Langone says steered clear of "cool" Madoff: report

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Langone says steered clear of "cool" Madoff: report
Wed Jan 21, 2009 9:45pm EST
By Joseph A. Giannone

NEW YORK (Reuters) - Kenneth Langone, a former New York Stock Exchange director and Home Depot co-founder, said he steered clear of accused swindler Bernard Madoff after getting a smooth sales pitch from the legendary investment manager.

On November 24, a little more than two weeks before Madoff was arrested, Langone visited Madoff at his Manhattan offices to learn about a new fund, Langone said on CNBC's "Kudlow & Co" program Wednesday. Madoff was gracious and charming, Langone said, but his pitch left Langone feeling uneasy.

"I had been told by three or four different people he was going to start a new fund, so we agreed to go see him," Langone recalled. "And I've got to tell you, I wouldn't want to play poker with this guy. He'd clean my clock like you wouldn't believe."

Langone observed that Madoff was "cool" and gracious, even though his namesake broker-dealer and investment advisory firm was weeks away from collapsing. Authorities have said he confessed to a $50 billion Ponzi scheme, a scam in which early investors are paid with money taken from newer ones.

"You wouldn't think this guy had a trouble in the world. He was gracious. He showed us his art. He took us around his famous 17th floor. He was cool," Langone said.

But the good impressions ended once Madoff started touting the potential gains of his new fund.

"He said something I found repulsive. He said to us, 'By the way, this fund I'm starting is going to be better than (the ones for) my existing investors.' That turned me off," Langone said.

Madoff raised further doubts when he declined to answer questions about how the fund, which was described as using a complex options and hedging strategy known as a "split strike conversion," would achieve these ends

A few days later, Langone's partners called Madoff and took a pass. Langone is chairman of broker-dealer Invemed Associates and Vantis Capital Management LLC.

The pitch, one of thousands Madoff likely made to potential investors over the years, gives a peek into how he apparently could raise billions of dollars with promises of steady double-digit-percent annual returns across any market, although in this case a sophisticated trader was able to walk away.

After the meeting, Langone told CNBC, his qualms were reinforced when he later took a look at a monthly financial statement from Madoff's firm.

"I couldn't make sense of it. It was the most convoluted thing I've ever seen," he said.

(Reporting by Joseph A. Giannone; Editing by Gary Hill)