Wednesday, December 31, 2008

Caroline Kennedy: NYT interview

Transcript of the Caroline Kennedy Interview

Following is a transcript of an interview with Caroline Kennedy conducted by Nicholas Confessore and David M. Halbfinger.

New York Times December 27, 2008

DH: Thank you for doing this.
CK: Thank you. (Laughs)
DH: Yeah, sure. I think we want to try and avoid questions you’ve already answered before and just get to the ones that would be somewhat newsworthy.
NC: Let’s talk a little bit about some of the other candidates who are interested in this job. Andrew Cuomo: he’s been attorney general, he’s been a cabinet secretary, he’s been a close adviser to a governor. He has an extensive record and knows upstate like the back of his hand. Tell me why the governor should pick you over Andrew Cuomo.

CK: I’m, you know, actually, Andrew Cuomo is someone I’ve known for many, many years and we’ve talked, you know, throughout this process, so, you know, we have a really good relationship and I admire the work he’s doing now and what he’s done, so I’m not really going to kind of criticize any of these other candidates, because I think there are a lot of people with great experience, and, you know, any one of which the governor could easily pick and they’d do a good job.
NC: I’m not asking you to criticize; I’m saying, why should he pick you over any of these other ones, what makes you the best candidate?

CK: Well, it obviously depends what the governor is looking for. I can tell you what I think I’d bring to this, which is, you know, I’m not a conventional choice, I haven’t followed the traditional path, but I do think I’d bring a kind of a lifetime of experience that is relevant to this job. I think that what we’ve seen over the last year, and particularly and even up to the last — is that there’s a lot of different ways that people are coming to public life now, and it’s not only the traditional path. Even in the New York delegation, you know, some of our great senators — Hillary Clinton, Pat Moynihan — came from, you know, other walks of life. We’ve got Carolyn McCarthy, John Hall, both of them have an unconventional background, so I don’t think that that is, uh — so I think in many ways, you know, we want to have all kinds of different voices, you know, representing us, and I think what I bring to it is, you know, my experience as a mother, as a woman, as a lawyer, you know, I’ve been an education activist for the last six years here, and, you know, I’ve written seven books — two on the Constitution, two on American politics. So obviously, you know, we have different strengths and weaknesses. And I think I also bring kind of a lifetime commitment to public service, a knowledge of these issues, and I’ve spent a lot of time encouraging people, and younger people, to go into public service, through a lot of the, you know, nonprofit work I’ve done. So I think it’s a whole, it’s different, it’s completely different, and it really is up to the governor to decide who would do the best job. But in terms of a family commitment —
NC: But do you think, in your own view, those things would make you a better pick for this job than other candidates?

CK: I think they would make me a really good pick for this job, and, um, it’s up to the governor to decide, you know, who would be the best. Really. And I think there are many ways to serve, and I’ve loved what I’ve done so far, and I plan to continue, I think, you know, serving and advocating for the issues that I think are important. So, if it’s this, that would be wonderful, because I really do think that the relationships that I have in Washington — you know, I worked hard on the Obama campaign, I have a good relationship with many of the people that are coming in to the administration, in the Senate, others, both sides of the aisle, you know, that’s the kind of work that I’ve done outside of politics. It hasn’t been sort of a partisan kind of career that I’ve had. So I think that at this point in time, that’s what people are looking for.
DH: Do you think you would be the best for the job of the people who are out there?
CK: Well, I wouldn’t be here if I didn’t think I would be the best. (Laughter) Do you think you’re the best for your job? I assume you do. Uh, yeah.
DH: OK. I just want to be clear, because you seem to be saying it’s up to the governor to decide —

CK: Well, it is up to the governor to decide, and it is up to the governor to decide what’s best for New York. You know, I think that I could advocate for New York, I think that we are losing a very visible, very strong, very powerful advocate in Hillary Clinton, and I think it’s to New York’s advantage to have somebody who can, you know, bring attention to New York, you know, bring four people from The New York Times here to the coffee shop (laughter) and really put that to work for average people. This is not, you know, about me, it’s about what I can do to, you know, help New York get its fair share, help working families, travel the state, bring attention to what is going on up there. So that’s why I think I would be good.
DH: Is it the path that you’ve been on that distinguishes you? Is it your skills and talents?

