New York – Bernard Madoff’s practice of promising investors double-digit returns dates to the founding of his firm in 1960 when his father-in-law steered clients to him, according to court records and customers.
Madoff, accused by the U.S. of running a $50 billion Ponzi scheme, got a boost in his early years from accountant Saul Alpern, the father of his wife Ruth. Alpern referred friends and their relatives who spent winters in North Miami Beach and summers at the Sunny Oaks Hotel in New York’s Catskill Mountains in the 1960s, according to Cynthia Arenson, the hotel owner.
“His son-in-law just opened a firm, and he was doing very well,” said Arenson, 68, who lost at least $1.25 million with Madoff. “Wouldn’t you encourage your friends to invest with him? Sometimes they got 18 percent, sometimes they got 19 percent.”
Paintings of Madoff Operation
Madoff, 70, was charged with securities fraud Dec. 11 after admitting to the Ponzi scheme, according to his arrest complaint. U.S. prosecutors and regulators are probing whether misconduct at his firm, Bernard L. Madoff Investment Securities LLC, spanned decades, according to people familiar with the matter. U.S. investigators said they found evidence of misconduct dating back to the 1970s, the people said last month.
Alpern died in 1999 at age 95.
Sunny Oaks, in Woodridge, New York, was part of a recruiting circuit for Madoff associates that included clubs in Palm Beach, Florida, and Long Island, New York. They exploited an atmosphere of trust to rope in investors, Arenson and other Madoff customers said.
The hotel, a collection of old wooden bungalows, treated guests like family, she said. They became “fertile ground” for Madoff, an occasional guest, according to a comment in CLL Diary, a blog written by Arenson’s stepson David.
Madoff’s name was synonymous with “bank,” David Arenson wrote in the blog. Most of Arenson’s family had Madoff accounts, which “radiated out through the guest population, through our distant relatives and the distant relatives of guests. I can think of a dozen people I know who are collectively out at least $5 million.”
Arenson lost $65,000 after taking out money over 20 years to pay expenses, he said.
Madoff’s early investors often were retired, entrusting him with amounts ranging from $5,000 to $50,000, said Arenson and other victims. Many gave Madoff money after their parents or other relatives or friends invested with him, she said.
Arenson came to Madoff by following her parents, who were “best friends” of Alpern, she said. Her father was a retired attorney, and his friends were retired teachers, said Arenson, who inherited Sunny Oaks, which closed in 1999, from her parents.