text: It was a warm August afternoon, a gentle sun blessed the immaculate fairways of the Long Island Country Club, an oasis of tranquility and temporary shelter from the violent storm raging on Wall Street. Lehman Brothers was in trouble. Four elderly men, dressed in polos, colorful slacks, were ambling toward the club house, heads down, pensive. “My God, Bernie, your chip shot on 17 was a doozy”, said Danny Solomon the suave Gold Coast realtor. It had been an unusually subdued round of golf, opportunities for small talk few and far between. Bernie Madoff was visibly anxious and spent much of the morning off by himself on his cellphone, missing the action on a couple of holes. His three companions gave him space, they knew he had a lot on his mind, but Danny needed guidance, the man’s wisdom. Things were getting serious. Should he sell his stocks and take a loss? “Thank you, Danny. The more I work at my stroke, the luckier I get,” said Bernie, smiling wryly, enigmatic as ever. His three companions - friends of Bernie - were in thrall of the great investor, and chortled at the remark; a combination of brilliance and self-effacement that they’d grown used to over the years. Bernie stopped at the threshold to the club house, on the patio, where they might not be overheard by the staff or other members. His three companions, alert to his every word, attentive to his every gesture, stopped and gathered in a polite huddle. “Gentlemen, I know you are worried about the market,” said Bernie, slight frown, hands clasped, the look of a sympathetic priest. Larry Folsom, a jumpy guy, owner of a local metal fabrication firm, allowed his agitation to show, “Oh, Bernie, please tell us that we are not in trouble.” The exclamation was a lapse, a social misstep, born of anxiety; Larry’s business was struggling owing to cheap knock-off products from China, so he relied heavily on his Madoff portfolio to sustain his North Shore lifestyle. “Larry, for goodness’ sake, calm down,” said Bernie. It was a gentle admonishment that shifted Larry’s status ever so slightly to the periphery of the inner circle. “The reason I wanted to speak to you - in private - is to tell you that my traders are hedged against this volatility and are riding a handsome profit from the market crash”. “Options?” said Jimmy DiNapoli, who liked to think he knew a thing or two about investing, “Out of the money puts? I heard on the radio that they’re the only game in town right now”. “Yes, options, put-options, and some naked shorts,” said Bernie momentarily surprised at Jimmy the Pizza Parlor operator - from the mouths of idiots - “two, three standard deviations, we’ve got it covered”. Jimmy was honored by the answer - so receptive to his input, so clever - and huffed with approval. Indeed, all three clients nodded knowingly, though not one of them understood a thing about trading and investing. All they really cared about was the Madoff & Co portfolio statements, up-and-to-the-right, every month, regular as clockwork. They were fat and happy, and obviously super smart. It’s all about choosing the right horse for the race, having the right friends. “Genius” said Danny Solomon, a big handsome man with swept-back silver hair and a winning smile. Danny’s portfolio was over $10 million, and he was months into his third marriage, each bride younger and more beautiful than the prior - all thanks to Bernie. Bernie dismissed the praise as unnecessary, but it felt good to be in the company of his close friends, his rich friends, his grateful friends. He’d built Madoff’s investment firm from nothing, and now it was worth billions, and he’d taken his friends along for the ride. They’d all started with nothing - scrappy boys from Queens - and now they were rich men, living the dream. “We have an opportunity to double our money in the next six months. The Fed is throwing money at Lehmans, and I know for absolute certain that the liquidity crisis will be resolved by next Tuesday,” he tapped his nose. The other men understood that he was close with top men in the business - moguls, bankers and politicians - and something very big, very hush-hush, was obviously in the works. “Big guns?” said Jimmy, the Pizza guy. “Massive market intervention,” confirmed Bernie. “Opportunity?” said Danny the realtor, nudging Larry Folsom playfully. “Yes, massive opportunity,” said Bernie. “Are you interested?” “How much?” said Larry, a bit skeptically. He really was on a tight budget, and Bernie would not let him dip into his portfolio. He was grateful of course - the value kept going up - but his wife needed a new car, his daughter’s college fees were due, dental implants cost a fortune. “As much as you can afford,” said Bernie. “Count me in!” said Jimmy, “I’m good for a million or two, Ginny too”. “Me too!” said Danny, who had Madoff money squirreled away in some offshore accounts. “Why don’t you guys go in and get lunch? I just need to take care of business. I’ll join you in a moment,” said Bernie. A couple of million was small potatoes. His friends wandered into the clubhouse, relieved that their nest-eggs were in such good hands. CNBC was playing on the TV monitor. The news was very bad, things were getting worse, but not for them. +++ “What the fuck” shouted Bernie into the cellphone, “you’re supposed to handle this shit”. Bernie was reaming Brian, the Madoff head trader, a second asshole. “I’m trying to dump the Lehman position, but Goldman and Morgan are both selling stock faster than green grass through a goose. We’re stuck holding the bag”. “Aren’t we protected?” Bernie paused - what was it that fucking Jimmy-the-idiot said? Options! “What about put options?” said Bernie. It was the first time Bernie had ever mentioned options. Brian was shocked. “You’re fucking kidding me, right? When did we ever hedge our positions?”