CK: Well, it’s a combination that makes me who I am. Each one of us is a unique person. I may, and I think I represent a tradition that means a lot to me, which has really always been about fighting for others, for middle-class families, for working class — for working people, you know, and that’s a tradition and a commitment that I take very seriously.
NC: Hillary Clinton was considered to be a very effective senator, obviously, even though she came in without much experience in a legislature. Is there any aspect of her performance, her representation, that you think you could improve on if you became a senator?

CK: Well, I think she spent a lot of time traveling around the state and really working to represent all the people of the state, and that’s the kind of commitment I would make, so I think she did a great job, so I would love to continue in that tradition.
NC: You think you can improve on it somehow?

CK: Well once I — when I get in there, then I can really tell you exactly how I would improve on it. But as I said, I think she did a phenomenal job.
DH: Why is it that you apparently did not give Senator Clinton any kind of advance warning that you’d be coming out for Senator Obama?
CK: Um, I’m not going to talk about that particular process, but —
DH: Why’s that?
CK: Because those conversations that I have had and had during that time are not something that I think is relevant right now.
NC: How come it isn’t relevant? It kind of goes to your relationship with the person that you’re trying to succeed in the Senate.

CK: I think this is about the future, and, um, you know, that’s what I want to talk about, which is, what’s going on in our state, you know, why I would be the best person to help deliver for New York. We’re facing, you know, an economic crisis, the paper this morning said there’s, you know, five billion dollars of construction projects which just stopped, you know, that’s, you know — conversations a year ago, that’s — beside that, I don’t, as I said, I have conversations with a lot of people, and those are confidential.
NC: You said that you would run — and this earned you, I think, some applause from Democrats who were skeptical before, but you said you would support in 2010, whoever the governor appoints, but it occurred to me to wonder why: Why not run if you want this job? If you were sincere about this job, why not run in 2010 regardless of what happens in the next two months?

CK: Well, you know, I’m a Democrat, a loyal Democrat, I would support whoever the governor appoints, and as I said, I think there are many ways to serve and advance the issues that I care about, and I have a long time to do that, so I plan, in 2010, to support the Democrat.
NC: It just seems like the only — your interest in this seat coincided with the chance to become appointed to it, which is the easy way into the seat, and so it raises questions. If you really want it —
CK: Actually, I think that actually a campaign would be an easier way, because I think it would give me a chance to explain exactly what I’m doing, why I would want to do this, and, you know, and get people to know me better and to understand exactly what my plans would be, how hard I would work, you know, kind of...
NC: That’s very interesting. Do you think it would be better for you, and for your purposes in public life, if the governor did appoint a quote-unquote “caretaker” and then just said, everybody can run, and that way you would sidestep a lot of these questions about the appointment, and whether it’s appropriate to appoint someone who hasn’t held elective office. Would you rather he did that? Like, if he appointed a caretaker —

CK: You know, this is all for the governor. And you guys are really focused on, kind of, the ins and outs and the comparisons of this process, and so, that’s really something that you should be asking him. Really. Um, you know, if you want to talk about, sort of, the economy or the issues, or me, that’s, you know — I’d be happy to do that. But —
NC: This is about your interest in the seat, though, and what drives you to do it, and what you bring to wanting to do it, so the question is: Do you want it enough to just run for it if you just had to run for it, if the appointment wasn’t available, let’s say —

CK: But this is where we are right now, so, you know, so I’m expressing my interest; many other people are as well. And I think that the reasons that I’m doing that is because I think it’s a special moment in my life and in the life of this country, where there is this unique opportunity to help bring change to Washington. So I think it’s a time when an unconventional choice is possible, more than maybe some other times, I think that I have a background and relationships that would allow me to deliver for New York. And, you know, I think that since this came up I thought about it really seriously, I’ve thought through a lot of these issues, of how this would appear and things like that, people always have opinions about, especially people in our family — what they’re doing, why they’re doing it, and I can’t really think about it from somebody else’s point of view.
NC: I understand what you’re saying, but this is your point of view, because you’re saying it would be easier if you ran for an election —
CK: I said in some ways it would be easier but this is where we are right now.
NC: So you’d rather do it with an appointment, you’d rather he not appoint a caretaker, this is the best way to do it for you.

