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Madoff Son's Suicide Followed Battle with Trustee

For two years, the two sons of jailed financier Bernard Madoff portrayed themselves as honest whistleblowers of their father's historic fraud. A court-appointed trustee depicted them as bungling money managers who did nothing to protect investors.

Financier Bernard Madoff with his wife Ruth Madoff and son Mark Madoff during November 2001 in Long Island, NY.
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Financier Bernard Madoff with his wife Ruth Madoff and son Mark Madoff during November 2001 in Long Island, NY.

The suicide of Mark Madoffleaves unanswered questions for investors seeking payback for the billions of dollars his father siphoned — and for criminal investigators who continued to pursue charging Madoff's family for knowing participation in the fraud.

The 46-year-old Madoff — Bernard Madoff's eldest son — hanged himself Saturday by a dog leash on a metal ceiling beam in his Manhattan loft apartment, his 2-year-old son asleep in another room. The death was officially ruled a suicide by hanging Sunday by the city medical examiner.

He died on the anniversary of his father's arrest two years ago in the largest pyramid scheme ever recorded. It followed the filing in recent weeks of dozens of lawsuits by trustee Irving Picard as he pursued billions of dollars in damages against those who profited from the multi-decade fraud.

Increasingly, Picard has stepped up his language in lawsuits against those who knew Madoff well, describing an Austrian banker accused in a lawsuit Friday of being Madoff's "criminal soul mate" as having acted criminally in her efforts on behalf of Madoff's fraud.

Last Wednesday, he included the brothers as defendants in an $80 million lawsuit he brought against the London-based international arm of Madoff's business, saying the overseas operation was used to siphon off money from the fraud for the Madoff family.

Picard said that for executives in the Madoff business, "pretending things do not exist — or looking away — may have been a well-honed survival strategy." Picard sought $200 million from Madoff family members in his lawsuit, which charged that family used the Madoff business like a "piggy bank," spending tens of millions on lavish homes and luxuries.

Mark Madoff and his brother, Andrew, portrayed themselves as heroes who sought to stop their father from committing more fraud.

"How ironic it is ... to blame the very two individuals who uncovered and reported the fraud, saving the estate more than $170 million, for not uncovering it sooner," their lawyer, Martin Flumenbaum, said in court papers earlier this year.

On Sunday, Flumenbaum continued to portray the brothers as innocent of their father's crimes.

"Mark and Andrew Madoff had no prior knowledge of their father's crimes and contacted the U.S. Department of Justice and the SEC immediately after their father told them he had defrauded his investment advisory clients," Flumenbaum said.

A person who had recent contact with Mark Madoff, speaking on condition of anonymity because of the sensitivity of the case, said Sunday that Andrew Madoff, a cancer survivor, has occupied himself by helping his fiancee in a business venture. "He's been doing much better than his brother," over the past two years, the person said of Andrew Madoff.

A criminal investigation is still active against the family. Authorities want to know whether Madoff family members knowingly participated in the fraud. At a minimum, authorities believe they might be able to build a tax fraud case, alleging that Madoff family members failed to fully report all of the income they received directly and indirectly from the family business.

But law enforcement officials said Sunday that they had had no direct contact with either of the brothers or with Bernard Madoff's brother, Peter, in the last year, and said no charges were imminent.

Bernard Madoff's brother, Peter, was derided in court papers by Picard for his work at Madoff's firm as the chief compliance officer.

Picard said Peter Madoff was paid more than $23 million between 2001 and 2008 in salary, bonuses and other compensation. He said he also withdrew more than $16 million in fictitious profits from accounts under his control that were the result of "blatant backdating of transactions." A message left Sunday with a lawyer for Peter Madoff was not immediately returned.

Mark Madoff had worked with his father at the company since 1986, while Andrew had been there since 1988. Shana Madoff, the lawyer daughter of Peter Madoff, had worked there since 1995 as compliance counsel and in-house counsel, the court papers said.

In response, Picard argued in court papers that the brothers were senior managers of their father's business who "failed, utterly and completely" to run it.

Separately, according to a return filed with the Internal Revenue Service on May 19, 2010, the "Mark and Stephanie Madoff Foundation" had assets of $1,881,199 at the end of 2009. The foundation claimed just $1,794 in disbursements, but almost all of that was for administrative expenses and professional fees.

The largest portion of the foundation's assets — $1,077,284 — was held in stocks, with the largest holding being 200 shares of IBM, worth $26,180 at the end of 2009. Mark Madoff is listed as president, devoting an average 12 hours a week to the position; Stephanie Madoff is secretary, also at 12 hours a week, and Andrew Madoff is treasurer, 11 hours per week. None took any compensation from the foundation, according to the return, and the foundation took no outside contributions.

Investors on Sunday said Mark Madoff's death will make it harder to find answers to how many people knew of the fraud.

Ruth Goldstein, wife of 78-year-old investor Allan Goldstein, a Massachusetts man who lost his life savings in the fraud, called the suicide "the ultimate punishment" for Bernard Madoff.

Madoff is serving a 150-year prison sentence in a North Carolina prison. He admitted having told his clients in November 2008 that $20 billion in investments had grown to more than $65 billion when only several hundred million dollars remained.

Mark Madoff's family — including his wife, Stephanie, who had been on vacation in Florida — has not spoken publicly about the death. Bernie Madoff attorney Ira Sorkin declined to say Sunday whether he had spoken to his 72-year-old client in a North Carolina prison or whether he would attempt to get him freed to attend a funeral.

Ellen Borakove, spokeswoman for the city medical examiner, said the death was ruled a suicide after an autopsy on Sunday. Toxicology tests were also conducted, but results wouldn't be known for weeks, she said.

By late afternoon, she said, Madoff's body had not been claimed.

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