. Bernie conceded the point with a grunt. Things were bad. He hung up on Brian, and called Janice, his back-office manager. “When do the statements go out?” asked Bernie. “Tomorrow” said Janice. “Do me a favor, send out the Friends and Family statements asap, but wait up on the rest of the clients. See if we can buy some time. Make sure everything is priced appropriately”. “Appropriately?” said Janice in response to the code word. “Use your discretion,” replied Bernie. He trusted her to massage the numbers. “Lots of inbound calls today, Bernie,” said Janice. He detected a note of terror in her voice. She was the ballast in his ship, and had worked with him for over 30 years. They’d been through tough times before, they’d get through this one too, somehow. “Anything I should know?” said Bernie, pulling at his soaking polo shirt, he was sweating profusely. “JPMorgan is making margin calls,” she said. This was bad. JP could make or break Madoff & Co with a single phone call to the Fed or the SEC. “Take cash out of the F&F accounts and wire the funds to JPMorgan so that they’re off our back for a while”. The Friends and Family accounts were like a big slush fund. The trick was to never ever let it run dry. “Will do”. “Don’t tell Brian, don’t tell anybody”. “How are we going to get out if this situation, Bernie?” “The same way we always do. Just keep a record of the transactions in your book, the special book. Call me if things get worse”. Bernie walked into the club house. His friends were seated near the TV monitor, each ignoring a tall glass of iced tea sitting in front of them. They were transfixed by the screen. “Gentlemen” said Bernie, taking his seat at the table. He glanced up at the screen. The Dow was down 17% and Lehman stock was trading down more than 80%, trading under $5.00 a share. “We’re not in Lehman stock, right, Bernie?” said Danny, worried. “Right, we sold out of the bank positions weeks ago”. Danny and Jimmy looked relieved; Larry was still troubled, twitchy. “Bernie, they say that there’s margin calls, some of the smaller hedge funds are struggling. That guy up in Boston thinks Madoff is in trouble”. Bernie laughed and took a sip of the iced tea, laced with Captain Morgan rum. “Hey Larry, relax,” it was Danny speaking. He placed a reassuring hand on Larry’s tense shoulder, “Bernie’s got this covered”. Larry was not easily reassured. “The Boston guy says he’s simulated your portfolio, and the returns are statistically impossible”. Larry was beginning to irritate Bernie. “Gah! Such nonsense” said Bernie, “An outsider cannot understand our risk-management methods”. He took a deep draft of the Iced Tea. His phone was ringing. He glanced at the screen - Janice - and denied the call. “How’s my God Daughter doing at Rutgers?” said Bernie, looking at Larry. Larry’s face lit up, “she’s doing great Bernie”. “Tell her I’ve got a job for her at the firm, next summer”. Bernie’s phone was ringing again. Janice again. He turned off the ringer. It was buzzing in his pocket. “Do you have to get going?” said Danny. “Yeah, I should probably check in with the team. Remember to wire Janice the funds if you want to buy at the bottom. Fortune favors the bold”. “You got it Bernie!” said Jimmy the pizza guy, two thumbs up. +++ A couple of million from his friends wouldn’t cut it. Bernie gave the valet a $50 bill - word of his generosity would get around the club - and slipped into the driver’s seat of the sleek black BMW. He idled the car on the forecourt, a lazy breeze brushed the dogwood trees. Bernie’s hands were shaking. The situation was dire, but it could change in an instant and get better. The phone was buzzing again. It was Janice again. Things could get worse. Bernie threw the phone onto the passenger seat, shifted the transmission and the automobile screeched off the hot forecourt.. Best to stay out of the office and away from the sharks in Manhattan. He headed for the Expressway, east bound, toward Montauk; he’d lie low for a while at the beach house, with his wife, Ruth. +++ The maid opened the door and looked worried. Bernie could hear the TV playing somewhere in the living room. He handed the car keys to the maid, and joined Ruth in the living room. She was twisted up like a pretzel on the white sofa, watching the financial news. “Oh Bernie!” she said, tears streaking mascara down her face, her neat, trimmed hair was mussed up. She was the most put-together woman he knew, his rock, so the tears were upsetting. His rock was crumbling. “I’ve got to sit down,” he stumbled, fell wearily into his reading chair. “Lehman’s going under”, she said, “and it’s going to take us down with it”. Angry, she hit her thighs with her hands, “you should never have listened to Jan”. Jan was the CFO at Lehman, a family friend. He’d reassured them, not once, but twice, late night phone calls. They’d bought more stock. “We’re ruined, aren’t we?” said Ruth. Bernie reached across to grab her trembling hand, to reassure her, but she spurned his advance. “No, we’re not ruined,” said Bernie, “our money is ring-fenced. If the firm goes under, we’ll be fine. The boys too.” It was a small relief. He was still the smartest man in the room... that funny looking kid from Queens with the big ambition. “But won’t we be liable for our clients’ funds?” she said. It was a good question; Madoff