Montauk Oceanfront Owner Cited in Ponzi Scheme
Bernie Madoff accused in $50 billion fraud; was 'generous to his employees'
By Kate Maier
(Dec. 12, 2008) The top Wall Street executive who was arrested on Thursday after the Securities and Exchange Commission filed a complaint against him has owned an oceanfront house on Old Montauk Highway in Montauk for nearly 30 years and was known for lavish annual parties for his staff at a nearby resort.
 Doug Kuntz
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According to court documents, Bernard L. Madoff revealed to two senior employees that a separate investment advisory business conducted under the umbrella of Bernard L. Madoff Investment Securities was "basically a giant Ponzi scheme." Losses were estimated at $50 billion.
The two unnamed senior employees were Mr. Madoff's sons, Andrew and Mark Madoff, according to a report in The Wall Street Journal.
In Montauk, where Mr. Madoff has owned property at 216 Old Montauk Highway with his wife, Ruth, since 1981, Mr. Madoff was well known for throwing an extravagant annual party for his employees near the Beachcomber Resort Hotel on the weekend following the Fourth of July.
According to a longtime employee of the hotel, who asked to remain anonymous, Mr. Madoff would rent the entire hotel for "anybody from the mail room up to the top executive," and was diligent about checking in to make sure "his people" were well cared for. The weekend typically included a dinner at the Montauk Yacht Club followed by a catered bash on the beach across from the Beachcomber the following day.
"He was a wonderful man," said the hotel employee, who was surprised to hear of the allegations. "He took care of everything. He was very generous to his employees and everybody spoke very highly of him."
It may have been that very sense of generosity that did Mr. Madoff in. According to the complaint, Mr. Madoff's senior employees became suspicious when he suggested that bonuses that were typically paid out in February be distributed in December.
"Madoff told these employees that he intends to distribute any remaining funds at BMIS to employees and certain investors in the investment advisor business, such as family and friends," the complaint says.
Also according to the court document, the employees who turned Mr. Madoff in had noticed that he had "been under great stress in the prior weeks." In a private meeting in his Manhattan apartment on Wednesday, Mr. Madoff revealed that he was "finished," that he had "absolutely nothing," and that "it's all just one big lie." Mr. Madoff revealed that for years he had been paying returns to certain investors out of the principal received by other investors, rather than from revenues generated by legitimate business transactions.
Mr. Madoff is a former chairman of the board of directors of the Nasdaq stock market. He pays approximately $17,000 in annual property taxes to the Town of East Hampton for his Montauk property.