger than her husband, Mrs. Madoff attended Queens College, where she earned a degree in psychology. “After college I married Bernie Madoff, FRHS class of ’55,” she wrote in an update for the 50th reunion of the Far Rockaway High School in Queens. “Bernie and I worked together in the investment business he founded in 1960.”

When Mrs. Madoff wasn’t working with her husband, she raised her two sons and helped run the Madoff Family Foundation. In 2007, it listed assets of $19 million and gave money to a variety of health-related and cultural charities.

Mrs. Madoff also earned a master’s of science in nutrition at New York University and co-edited “Great Chefs of America Cook Kosher: Over 175 Recipes From America’s Greatest Restaurants.” It sold poorly, though, and has probably yielded more “cooked book” jokes than hot meals.

It’s unclear how involved Mrs. Madoff was in her husband’s business. In the cookbook, she describes her role as “director” in Madoff Securities, and visitors to the firm’s office say she was an occasional presence. One of the obvious mysteries is whether Mr. Madoff had any collaborators in his fraud. When it comes to his wife, there is a related question: How hard would it be to keep a multibillion-dollar Ponzi scheme a secret from your spouse?

The answer, according to Stephen Greenspan, author of “Annals of Gullibility,” is pretty easy. Pulling off a Ponzi is mostly about nerve and bookkeeping, and an outsider would need to study those books pretty hard to figure out they were cooked.

“Unless Madoff told her, why would she have any suspicion?” Mr. Greenspan says. “I know plenty of wives that stay out of their husbands’ business, particularly from that generation. And all she knows is that she’s living well and everyone keeps telling her how wonderful her husband is.”

Whatever her role, many of Mrs. Madoff’s friends wound up investing with her husband. Not that the fund was a hard sell. People were constantly calling Mrs. Madoff and pleading for entree into the wondrous and reliable cash machine that yielded 10 to 15 percent returns each year and that so many of their acquaintances were profiting from.

"...I'll get you into the fund."

The fund, lore had it, was nearly always closed, and in Mrs. Madoff’s coterie, she was the insider who could wave you past the velvet rope. Which is why the Madoffs were treated a bit like celebrities when they showed up at their high school’s 50th reunion, held in November at a Doubletree Hotel in Fort Lee, N.J. To the many who attended, it seemed like the room could be divided into those who had invested with Mr. Madoff and those who were hoping to.

“I had a friend say she couldn’t believe how many of our class was in the fund,” says Cynthia Arenson, a classmate and childhood friend of Mrs. Madoff. “She was actually a little jealous, and she was hoping that Bernie would go to the morning-after breakfast, so she could try to talk to him there.”

Luckily for Ms. Arenson’s friend, the Madoffs skipped that event. Ms. Arenson herself wasn’t as fortunate. She and her husband, now a retired school teacher, lost $1.2 million with Mr. Madoff. Adding guilt to injury, about five years ago, she said, she called Mrs. Madoff at home and finagled her cousin into the fund. Some of Ms. Arenson’s friends were investors, too, many of them regulars at a Borscht Belt hotel that Ms. Arenson’s family owned for years and that Mrs. Madoff’s parents patronized. At the time of the reunion — about a month before the fraud was revealed — Ms. Arenson felt nothing but gratitude.

“I walked up to him and said, ‘I’ve got to give you a big hug from me and all my family!’ ” she recalls. “We were up in the market and everyone else was getting killed. The word was that Bernie had pulled the fund’s money out of the stock market just as it started to tumble.”

Entree to the Fund

Mr. Rosenzweig, another classmate of Mrs. Madoff’s who attended the reunion, was feeling grateful at the time, too. In 2003, he had called Mr. Madoff for advice about whether to invest with a particular brokerage firm. The two men hadn’t spoken in decades, but Mr. Madoff couldn’t have been warmer or more gracious with his time.

“I played a little cute and I said, ‘What are you up to?’ And of course, I knew because when you’re from a small town and someone makes it that big, you know about their accomplishments and you’re very proud. And he told me. And I said, ‘Well, will you handle my money for me?’ He said: ‘I’m sorry, we’ve been closed for four or five years. By the way, Ruth is sitting right here, would you like to say hello to her?’ ”

Mr. Rosenzweig had actually taken Ruth out on a couple of dates, when they were 13 years old. (“A couple movies,” he recalls.) He and Mrs. Madoff reminisced on the phone for a bit and then she said that her husband wanted to say something.

“And he got back on the phone and said, ‘Look, Donny, we go back a long way, I’ll get you into the fund.’ ”

He told Mr. Rosenzweig that the minimum investment was $2 million. That was more than Mr. Rosenzweig had, so he asked family members to pitch in. Ultimately, his mother, brother, sister, sister-in-law and brother-in-law and an 83-year-old uncle all contributed.

“At no time did it feel like he was pulling me in,” says Mr. Rosenzweig. “It felt like he was doing me a favor.”

Diana B. Henriques and Landon Thomas Jr. contributed reporting.