CK: Um, no. I’m saying that this is the opportunity that’s presenting itself right now, and I’m interested if the governor thinks that I could do a good job and help New York and help him. He is facing, you know, a massive deficit, he needs people, a team in Washington that can help, you know, get New York its fair share, whether it’s transportation, whether it’s the stimulus, whether it’s TARP, and I think that I can be a member of that team and I think I have a lot of advantages to bring to that work. And I think the point of this all is that people are hurting across the state and in this city, and, you know, we have a once-in-a-lifetime opportunity to bring home a lot of the stimulus package, TARP funds, I mean, government is now poised to really invest in this economy, and I think we need to make sure it’s done, right, and that’s what I would like to do.
DH: We respect that, and I think we should talk about some issues, but I think we’re really focused on how much you want it for the reason that, one of the big assets that whoever is appointed to this job must bring is the fire in the belly, or the stomach, or whatever, to run two times in two years. And so, we’re just trying to establish how much you want this job. You’ve said you want it, you’ve said you think you’d be the best, but again, why would you say that you’d support whoever the governor chooses, and not run, in two years, if you’re not chosen? It just sort of — we were thinking about the way that sounds, and it sounds like you only want it if it’s handed to you.

CK: OK. Well, as I said, I’m interested in this opportunity, this is a complicated process, you know. I am a loyal Democrat, and I believe in the Democratic party, and I think that we need a team effort here to solve the problems that we have. So I will work with other Democrats, I will continue to advocate for the issues that I believe in, in two years, and I’m making that commitment, and after that, we’ll see what happens. (Pause) That’s a long time from now.
NC: Would you have sought this if there hadn’t been an appointment open, if it had been an election?
CK: I think we covered that.
NC: What’s the answer, then, if we covered it? Would you have considered going for this office if no appointment was available? If it was just an open seat in 2012? Would that have appealed to you?

CK: Well, it — 2012 is four years from now, and I just said that after 2010 I would think about, you know, anything, and I’m committed to these issues. This is the opportunity that’s now. I didn’t expect that it would come along, but, you know, a lot of life is seizing the moment and doing the unexpected thing. And I think, um, you know, that’s an important part of life. So is working hard over a long period of time. And so, I am, as I said, I told the governor I was interested, he has a process, he has a lot of candidates to weigh, and he’ll make the best decision for New York. And that’s why I will support whoever he picks.
(Pause)
Is that it? You guys want to ask that again? (Laughter)
DH: Well, we did have another way of coming at it.
CK: Go ahead, let’s ask that some more.
DH: Seriously, you know, everybody says, and the reporting that we did showed, that you were torn, that this decision took a lot of time to arrive at, at least a lot of thinking; your uncle, Senator Kennedy, obviously played a role in that. How disappointed would he have been if you’d have decided not to do it?

CK: Well, Teddy is — I don’t think that’s kind of, really, accurate in terms of the overall impression. But Teddy wants what would make me happy, and he wants that for everybody in our family, so, you know, he loves the Senate, he’s spent his whole life there, and I think has been one of the great senators in history, so of course, that, that kind of an example is inspiring, but I don’t think he would be disappointed in any way.
NC: I guess another way of thinking about it is that Jennifer Aniston movie, where she tells her boyfriend, ‘I want you to want to do the dishes,’ you know? And I wonder if Senator Kennedy wanted you to want to do it.
DH: “The Break-Up.”
CK: (Laughter) I hope you’re going to put this in the article, not just the answer. OK?
DH: I mean, was there anything wistful about it. Do you think he was hoping that you would really want to do it?

CK: No, as I said, I think Teddy wants everyone to do what is right for them. And I think he believes in public service, you know, of all kinds, and you know, in our family — you know, my aunt Eunice started the Special Olympics and I’d say she’s had an impact worldwide on the intellectually disabled. And, I mean, there’s many ways to serve, and elective office is one of them, and obviously it’s part of our family tradition, but it’s certainly not the only way. And I don’t think that Teddy would think for a minute that this was, you know, the Senate or nothing. I mean —
NC: No, I’m not —
DH: No, no. Nobody’s suggesting that. I mean, it just came up. You were thinking about it.
NC: It just seems like he —
DH: I just wonder if — he’s not giving interviews about it, you’re here, (laughter) and I think everybody would want to know: Did he get excited about the idea? Did you feel like he wanted you to do it? That’s it.

