The first sign that Ronnie Sue Ambrosino's world was tumbling down came in a phone call from her ex-husband. "He said, 'I have bad news for you,'" she recalls. "'Bernie Madoff was arrested today.'"
Word quickly spread just how gut-wrenching the news was, not just for Ronnie Sue, 55, but for thousands of once confident investors worldwide. On Dec. 11 federal authorities charged Madoff—one of Wall Street's most revered traders—with securities fraud for allegedly running a $50 billion Ponzi scheme (see box), perhaps the largest financial fraud in history. Madoff's victims were sophisticated hedge funds, charities including the Elie Wiesel Foundation for Humanity and Steven Spielberg's Wunderkinder Foundation, and affluent celebrity clients like Spielberg and Jeffrey Katzenberg—but his prey also included an untold number of smaller investors like Ronnie Sue and her husband, Dominic, who lost the entire $1.7 million nest egg that had taken them a lifetime to build. She'd been investing with Madoff for nearly 30 years. But in a flash, she and Dominic, 48, an ex-corrections officer, went from being comfortable retirees in Surprise, Ariz., to desperate job seekers. They fear Dominic's small pension won't cover even the basics. "What about food? What about my electric bill?" wonders Ronnie Sue. "I was a millionaire and now I'm a pauper."
Federal investigators say Madoff, 70 (who is under house arrest in his Manhattan penthouse apartment and whose lawyer declined to comment), masterminded the operation from his midtown Manhattan office, where his sons Mark, 44, and Andrew, 42, and brother Peter, 63, worked for him. Madoff claims he ran the scheme for years without anyone else's knowledge, but by early December, it had fallen apart—apparently due to mounting redemptions by clients looking to raise cash in the rapidly deteriorating stock market. According to the criminal complaint, on Dec. 10 Mark and Andrew, who didn't work in the division where the fraud occurred, confronted their father on why he wanted to pay employee bonuses in December rather than February. Madoff broke down, confessing to them his business was "all just one big lie" and that he was "finished." The brothers, who also lost millions, turned him in. The SEC is seeking emergency relief for investors.
That may be the only glimmer of sunshine for people like Bette Greenfield. Her late father invested money with Madoff in the early 1990s, and it had grown to a "substantial amount" for her and her two brothers. It's all gone now, and Greenfield, 71, who just retired to Deerfield Beach, Fla., is left with only her Social Security. Greenfield is going back to work, hoping to turn her hobby—making beaded watchbands—into a moneymaker. "I feel bad for the charities that have lost money and my heart breaks for my own family," says Greenfield, who, like many investors, is considering legal action. "How could a man do this to so many people?"
At first glance, Madoff, a Queens native, exuded respectability. A former chairman of the NASDAQ board of directors, he earned his fortune as a pioneer in computerized stock trading. Although he owned a Manhattan penthouse and waterfront homes in Palm Beach, Fla., and Montauk, N.Y., he was otherwise an "unassuming, down-to-earth person," says a longtime friend, who asked that she not be named. "Everyone admired him. Everyone was in awe of him. Everyone thought he was brilliant."
He also had a talent for schmoozing. Madoff and his wife of 49 years, Ruth, 67, were regulars on the Palm Beach scene—shopping at upscale stores and playing golf with friends at the Palm Beach Country Club. "He's very charming," says attorney Jerry Reisman. "He was probably one of the best social networkers in America."
But Madoff's gift of gab would have been useless without his primary sales pitch: huge returns, even in down markets. At least on paper, his clients saw annual gains of 10 to 20 percent. Adding to his cachet, he often turned down would-be investors; word was that you had to know someone to get Madoff to run your money. Some occasionally wondered if an investment that never lost money was too good to be true—but those doubts were drowned out by the constant cha-ching. "There was always a feeling, 'Why isn't everyone doing this?'" says Robert Chew, 55, whose funds were, unbeknownst to him, invested with Madoff. On Dec. 11 the manager of one of Chew's funds called. "He said, 'I'm sorry, Bob, we're all wiped out.'" Chew and his wife lost $1.2 million, and his mother-in-law lost $300,000. Now that the shock is wearing off, the family is adjusting. Chew is ratchetting up his marketing business, selling the home that his 84-year-old mother lives in and moving his mother-in-law from an assisted---living apartment into a Medicaid-sponsored nursing home.
Red flags went up years ago about Madoff's operation. Michael Ocrant, then a writer for a hedge fund magazine, MAR/Hedge, met Madoff while following up a tip that his business was possibly a Ponzi scheme. He asked financial experts to review Madoff's operation and they "thought it was not legitimate," Ocrant recalls. After interviewing Madoff at length, Ocrant reached the same conclusion. He was frustrated, however, that the SEC didn't investigate Madoff after his story ran in the magazine in 2001. In a statement, SEC Chairman Christopher Cox admitted he found it "deeply troubling" that complaints have been made to his agency about Madoff since 1999, but no one ever seriously investigated them.
Joyce Z. Greenberg's father opened an account with Madoff in 1971 that paid for college for his grandchildren, and Greenberg has been a personal client for years. Madoff was so well-liked by her family that he attended the 90th birthday party of Greenberg's stepmother in 2003. "My personal experience until [Dec. 11] was a favorable one," says Greenberg, 76, a retired stockbroker. But in the last few weeks, she and her family have lost "millions." While Greenberg has other investments, the money she lost was earmarked for the charities she donates to. "I'm trying to figure out when he became a crook," she says.
Madoff has a preliminary hearing on Jan. 12, and, if convicted, faces up to 20 years. His victims are united in their bitterness—and take a certain satisfaction from his total disgrace. They say it's telling that when Madoff was first arrested, he couldn't find four people willing to cosign a $10 million bail bond that would have kept him out of house arrest part of the time. "Here's a guy who had all his villas and yachts, and he doesn't have a friend in the world," says Burt Ross, 65, the former mayor of Fort Lee, N.J., who lost $5 million—the bulk of his retirement savings. Ross still draws income from two commercial properties but will likely go back to work as well as live more modestly. "His name will live in infamy. I [meanwhile] am surrounded by love from friends and family. I would not trade places with that guy for a million bucks."