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Woman Tells of Affair With Madoff in New Book

Diana Henriques and Stephanie Strom|The New York Times
Friday, 14 Aug 2009 | 10:49 AM ET

Hadassah, the Jewish volunteer organization, knew it had invested $40 million with Bernard L. Madoff by the late 1990s. It also knew it had taken more than $130 million from its Madoff accounts and still had millions on the books when the vast Ponzi scheme was revealed in December.

Bernard L. Madoff
CNBC.com
Bernard L. Madoff

What the charity says it did not know, however, was that Sheryl Weinstein, its chief financial officer when it made those investments, was having an affair with Mr. Madoff.

Ms. Weinstein, who has been married for 37 years, discloses that relationship in “Madoff’s Other Secret: Love, Money, Bernie, and Me,” a memoir scheduled for publication by St. Martin’s Press at the end of August, a spokesman for the publisher confirmed.

Hadassah’s national president, Nancy Falchuk, told Hadassah’s national board in a letter on Thursday that the group was “shocked to hear the news reports of Mrs. Weinstein’s personal admission regarding this relationship. Indeed, we knew nothing of her relationship with Mr. Madoff until today.”

Ruth Madoff, who has been married to Mr. Madoff for almost 50 years, knew nothing about the “alleged affair,” said Peter Chavkin, her lawyer. While that, unfortunately, will not ease the pain of the people destroyed by the Madoff fraud, he continued, the allegation “stands as a powerful reminder, to those who say Ruth must have known of her husband’s criminal scheme, that there are some things that some spouses — however close they are — do not share with each other.”

Ira Lee Sorkin, a lawyer for Mr. Madoff, declined to comment.

According to John Murphy, the publisher’s spokesman, Ms. Weinstein’s relationship with Mr. Madoff “spanned 20 years.” That would take it back to 1988, when Hadassah received a gift of about $7 million from a French donor, whom the organization has declined to name.

That money was already invested with Mr. Madoff, and the donor wanted it to remain in his hands, the organization reported in December. Thereafter, Hadassah invested an additional $33 million with Mr. Madoff, who was a well-known figure on Wall Street and a contributor to several other prominent charities — some of which were also victims of his fraud.

Indeed, the Madoff scandal raised questions in the nonprofit community about how well charities managed their investments and monitored their conflicts of interest, with some watchdog organizations saying that some groups left those decisions to small, clubby boards or influential insiders.

Hadassah has declined to identify the members of its investment advisory committee, other than to say they are “prominent and experienced financial and investment individuals” who serve without pay and are not members of its large governing board, whose membership rotates frequently.

But the organization did confirm that one member of that committee was Ms. Weinstein, who was on Hadassah’s staff for more than a dozen years.

Despite Mr. Madoff’s remarkably consistent returns — an average of 11 percent a year from 2003 to 2008, according to Hadassah — the organization did not make any additional investments with him after 1997, the year Ms. Weinstein left the organization.

But Ms. Weinstein and her husband did. According to her previous statements, they invested virtually everything they owned with Mr. Madoff, and lost it all.

At his sentencing hearing in June, Ms. Weinstein spoke about the emotional and financial devastation of her family.

“A deep, heavy depression would surround me and not lift,” she said. For months, she felt “unable to escape the reality of my personal devastation.” She and her husband were forced to sell their home “because four years ago we refinanced our mortgage and gave the excess cash to Bernie Madoff,” she continued.

She also said she “felt it was important for somebody who was personally acquainted with Madoff to speak. My family and I are not anonymous people to him. He knows my husband’s name is Rob and my son’s name is Eric.”

Mr. Murphy, the publisher’s spokesman, declined to make Ms. Weinstein available for questions about how, or whether, her relationship with Mr. Madoff had affected her obligations to her employer.

What to do with the profits?

Ms. Weinstein has not said publicly whether she actively participated in investment decisions involving Mr. Madoff. But William Josephson, a lawyer who was formerly the chief charity regulator for the New York attorney general’s office, said she should not have done so.

“In her position, she had a fiduciary duty to her employer that would require her to either disclose the relationship or recuse herself from making any decision related to investment with his firm,” Mr. Josephson said.

In the view of Jack Siegel, a lawyer and nonprofit governance expert, Ms. Weinstein’s personal relationship with Mr. Madoff and her personal investments with him both posed potential conflicts of interest.

“The former is obvious,” Mr. Siegel said. “But she also had a personal interest in increasing the assets he had under his management because by strengthening his business, she also strengthened her family’s investments with him.”

Ms. Weinstein’s headlines are not Hadassah’s biggest worry these days. Because it withdrew far more cash from its Madoff accounts than it contributed, it may be vulnerable to a lawsuit by the Madoff bankruptcy trustee, who is trying to recover money for those victims who put in more than they took out.

The trustee, Irving H. Picard, has said publicly that he is unlikely to go after small or thinly financed charities that already have used their Madoff profits for grants and operations. But Mr. Picard has not yet addressed the issues posed by large, wealthy charities that reaped profits from their Madoff investments. He declined to comment on Thursday about Hadassah’s specific situation.

But Hadassah clearly was chagrined at Ms. Weinstein’s disclosures.

The news “comes at a time when we are moving away from the events of the past year and looking ahead with renewed energy and enthusiasm for the coming year,” Ms. Falchuk said in her note to her board members. News about the group’s ambitious charitable projects “are the only headlines that matter,” she added.

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