CK: As I said, I mean, he loves the Senate, it’s been, you know, the most, you know, rewarding life for him, you know, I’m sure he would love it to feel like somebody that he cared about had that same kind of opportunity, and I think he really — and so do I, think the impact he’s had on, you know, working people, you know, the minimum wage fights that he’s led, health care, I mean that’s really — his example is something that, as I said, inspires me, because of the impact that he’s been able to have. Whether it’s voting, civil rights, you know, across the board, and I think he’s shown that the Senate can have that kind of an impact on people’s daily lives. And that’s what’s appealing about this opportunity, and I mean, I think, for those reasons he would love to have somebody that he cares about following, you know, that tradition. But I think in terms of me, you know, he doesn’t care, you know, he’s happy if I’m happy.
NC: Can you tell us a bit about, on a similar note, people are very, very curious about the days in which you were weighing this, and who you talked to about it, and whose thoughts influenced you and inspired you as you were weighing this in your mind. Can you tell us, who was the first person you had a serious discussions of, like, ‘If I went for this, how would it work and what would it look like?’ Who was the first person you really talked to about it?
DH: Where you took it seriously.
NC: Where it was live.
CK: Um, well, I obviously talked to my husband and my children, you know, the family, friends, uh —
DH: Outside of your immediately family. Can you say who the first person was?
CK: You know, I mean, also people started talking to me about it, so it was kind of a process, you know —
DH: Was there one, like, kind of, like —
NC: ...tada moment?
DH: Yeah, where you actually kind of, in your own mind, started to say, ‘Huh, that’s like — maybe I really will think about this.’

CK: Well I think, as I said, there was, first — no, uh, you’re, uh — somebody dropped off 200 signs at my husband’s office, like, the day after all this was going on. So I felt with that — you know, so, and it builds. And, you know, I had conversations with Antonia Hernandez from the Mexican-American Legal Defense Fund in California, and I thought, well, she’s someone I really respect, her legal mind, her sense of that community. And then there were people who I would run into during that period of time that, uh, people here in New York as well as people that I know from around the country, and I was up at the Institute of Politics meeting and I saw Elaine Chao, who’s the Secretary of Labor now, I know Hilda Solis who’s coming in, and a lot of people who I’ve, you know — Elaine Jones from the Legal Defense Fund, a lot of people that I talk to, you know, often in politics, and people that I met in the Obama campaign, who worked with me doing that kind of work. So I think it was kind of a broad range of people that, people that I’m close to...
NC: So when in your own mind did it go from, ‘It’s kind of an interesting idea’ to ‘Maybe I should do this?’ (Pause) Or was that —
CK: Over the last couple weeks. (She chuckles.)
NC: Was there any moment where —

CK: No, I don’t think there was a moment, I mean, this kind of thing is too important for it to be, like, an on-off switch, right? This is a process, and as I became more serious about it, and talked to more people, you know, I thought — and then obviously I called the governor and expressed interest, and um, you know, so...
NC: The signs were on what day? Was it before you called the governor?
CK: The what? Oh yeah, that was a while ago.
NC: That was a while ago?
CK: Yeah.
NC: So that was after Senator Clinton had announced — so it was after the vacancy became possible?
CK: Well, yeah. Obviously.
NC: OK. (CK laughs.) I just wanted to make sure of the chronology.
DH: We just don’t know if it was after we started writing about you or —
CK: No, you guys had nothing to do with it. (Laughs.)
DH: No, we didn’t mean that. The timing.
NC: Uh, so sometime before those stories about your discussion with the governor, sometime after Senator Clinton had been tapped for —
CK: Yeah — yeah.
DH: What was the best single reason not to do it?

