Following the money. Er, what money?

If you’ve even been the subject of a due diligence inquiry (as I and my colleagues have) then you might be forgiven for thinking that investors are very careful about where they put their money. Well, it looks as though the more money you have the less careful you are. Here’s the NYT reporting today on the Bernard Madoff scam.

The epicenter of what may be the largest Ponzi scheme* in history was the 17th floor of the Lipstick Building, an oval red-granite building rising 34 floors above Third Avenue in Midtown Manhattan.

A busy stock-trading operation occupied the 19th floor, and the computers and paperwork of Bernard L. Madoff Investment Securities filled the 18th floor.

But the 17th floor was Bernie Madoff’s sanctum, occupied by fewer than two dozen staff members and rarely visited by other employees. It was called the “hedge fund” floor, but federal prosecutors now say the work Mr. Madoff did there was actually a fraud scheme whose losses Mr. Madoff himself estimates at $50 billion.

The tally of reported losses climbed through the weekend to nearly $20 billion, with a giant Spanish bank, Banco Santander, reporting on Sunday that clients of one of its Swiss subsidiaries have lost $3 billion. Some of the biggest losers were members of the Palm Beach Country Club, where many of Mr. Madoff’s wealthy clients were recruited.

The list of prominent fraud victims grew as well. According to a person familiar with the business of the real estate and publishing magnate Mort Zuckerman, he is also on a list of victims that already included the owners of the New York Mets, a former owner of the Philadelphia Eagles and the chairman of GMAC.

And the 17th floor is now an occupied zone, as investigators and forensic auditors try to piece together what Mr. Madoff did with the billions entrusted to him by individuals, banks and hedge funds around the world.


As a United States Senator once observed: “A billion here, a billion there and pretty soon you’re talking serious money”.

*Footnote: Ponzi scheme.

LATER: This touching dispatch from the Palm Beach club. Excerpt:

Just days after the collapse of Bernard L. Madoff’s suspected $50 billion Ponzi scheme, two of his emissaries returned to the epicenter of the financial disaster to face some of the hardest-hit investors, many of them old friends whom they had recruited to invest in Mr. Madoff’s firm.

As Carl J. Shapiro and Robert M. Jaffe sat down at the Men’s Grill of the Palm Beach Country Club they scanned an awkwardly quiet room, seemingly looking for friendly faces and reassuring nods.

The moment was a stark reversal for two men whom people used to trip over themselves to meet in hopes of a chance to invest with Mr. Madoff.

“You doing O.K.?” asked one of the several club members who approached the men in a show of support. “We’re here for you.”

While the fallout from Mr. Madoff’s suspected con game shook investors around the world, perhaps nowhere was there a higher concentration of victims than in this room. Investors were said to have paid hundreds of thousands of dollars a year to remain members of this club in hopes of an introduction to Mr. Madoff, usually by Mr. Jaffe or Mr. Shapiro. Mr. Madoff has been a member since 1996.

But more than wealth, these people seemed to have lost a sense of trust and prestige. During a visit to the club on Saturday, many members, asked for their reactions, requested not to be named because they did not want to ruin their standing among friends.

But wait! — there’s more:

Everywhere at the club, it was the topic of conversation.

Upstairs in the women’s dining room, a woman joked that she now knew the proper way to pronounce his name.

“Made off,” she said. “You know, like he made off with all our money.”

Even off the island, many investors said they were impressed with how careful Mr. Madoff had seemed.

“He just didn’t make mistakes,” said Richard Spring, 73, from Boca Raton. “He was just a sound, smart, reasonable guy.”

Mr. Spring recounted meeting Mr. Madoff in the early 1970s when they shared a helicopter each day commuting from Long Island to Wall Street.

He said he vividly recalled one commute when Mr. Madoff “bawled out” one of his traders for sloppy work, not protecting against a downturn.

Impressed, he later invested with Mr. Madoff, over time putting more than $11 million into the firm, virtually every cent of his savings, he said.

“I’m taking care of my sick mother-in-law. My wife has cancer. I just can’t deal with it,” Mr. Spring said, only barely choking back tears. “I’m cooked.”