Loyalty on the Slopes: Madoff Goes Skiing in 2004

Posted in Madoff by Nina Mehta on January 29, 2009


Bernard Madoff may have wiped out the life savings and shattered the confidence and trust of thousands of investors around the world, but Madoff could be a loyal friend and patron. Witness his January 2004 boondoggle to Zermatt, Switzerland, accompanied by a large group of people, most of whom had ties to his fraudulent investment advisory business.

Bernard Madoff, his brother Peter Madoff, and their respective wives, Ruth and Marion, played host to 13 people on a ski trip organized by Interbourse, a European organization that aims to get stock exchange representatives and their guests to mingle, chat and engage in friendly competition on the slopes. The week-long trip in January 2004, which had a total of 600 attendees, was hosted by the SWX Swiss Exchange. (This year’s Interbourse trip is underway and will end on Saturday.)

The Madoffs and their friends were part of the National Stock Exchange group at the Zermatt event. No full-time employee or executive from the NSX appears to have been on the trip. The Madoff brothers’ association with the NSX, however, goes back decades. According to the Wall Street Journal, Peter Madoff, the second-in-command at Bernard L. Madoff Investment Securities, joined the board of the NSX, then called the Cincinnati Stock Exchange, in 1980. (He left the NSX board and the board of its parent company this past week.) The Madoff securities firm is owned entirely by Bernard Madoff.

Cincy became the first all-electronic U.S. stock market in 1980. In the run-up to that, the Madoff firm reportedly spent about $250,000 to help the exchange overhaul its technology. The all-electronic Nasdaq market at the time was not an exchange but an over-the-counter market. Madoff for years has also described his firm as one of five broker-dealers that had a big hand in developing the Nasdaq market.

The Madoff firm’s involvement with the Cincinnati exchange occurred through what, so far, appears to be the legitimate end of Bernard L. Madoff Investment Securities. Madoff operated his long-running Ponzi scheme from the 17th floor of the Lipstick Building in Manhattan, while the main broker-dealer operation, which was regulated by the Financial Industry Regulatory Authority (formerly called the National Association of Securities Dealers), was on the 19th floor.

The Zermatt ski trip brought together a number of people with connections to Madoff’s investment advisory business. What they had in common was their deep and long-standing relationships with Bernard Madoff. Indeed, the roster includes several people who may yet be candidates for a debriefing by the Securities and Exchange Commission.

For these visitors, the alpine trip also had a memorable ski-centered perk. Just weeks earlier, on Jan. 4, 2004, the Zermatt ski lodge unveiled Europe’s longest glacial chair lift. The 8,465-foot-long Furggsattel lift, at the Swiss-Italian border, took a year and a half to build, and ferried skiers from Trockener Steg, at 9,642 feet, to Furggsattel station, at 11,040 feet, in under nine minutes.

The Madoff brothers were the ski team’s co-captains. Back at home, they ran the market-making firm together. Peter Madoff, who joined his older brother’s 10-year-old business in 1970, eventually took over management of the trading operation on the 19th floor. He was the senior managing director at the firm. Other family members also worked at the broker.

Peter Madoff, in addition, was a director at Cohmad Securities Corp., a New York-based broker-dealer set up by Bernard Madoff and Maurice (“Sonny”) Cohn, a friend of Bernard’s since the 1960s. The company name is a conjunction of Cohn and Madoff.

According to regulatory filings, Cohmad was formed in February 1985. Sonny Cohn, the chairman and CEO, currently owns 25-50 percent of the firm. His daughter, Marcia Beth Cohn, the president, chief operating officer and chief compliance officer, owns 10-25 percent of the firm. Milton Cohn, Maurice’s brother, has a 5-10 percent stake. Bernard Madoff owns 10-25 percent of the firm, while Peter Madoff has 5-10 percent. Two others, Robert Jaffe and Rosalie Buccellato, each owns less than 5 percent.

William Galvin, the Secretary of the Commonwealth of Massachusetts, is now investigating Cohmad, which allegedly helped execute trades for Madoff’s investment advisory business. Galvin has issued a subpoena to Robert Jaffe, who has homes in Massachusetts and Florida. Jaffe is the son-in-law of Carl J. Shapiro, the Boston-raised billionaire philanthropist who made his money in the clothing business, and who was an early and large investor in Madoff (before his son-in-law was in the picture). The Carl and Ruth Shapiro Family Foundation has lost hundreds of millions of dollars through Madoff’s Ponzi scheme. Over the last two decades, Jaffe brought wealthy Palm Beach, Florida, investors into Madoff’s investment universe through a firm called M/A/S Capital Corp., registered in Palm Beach. The firm’s Boston office shares Cohmad’s address and phone number.

Back in January 1990, Cohmad was fined $30,000 by the Massachusetts securities regulator for transacting business in the state before registering as a broker-dealer there. The case, which involved trading in municipal debt, was initiated by the State of Massachusetts Securities Division, according to FINRA.

Joining the Madoffs in Zermatt, Switzerland, at the foot of the Matterhorn, was Paul J. Konigsberg, his wife Judy, and two other Konigsbergs: Victoria, and Steven (which might be a misspelling of Stephen). It is not clear how Victoria and Steven are related to the older Konigsberg couple.

Paul J. Konigsberg is the senior tax partner at Konigsberg Wolf & Co., the accounting firm that signed off on Madoff’s family foundation’s books in at least 2006 and 2007. His brother, Robert I. Konigsberg, is the firm’s managing partner.