CK: Well, you know, I think it’s been a continuum, as I said, and I sort of first got involved in the city schools after 9/11, and I think that was really a defining moment for me, like a lot of people in New York. You know, thinking about, you know, how to become more involved on a civic level in this community. And I think over the last year, you know, during the Obama campaign, was really probably the most important thing that led me to this, because when I did travel much more extensively than I did in 2004, and um, you know, talked to people across the country and saw what was going on, and the impact that the campaign was having and the excitement that it generated, in both the primary and in the general election, and I think that that, uh, there’s a chance to sort of bring all the sort of values that are, that I’ve grown up with and really turn them into something new. This is not about the past, this is really about the future and the moment that we’re in, and I think that everybody right now has an obligation to think about what they can do to help. This is, you know — nobody can sit out this one any more. So I am volunteering to pitch in, if I’m, you know, if there’s something I can contribute, and if there’s someone else who can do a better job, the governor will pick them, and I’ll work in whatever way I can in another capacity.
DH: No, but, my question was, as you were weighing the decision, what was the best argument not to go for it?
NC: A personal reason.
CK: Well obviously the arguments to go for it were better than the arguments not to.
DH: No, but I’m asking, what was the best —
NC: What was the single —
DH: What was the best argument against it? I mean, what was the thing you had to most overcome?

CK: Well I knew it would be a big change in my life, and I have really a wonderful life, and but, I feel like, you know, it’s, you know, it’s not really complete if there are things you could be doing that would benefit others and you’re not taking, you know, the time and making the effort to do that. So, um, so I think it’s really the, you know, it would be a big change, and change can be, you know, traumatic. It’s different. It’s good!
NC: How much of a concern were your kids and your family that you checked with them before embarking on this?

CK: That was a concern. You know, as I said, I think they are really politically engaged and kind of going through the campaign last year with them, you know, and with my uncle, and sort of having this kind of multigenerational effort brought us all closer together, and I think that’s something that I think I saw in families across the country, where grandparents, people my age, and people voting for the first time all really felt that this was kind of a moment in time that re-energized people in terms of the change that needed to be possible. So I think in that way our family was like many, many others, and I feel lucky that I would even have, be considered for this kind of opportunity.
NC: Your husband hasn’t been — wasn’t very kind of visible on the campaign trail. I don’t know if he traveled with you with Barack Obama. Do you think he’ll be on the stump with you in New York, will he go to Watertown and to Syracuse and to —
CK: Well there’s nobody who has a more supportive husband than I do, and he has a business that he runs, and it’s his own business, so he has work to do, my kids have school to do, I mean, people have — there are other things in life besides politics. So he did come, you know, a few times, but he was home with our two children, home last year, so it’s kind of a, it’s a team effort.
NC: Do you think he’ll be around the state with you a little more than he was last year?
CK: Well it depends on what’s going on in his office. (Huffs.)
DH: I mean, does he have a desire to do it, if he can? Or, do you have a desire for him to do that with you?
CK: I mean, the more time I spend with him, the happier I am.
DH: Have the two of you figured out how to balance — I mean, among the other ways in which this is a change, is that it’s a change, I assume, in how you each together balance work and family and all that other stuff. Have you figured out how you’ll navigate that, if you become Senator? Or how that will change —

CK: Well since I’ve — I assume we’ll navigate that the way we’ve always navigated everything. I mean, both of us have had a lot of commitments, you know, up till now I think we’ve both put our family first. And my kids are really supportive of this idea, I think they understand that it will make — you know, bring change for them. But you know, again, I think this is, you know, I think he’s someone who’s committed to, you know, education, science education, you know, he makes children’s museums, you know, this is, he —
DH: He’s had a really cool career.

CK: What? Yeah, so for him, that I would have this opportunity, I think he believes strongly that, you know, that I would be great, and that I, this is, you know, an unbelievable privilege that I have, and he’s as concerned as I am about, you know, what we see here in this city and state that we both grew up in, and, you know, and that we both care about. So the idea that I can help people here I think is something that he totally is behind.
NC: Was he the first person you told — do you know if you uttered the words, ‘I think I’m gonna go for this?’ Or, something like it?
CK: Well, I don’t know if I utter those kinds of words, but yes. You know, it was a mutual decision.
NC: Could you, for the sake of storytelling, could you tell us a little bit about that moment, like, where you were, what you said to him about your decision, how that played out?
CK: Have you guys ever thought about writing for, like, a woman’s magazine or something? (Laughter)
DH: What do you have against women’s magazines?