the firm would be liable criminally, but Madoff the man, maybe not. He needed to make sure that the paper-trail stopped with Brian and Janice, stopped with the Special Book. It was a good plan. They signed the books. They dealt with the regulators. They would take the fall. “Don’t worry, they’ll have a hell of a job pinning the blame on us”. “We’ll never be able to show our faces in public again,” said Ruth. Her calendar was jammed solid with galas and charity events, the opera and trips to Europe. And the neighbors, the cousins and in-laws, their closest friends - the Friends and Family - they were all clients of the firm. How could she ever face them? The maid came into the room, “Mr. Madoff, Sir, there are men at the door, with cameras. It looks like a TV crew”. “Tell them to go away”. +++ Bernie was hunched over the bathroom sink, wearing his striped pajamas. He could end it now with razor cuts across the wrists, or a bullet in the head; he had firearms in the safe downstairs. He knew it was the easy way out, maybe the right thing to do because it would make things easier on the boys, on Ruth. He could take the whole damn mess with him to the grave, but who was he kidding? He didn’t have that kind of courage. He’d always imagined a graceful decline, the best managed care money could buy, he’d die in his sleep surrounded by paid help, eased into the night with medications. He pulled an amber vial of sleeping pills from the bathroom cabinet and examined the label. Fifty years and counting since he’d taken the big leap, the one act of courage, using money saved from summer jobs and a loan from his father-in-law. It started off well enough - the big scheme - he was the boy genius, king of the heap, but a setback here, a bad bet there, an unlucky one-in-a-million streak, and suddenly Madoff was in a hole, and the hole just kept getting deeper and deeper. Sleight of hand, cooked books, spinning dreams, he kept everybody happy. When Peter demanded payment, he borrowed from Paul. When Paul needed money, he borrowed it from Mary. Just for a little bit, for a little while... temporary measures... until the market came back, till he’d dug his way out of the hole. But the market never came back, and he kept digging, digging, digging that hole. He took three sleeping tablets. +++ “It’s a fucking miracle, Bernie”. It was Brian the trader on the phone, first thing in the morning. Bernie was staring at the TV screen in disbelief. “Lehman Brothers Bailed Out, Market Rebounds” said the banner headline beneath the talking head. LEH stock was up four-fold. The Saudis took a stake in the company, Buffett too; it was a fucking miracle. “I told you not to worry”, said Bernie, trying the words out for size. He was quick to understand the new reality. It needed a narrative that cast him in the best possible light. “Bernie, you are the fucking man!” Brian was gushing, but then went quiet, conspiratorial. “Last night I was so scared that I nearly did something very stupid,” he almost choked on his words, and seemed about to start crying. . Bernie let the confession pass. It wasn’t his job to provide comfort to this man. This man that nearly blew up his company. If Brian wanted to dwell upon his own failings... that was his narrative, not Bernie’s. “Well thank goodness you didn’t!” said Bernie, jovially, no hint of sympathy. The news was coming at them thick and fast. The S&P500 marked up more than 20% in the pre-market, animal spirits were at work. Lehman was saved, Madoff’s was saved. Yesterday’s blood bath seemed like a bad dream. “We might even make a profit on the Lehman trade,” said Brian. “Tell Janice that I’ll take client calls after the open”. Bernie ended the call. Ruth looked tired but relieved. “Do you think we’re going to be OK?” she asked. “Of course we’ll be OK” said Bernie, snapping his gold cufflinks into place. It was safe to go back to the office. He might even charter a copter to take him to Manhattan from the Hamptons. +++ Danny Solomon was grinning like an idiot; he just could not contain his happiness nor his gratitude. “A toast to our good friend, Bernie Madoff!”, he said, raising a glass, clinking it merrily. Bernie’s golf buddies were in ebullient mood. They were the center of attention in the club house. “I nearly shat my pants, Bernie”, said Danny, “but the Lehman trade worked out, just like you said it would”. Bernie acknowledge his friend. “It was a smart move, Danny. You have to keep your head, when others are losing theirs”. “So true, so true,” said Jimmy the pizza owner, “when do you think Janice will send the statements through? I can’t wait to see this month’s numbers. Up-and-to-the- right, I’ll betcha!” “Soon enough” said Bernie, enigmatic again, wry, smiling. It was Larry Folsom’s turn; he was happy enough, but not as cheerful as Danny or Jimmy, “Yeah Bernie, you’ve still got that magic touch”. A touch of jealousy. Bernie had scanned the F&F accounts, like Santa, tallying the naughties on his list. “I’m sorry that you couldn’t get in at the bottom, Larry. These opportunities don’t come around so often,” said Bernie. It wasn’t just gratitude that Bernie needed, he required compliance too, a key element of the big scheme. “I’m sorry Bernie but I was scared shitless,” admitted Larry, twitch-twitch. Bernie the forgiving, the magnificent, the beneficent, “That’s OK Larry, there’s more important things than money... like family and friends”. There was nothing more important than the slush fund. “I’ll drink to that!” said Danny, “up-and-to-the-right” “Up-and-to-the-right, regular as clockwork”