The sole principal of Konigsberg Wolf is Steven Mendelow, who operated an unregistered investment company that functioned as a feeder fund for Madoff from 1989 until 1992, when the SEC shut down that fund along with a much bigger one operated by Avellino & Bienes, a New York accounting firm run by Frank J. Avellino and Michael S. Bienes. The latter firm grew out of the accounting practice run by Madoff’s father-in-law and his partner, called Alpern & Heller (see this blog’s Dec. 22 post). Mendelow ran his firm, called Telfran Associates Corp., with Edward R. Glantz of Lake Worth, Florida. Avellino, Bienes, Mendelow, Glantz and their two firms in 1993 paid the SEC a total of $700,000 in civil penalties stemming from their illicit activities.

Paul Konigsberg is also the only non-family shareholder of Madoff Securities International, Bernard L. Madoff Investment Securities’ London-based operation, which opened its doors in 1983. That business is currently owned by Bernard Madoff, Bernard’s wife Ruth, their sons Andrew and Mark, and Paul Konigsberg. The U.K.’s Serious Fraud Office opened an investigation earlier this month into the British operations of Madoff’s company.

Other members of the NSX-sponsored ski team were also tied to the investment side of Madoff’s business. Alvin J. Delaire Jr. and his wife Carole Delaire were on the Zermatt trip. Alvin Jr., known as Sonny, appears to have been a point-man for Madoff’s investment operation. The Wall Street Journal reported on Jan. 14 that he was the go-to man for account information, withdrawals from Madoff’s fund and other administrative functions. Delaire appears to have initially worked at Madoff’s firm and then at Cohmad.

Sonny Cohn and Delaire go back at least four decades. Cohn and Sonny Delaire’s father, Alvin Delaire Sr., started Cohn & Delaire, a New York Stock Exchange specialist firm, in October 1963. Sonny Delaire took over after his father’s partnership after Alvin Sr.’s death in 1968. Sometime before 1971, the firm also began functioning as a specialist on the American Stock Exchange. In 1978 the firm transitioned into Cohn, Delaire & Kaufman, with Joseph L. Kaufman, an Amex member since 1957, stewarding the operation. It’s not clear when the firm shut down.

Other guests of the Madoff bothers in Zermatt also had links to the investment side of Madoff’s business. These include Marja Engler, her son Steven Engler and his wife Laura Engler.

Marja’s husband, Mendel (Michael) Engler, worked in the Minneapolis theater and entertainment industry in the 1950s, before venturing into the securities business. According to a profile of Mike Engler published in the Minneapolis Star-Tribune on Dec. 20, 1994, Engler later on became an “investment counselor” for Madoff’s investment business. A Fortune report noted that Engler began raising money for Madoff in the 1980s.

In 1961, after Engler and Eli Budd, a businessman who came from the grocery industry, met through Engler’s accountant, they joined forces and entered the brokerage business as Engler & Budd Co. They dealt in local over-the-counter Minnesota stocks and then moved into underwriting securities, selling the company in 1986. According to a Bloomberg article, Engler steered many well-heeled families who belonged to the Oak Ridge Country Club, just west of Minneapolis, into investments with Madoff. The Star-Tribune profile noted that Engler, who died in 1994, had been a member of the NASD’s ethics committee.

Both Bernard Madoff and Peter Madoff had ties to NASD. Bernard Madoff became a member of NASD’s board of governors in January 1984, according to a Jan. 20, 1984, notice in the New York Times. Bernard Madoff noted that he had also been a member of “numerous NASD committees” in a brief bio for a book published in 2003. Peter Madoff was elected vice chairman of the NASD in November 1992. The Associated Press published a notice about the election on Nov. 19, 1992. Two days earlier, on Nov. 17, the SEC had charged Avellino and Bienes with operating an unregistered investment company. They functioned as the first feeder fund for Madoff’s investment business. They began funneling money to an unnamed money manager in 1962, according to the SEC. The Commission did not reveal the name of the money manager, but the Wall Street Journal on Dec. 16, 1992, said it was Bernard Madoff.

Another couple on the alpine ski trip was Elana Flax and her husband Dr. Herschel Flax of Great Neck, NY. Elana worked at Madoff’s firm. In addition, Herschel’s brother Leon was a director at Madoff Securities International, Madoff’s London office that’s now under investigation.

The final couple on the 2004 ski trip was Jean-Pierre Michaux and Patricia Michaux. It isn’t clear whether he and his wife have ties to Madoff’s investment business. Michaux was a foreign exchange broker at several firms who eventually worked at his family company Michaux, becoming the chairman in the mid-1990s and then chairman of the successor firm Michaux Gestion, a portfolio management company based in Lyon, France. In 2005, that firm was absorbed into KBL European Private Bankers, which then became KBC Group NV. KBC has said that its funds did not have significant exposure to Madoff, unlike several other private banks in Europe, whose customers had placed money through those banks with Madoff.


3 Responses

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  1. Lars Toomre said, on January 30, 2009 at 10:08 am

    This is a well-written post. As a result, I have highlighted your work in the Toomre Capital Markets LLC post Bernie Madoff’s 2004 Zermatt Ski Trip. Thank you for your excellent contributions to better understanding the relationships around Bernie Madoff.

  2. nyc said, on March 8, 2009 at 8:20 pm

    Stephen and Victoria Konigsberg are Paul Konigsbergs son and daughter in law.

  3. mrs p said, on March 12, 2009 at 2:29 pm

    I though Leslie Wayne should have credited you for the ski trip story but I don’t know how these things work.

    I think your work is terrific.

    Is London the next stop?

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