CK: Nothing at all, but I thought you were the crack political team here. As I said, it was kind of over a period of time, you know, obviously we talked about politics, we talked about what’s going on, we’ve been watching the team that the president-elect is putting together — Hillary Clinton is going to be a spectacular part of that team, you know, then there was a vacancy here, you know, just like everybody else, you know: who’s going to fill it, isn’t that interesting, there’s a lot of great candidates, you know, obviously I have become much more politically involved than I have in the past, so you know, I figure, why not try, I really think I have something to offer.
NC: But there was no one moment you can draw on —
CK: I know I wish there was, I’ll think about it.
NC: If there isn’t, that’s what it was, that’s fine too. We’re not the crack political team, we’re always looking for good anecdotes and good stories.
CK: I know, and I understand. I’ll think about it a little more.
DH: It’s not an executive branch thing, being a Senator, but there is a sizable staff that any senator manages. As you know from your uncle and many other senators, I’m sure. What management experience have you had? By the way, I think there’s some curiosity about, just, what sort of staff do you manage now?

CK: Um, I, uh, you know, I think there’s — obviously, you need to build a team, and that’s how effective, how tough senators are effective. So I understand that that is part of the job. And I have been — but I also think it’s the kind of leadership is also now, you know, kind of a public, there’s a public role to it, and it’s about building relationships, you know, in the institution, and in the other branches of government. So I think it’s a multi-layered effort. I think that building a staff is something that I would have no trouble doing. I think the staff that we built down at the Department of Education in the office that I’ve been, first, CEO of, and now kind of the Fund for Public Schools staff, is absolutely outstanding, and I think I would be able to do the same kind of thing here. And I think the results there show that.
DH: Would you comment on just how, in your personal life, what kind of people do you employ? I think there’s a lot of speculation about the Kennedy wealth, and the Caroline Kennedy wealth given that you’re looking for this job. Also, I think it gets to the question of whether you can show that you are able to relate to, just, everyday New Yorkers. I think that’s the vein that we’re asking the question in. But, would you say how many people you have on staff?

CK: Well I’ve been writing books. So that, by its nature, is kind of a solitary occupation. And from time to time I have research help, but mostly I’ve done those completely on my own. So I am not bringing a large management — that is not my background, in management of large organizations. But I think it’s much more focused on the individual. Most of the books that I’ve written have been focused on, sort of, the individual, and sort of, either a voice, a personal voice, or a kind of transforming event where they step forward to fight for something they value. So that’s ... and in terms of, so I don’t have large staff —
DH: Do you have any?
CK: In my house, is that what you’re asking me?
DH: Yeah. I think it gets to the whole, is there a Nannygate issue down the road.

CK: (Laughs) I think we’re heading down to the — I have somebody who helps me in my house, and I have an assistant who helps me with you, know, kind of all the correspondence, I mean, I’m on the board of the Legal Defense Fund, the Commission on Presidential Debates, I have staff that I work with down at the Department of Education, at the Kennedy Library, so in that way, I’m managing, you know, staff in different places, and so that’s really how I do that. They don’t work directly for me, but they’re people that I work with in all these different capabilities. So in that way it’s kind of a decentralized operation.
NC: Have your personal finances been affected by the economic crash?
CK: Um, probably — yes. (Laughter)
NC: Can you give a sense of how badly?

CK: You know, I think everybody’s — not as badly as a lot of people’s, but obviously everybody’s been hurt by this, and it doesn’t matter where you live. And, I’m lucky that I’m not afraid of losing my home. And my husband still has a job. And that’s not true for a lot of people. So I feel very fortunate, and that’s exactly why I would like to help people who are in those circumstances.
NC: How much money do you live on each year?
CK: Um, you know, I’m not really going to answer those kinds of specific questions. If I’m chosen for this, I’m going to comply with every kind of disclosure that’s available. If the governor has questions about my finances, I’m happy to talk to him.
NC: Is it $2 million? Is it less than $2 million? Is it more than $5 million? How much do you live on each year?
CK: Um, you know, as I said, if I’m selected, I’ll probably be able to answer all those questions, but I’m not going to go into that right now.
NC: The reason I ask is because it goes to the question: What experiences do you have, other than the campaign appearances you made with the president-elect, that give you the ability to relate to how average people live, and the struggles they’re facing now?

