PALM BEACH, Florida (Reuters) - Bernard Madoff’s alleged $50 billion Wall Street fraud scheme has hurt and embarrassed the Jewish community of Palm Beach, the Florida town of the mega-wealthy where the financier found so many of his investors.
Madoff made his connections at the Palm Beach Country Club, an oceanfront hideaway founded by Jews excluded from other posh clubs in one of America’s wealthiest towns.
His suspected Ponzi scheme, which has devastated charities and bilked some of Palm Beach’s richest families, has stirred anger, disappointment and some soul-searching in a town that at the height of the winter social season is 50 percent Jewish, said Rabbi Moshe Scheiner of the Palm Beach Synagogue.
“I know a number of people who have been hurt by this, wonderful people who have been extremely generous with their wealth to make the world a better place,” he said. “It’s a shame they won’t be in a position to do the good things they have been doing.”
The fraud, one of the largest in U.S. history, appears to have struck hardest at Jewish families and charities across the United States, where Madoff’s allure spread by word of mouth, and at European banks and wealth managers that bought into his funds for their rich clients.
Madoff’s connections won him a following in Palm Beach, a beach enclave with a permanent population of 10,000 that triples when winter cold hits the Northeastern United States. A financial adviser said he knew of several local families that had lost more than $100 million each.
The charitable foundation of Carl Shapiro, the 95-year-old philanthropist who introduced Madoff to some of his eventual investors at the Palm Beach Country Club, said it had about 45 percent of assets, $345 million at the end of 2007, invested with Madoff.
The ripples reached into Jewish communities across America and swept up luminaries like billionaire real estate investor Mort Zuckerman and director Steven Spielberg.
Total losses to the Jewish community were unknown, but the Jerusalem Post, in what it called a partial review, said at least $600 million in Jewish charitable funds were wiped out.
The newspaper said the Madoff losses “may amount to the most spectacular financial disaster to hit Jewish life since the Great Depression, with unconfirmed losses totaling up to $1.5 billion.”
Among the hardest hit appear to be New York’s Yeshiva University, which said its investment with Ascot Partners, a money manager that had most of its assets with Madoff, was recently valued at about $110 million, and the Shapiro Foundation.
The Jewish Federation of Palm Beach has not been affected so far, spokesman Bill Orlove said, but it just started its annual fundraising campaign last week and it was too soon to tell if the scandal would curtail donations.
No one answered a knock this week on the massive polished wooden door at Madoff’s $9.4 million Palm Beach home on the Intracoastal Waterway tucked behind a towering ficus hedge. The backyard pool is fringed with palms and flowering bougainvillea and a gray Lexus sits in the gravel drive, which encircles a banyan tree.
While luxurious, Madoff’s winter getaway in no way compares with the vast Palm Beach playgrounds along the Atlantic Ocean. Donald Trump recently sold one of those estates for $95 million and another changed hands for $77.5 million.
Madoff’s home is a short distance from the exclusive Palm Beach Country Club, which seeks no visitors. The clubhouse, behind manicured hedges and separated from the Atlantic by a narrow roadway, has no sign out front to identify it and employees are quick to chase away interlopers.
Founded by oil tycoon and developer Henry Flagler as a winter resort for the rich, Palm Beach has long been a haunt of American bluebloods like the Vanderbilts, Kennedys, Trump and a host of lesser-knowns from the U.S. Northeast.
The scale of the fraud raised fears of an anti-Semitic backlash in a town with a long history of discrimination, said author and Palm Beach resident Laurence Leamer.
“The Jews were so discriminated against they couldn’t even go until 1965 to The Breakers and other local hotels,” said Leamer, whose forthcoming book, “Madness Under the Royal Palms,” chronicles the elite island.
While the scam has brought to light the overwhelming charity of the Jewish community, Leamer said, it had already triggered anti-Semitic reaction on the Internet.
People are saying, “Look at these devious, dishonest Jews, how they’ve brought us down.’ You will find things on the Web of people trying to blame the Jews for what’s happened,” he said.
The Anti-Defamation League said it had noted anti-Semitic Web postings related to the Madoff scandal.
“This is an opportunity for the anti-Semites to promulgate bigotry and hatred,” said Andrew Rosenkranz, the ADL’s Florida director. “We hope the community will be proactive in flagging the comments as offensive and that the moderators of these sites will be diligent in removing the offensive material.”
While Madoff made many of his connections among the Jews of New York and Palm Beach, the scandal should not be portrayed in terms of their religion, some Jews say, noting many of the victims were also Jewish.
Bette Greenfield, a resident of Deerfield Beach, Florida, lost $300,000 invested with Madoff by her father through his connections in the Jewish community.
Her father thought Madoff was “a prince,” she said.
“He was just a scoundrel. He stole from everyone,” she said. “This is not a Jewish issue.”
Now 71 and retired, Greenfield said she was going to try to turn her hobby, making jewelry, into a business to make up for the losses.
Scheiner, the rabbi, said while it was “obviously disappointing” that Jews had been taken by a fellow Jew, there was a deeper sense of betrayal that Madoff had taken advantage of charities and that the needy would suffer as a result.
“Nobody is sitting around crying,” he said. With the approach of the Jewish holiday of Hanukkah, Palm Beach Jews are re-evaluating priorities and “reaching out for more spirituality.”
“Jews are people who have defied the odds and hope for a better tomorrow. Life goes on and you can’t let this paralyze you. We’ve been through a lot worse, obviously.”
Editing by Howard Goller