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Fallout from Madoff scandal touches dozens in Morris County
By PHIL GARBER, Managing Editor
Published: Feb 20th, 2:36 AM
Accused swindler Bernard Madoff not only stole from the rich and powerful, but also allegedly from thousands of other lesser investors, including a number of residents, businessmen and foundations from Morris County.
Among others, they include the wife of a former Morris County Prosecutor, a Long Valley radiologist and a Mendham-based foundation that helped educational and health care organizations.
One organization on the list is the Pulver Family Foundation Inc. of Mendham. According to its website, the foundation focuses on education, health-care and Jewish causes. A 2008 report showed the foundation had assets of about $12.6 million.
A spokesman for the foundation did not return a call for comment.
Others on the list include Barbara Manahan, wife of attorney and former Morris County Prosecutor Peter D. Manahan. Mrs. Manahan did not return a call and Mr. Manahan declined to comment, saying it was a personal matter.
Some others named are Dr. Frank Gingerelli of Long Valley, formerly the chief of radiation oncology at Pascack Valley Hospital. Also listed are Lester Lieberman of New Vernon, the chairman of Newark Beth Israel Medical Center; and Lynn McLaughlin of New Vernon, whose husband, Daniel, is chairman of the board of the Matheny Medical and Education Center in Peapack-Gladstone.
Some others on the list are Bernardsville cardiologist James Coyne; Marcey B. Needel of Randolph, manager of Gilda’s Club of New York City; and Melanie Gladwell of Bedminster, president of 360 Solutions Corp..
Several people who are identified on the list as having invested with Madoff spoke about their experiences on condition they would not be identified.
One retired physician from Morristown, who asked not to be identified, said he lost about $2 million and is now worried that he may lose his home to foreclosure.
The physician described a similar scenario to others who invested with Madoff for many years.
He said his parents met Madoff’s father-in-law, Saul Alpern, in the 1960s and began investing with Madoff. Over the years, the physician and his relatives also began placing their money with Madoff, hoping to one day use the earnings for retirement.
The physician said he invested about two-third of his retirement fund and lost it all. He said his 99-year-old mother also lost her savings and “was pretty well destroyed by it.
“We’ve cut down drastically,” the physician said. “We’re not acting like we have money anymore and my biggest worry is keeping my house.”
Like others, the physician said he never questioned the legitimacy of the investments for several reasons. One was that he received regular dividends and in recent years, he withdrew funds from his account with no problem. Another reason was that he received extremely detailed, monthly reports from Madoff indicating each alleged investment. And lastly, Madoff allegedly had the approval of the U.S. Securities and Exchange Commission (SEC).
“After so long, you convince yourself that it’s a decent investment and that it’s been checked by the powers that be,” the physician said. “It was a real government screw up.”
The physician said he had initially invested much of his money with Avellino & Bienes, a hedge fund linked with Madoff. But Avellino & Bienes was cited by the SEC in 1992 and the physician transferred his investments directly to Madoff.
The Miami Herald reported that in 1992, the SEC charged the firm of Avellino & Bienes with selling unregistered securities and ordered it to refund more than $441 million to 3,200 investors. The firm paid a $250,000 fine and the men paid $50,000, the Herald said.
Another investor from Green Village said many people did not diversify but instead invested a majority of their assets with Madoff. The attraction was partly because Madoff offered conservative investments, with returns in the teens at a time when the market was returning more than 20 percent on investments.
“It was devastating,” the man said. “I know you should diversify but how do you pull your money out when your investment seems to be making money while the market is plummeting?”
The Green Village man, who asked not to be named, said he considers himself a savvy investor, usually.
“I’m a smart enough guy in most ways,” he said. “But the whole thing was way beyond 99 percent of the population’s ability to understand this.”
A Long Valley investor was not as traumatized and said his losses were probably only a bit worse than if he had invested in the market. The investor said Madoff had an impeccable record and references.
“The guy was a legend on Wall Street,” the investor said. “He was one of the top 10 market makers and he had a tremendously successful business up until the day he went out of business. Everyone knew Bernie Madoff.”
A Florham Park businessman said his portfolio was diversified so his losses weren’t severe. But he said he had donated to many of the foundations that went bankrupt because of the Madoff scam.
“So many good charities are closed because of this man,” the businessman said. “It’s a tragedy.”
The businessman also said many of Madoff’s victims are not on the list because of indirect investments. He said a friend invested 80 percent of his savings with Family Management Corp. of New York City. The company’s chief executive officer, Seymour Zises, has been named in a civil suit in New York City for allegedly investing most of the fund’s assets with Madoff, after claiming that no more than 35 percent of assets “would be allocated to any one investment vehicle,” according to the complaint.
As of May 31, Family Management had about $1.3 billion under management, according to the complaint.
Hedge Fund
In a related matter, a Chester Township man formerly worked for his father's hedge fund, Avellino & Bienes, that had close ties with Madoff for more than 20 years, according to published reports.
The township man, Joseph Avellino, also is a member of the Board of Trustees of the Willow School in Peapack-Gladstone, a small, independent coeducational day school for students in kindergarten through eighth grade.
Avellino did not return calls for comment and neither did his father, Frank Avellino, who has homes in Florida, Massachusetts and New York.
Joseph Avellino's biography on the Willow School website notes that from 1984 to 1994, he "helped to grow his family's hedge fund, Avellino & Bienes."
Both the New York Times and the Miami Herald reported that at the time that Avellino & Bienes was cited, the SEC failed to uncover Madoff's scheme and didn't investigate Madoff's firm, which invested the money collected from Avellino & Bienes clients.
Frank Avellino, Joseph's father, is an accountant who had a long term relationship with Madoff, dating back to the 1960s, according to published reports.
Frank Avellino has not been charged in connection with Madoff, but he is the subject of a lawsuit filed by his former housekeeper, who invested her life savings of $124,000 with Avellino. The suit claims that Avellino warned the housekeeper that her money was lost 10 days before federal investigators made public Madoff's alleged fraud.
Michael Bienes was Frank Avellino's partner in a business that oversaw $440 million in investments, according to published reports.
The Times reported that after Frank Avellino graduated from the City University of New York in 1958, he began working as an accountant at a firm run by Madoff's father-in-law. The Times said Madoff ran his securities business from his father-in-law's office, for a time.
According to the Times, Frank Avellino began raising money for Madoff's brokerage firm in 1962. Bienes joined the firm in 1965.
Frank Avellino and Bienes formed their firm in 1977 and as the business expanded, they promised investors annual returns of as high as 20 percent.
The Avellino family also maintains the Avellino Family Foundation Inc., based in Palm Beach, Fla., with assets of $6 million, according to the National Center For Charitable Statistics.
According to the Willow School website, after he left Avellino & Bienes, Joseph Avellino went on to found, manage and sell businesses in industries from home building to communications and software.
He formed several companies, including Optuf Software and Capital Metrics, which the website says, "provides investment banking and merger and acquisition consulting services for middle market companies which have strategic ties to large scale enterprises."
Joseph Avellino is a graduate of the New York City and New Jersey public schools. He formerly lived in a home on State Park Road and currently lives in a converted farmhouse adjacent to the Alstede’s Farm on Route 24. He and his wife, Amy Jane (A.J.) Agnew Avellino, have two sons, Noble and Sterling.
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