CK: Well, you know, I have grown up around politics, I have lived a very advantaged life, and I am very fortunate, and I think that — but our family tradition has been always to work for, as I said, for working people, and I think my experience in the New York City Public Schools, you know, I’ve been doing that for six years, and I have a real understanding of the kind of struggles that people are facing. Many of those families are headed by women who are poor, and the kids are poor. So I think that I’ve seen firsthand, and extensively across this city, the need that there is, the disadvantage those kids are at when they enter school without the kind of support that kids from more fortunate backgrounds have, and the long-term impact of that on our city. We have a dropout rate that is still way too high, these kids aren’t graduating. So I’ve spent a lot of time throughout my life working in the community here, and in politics, so I think I’ll have a pretty good understanding.
NC: How much of that job in the city schools involved going to schools? Did you do a lot of on-site stuff?

CK: I do a lot of on-site visits, you know, I think the job was really to connect these schools with the broader city communities, so that involved both working with the business community, training — to train, you know, set up the Leadership Academy to train new principals. So that involved going to meet with business leaders, it also involved many trips to meet the new principals and the schools that they would be working in. When it’s an arts curriculum that we put together, we had the cultural community come in and work with the Department of Education, you know, that’s trips to the schools where the arts education is being delivered or not delivered, and we did a census, basically, on what kind of arts were going on, how many kids are exposed to how many disciplines of art throughout the city, so that requires a lot of time, too.
NC: How many schools would you say you’ve visited over the course of that work?
CK: I can get you that number because they have a track of it, the Department of Education.
NC: There have been some discrepancies in the reporting on your job there, which grants you were involved in, like the Gates grant. Some people say that you brought that one in, or, I think Joel Klein said you brought that one in; some former employees of the fund said, actually that grant was pretty much already in the works. Do you feel like maybe the people who are fans of yours have been trying to bolster you perhaps a little too much, and maybe giving you too much credit for the fund-raising?

CK: Well, the Fund for Public Schools was started in the ’80s, and it really functioned as a sort of a pass-through for specific school donations over a certain amount. And it brought in about an average of $2 million a year, with more after 9/11 that was mostly intended for the Lower Manhattan schools. So when we kind of relaunched it and revitalized it, you know, now we’ve raised $238 million since then. So I think that, whether it’s the Leadership Academy, the Gates grant that you’re speaking of, you know, went to many of the partner organizations who are developing, starting small high schools. But I think that, right at the end there, I played an important role. So I’m not claiming all the credit for the setup, for the planning — those are planning grants for 51 small high schools — I mean $51 million for small high schools. So this work had been going on for a long time. But there was still a pretty — a skepticism about private funds going to public education, how they were used, and whether there were results. And what we really focused on, what I really focused on, was trying to target those funds to initiatives that would have an impact across the whole system. Because there are a lot of organizations that either work in individual schools, do partnerships, do, you know, arts education services, many other kinds of CBOs and faith-based organizations that work across the system. But there isn’t anybody else who’s targeting the whole system, so that was kind of an issue we defined for ourselves, and I think that’s why it’s been effective.
NC: So your precise role in the Gates grant was what? You came in at the end...
CK: It coincided with the time that I came into the department, and I think it was important to Bill Gates that I was there.
DH: What do you mean? I don’t get it. Just that you were there physically? Or just that you had arrived?
CK: Well I don’t know, you gotta ask him. But I think I, um —
DH: Do you deserve the credit that people are giving you for having helped to bring it in?
CK: Some of the credit, yeah.
DH: Can you talk about — given your work for the city schools, your support for the schools, we have to ask, though there’s nothing wrong with the choice, why you chose to send your own children to private school? What was it about, why exactly did you decide to keep them out of the public schools and go to the schools that they did?
CK: Well, they were already in school, and they were in middle school, I think, and in high school when I joined — yeah, so —
DH: When you started to work, yeah. But at the point that you decided to send them to private school, why? What was the reason?

CK: Why? Well, I think that I made a decision that was best for our family, and I think that everybody should have, obviously, excellent choices, and that’s — I want every kid to have the same kind of opportunities that my kids have. So I didn’t obviously want to move them for my own purposes, because they were on their path.
NC: So you never considered public school for them from the beginning?
CK: I think that, for us, for our family, the schools that we chose were probably the right ones.
NC: What about an issue that’s very important in public schools, and you’ve been involved in: teacher tenure. Are you familiar with Michelle Rhee’s proposal to trade tenure for more money, essentially. Do you think that New York City should have a system, for instance, where, or even nationally, we should have a system where teachers should have the chance to give up tenure in exchange for a lot more money? Is that a policy you would support?

CK: I think that the whole issue of teacher training, teacher support, teacher compensation, attracting and recruiting — I mean, there are so many people that are looking to become teachers, and for the very best reasons. But I think that what we see is that it’s a really tough job, and that we don’t support teachers, we don’t support the good ones, in a way that so many leave before five years are up. So I think that we need to do an across-the-board work on the teaching profession.
NC: Is that a good idea, though, that one idea?
CK: Well I think it’s important to raise these issues. I don’t — that’s a really controversial idea, and I don’t think standing alone, you know — Washington, D.C., is a separate thing. I mean, New York City has a million — 1.1 million kids, 90,000 teachers; Washington, D.C., is a really, really small system. So I don’t think it is a one-size-fits-all. But I think it’s a national priority to support teachers and do a better job of training and certifying —
NC: But really, this is a single important issue, I mean, it would be good to hear your stance on it. Do you think that can work? Do you think that —

CK: I think it has to be done, you know, collaboratively with the teachers and with the union. I think here the school-wide bonuses that we gave, here, that we’ve done with the union and the city — I mean, that is, I think, a good model. There’ve been — Arne Duncan, the new Secretary of Education, incoming, has worked with the union and I think that the reform efforts that they’ve made over time will yield benefits in terms of student achievements. So if you just pick out the most controversial one as a stand-alone thing, you know, I don’t think that’s really the way to go about this. I think if people can vote it’ll be really interesting to see what happens. I think there’s a lot of experimentation going on around the country that we should pay attention to. But here, I think these bonuses that are shared schoolwide give everyone in the leadership team incentive in the school to work together to raise the kids’, you know, achievement, and I think that’s going to be an interesting thing to see how that works. And the schools, you know, have almost all signed up for it.
NC: So you’re not going to answer about teacher tenure?
CK: About that specific proposal?
NC: Yeah. That’s a big one. That could become a national issue, that could become —
CK: Yeah, it could be, so I want to watch — I haven’t talked to her about it, and I know what the concept is, and I think it’s really interesting. As I said, I think my initial approach would be to work with, talk to everybody involved with that and see how that is going down. And I think there’s a lot going on in Washington, D.C., that’s going to play into that.
NC: Do you think test scores should be a part of tenure decisions? Does that make sense to you in as one aspect —

CK: You know, I think there’s also a lot of problems with test scores, and so, you know, I think we need to give the schools the flexibility. There’s too much reliance on these, you know, NAPE tests. But No Child Left Behind is going to come up, right, for reauthorization in the next couple of years and that is an area that I feel I would bring a lot, and that’s an issue and a set of issues that, you know, were I lucky enough to be selected that we could discuss, you know, in more detail, but that’s something, an area that I have a lot of thoughts about.
DH: Just to talk a little more about issues: a lot of your political positions seem pretty straight-up-the-middle, conventional for a Democrat.
CK: Does that surprise you?
DH: No. But I wonder, what are the biggest areas where you disagree with Democratic party orthodoxy? We want to know what sets you apart. You’ve cited a lot of examples and influences; what would be a subject that we would expect your position to be a real surprise on?
CK: Well, I think that there’s a range of views in the Democratic party. And you know, I am a proud Democrat, those are the values, you know — middle class tax relief, helping working families, fixing the health care system — those are the national priorities right now. So those are the issues that I would expect — I mean, I am a Democrat, that is, you know — I am trying to become a Democratic senator, so I don’t, um — I mean, there are issues along the way, that I’m sure that people have differences of opinion. There’s controversies in all these areas.
DH: One where you have a clear-eyed idea about where you stand on something that is diff —
CK: That is different from who? Anybody?
DH: The party platform. I mean, pick some standard. Just something that would surprise —

CK: I support gay marriage, I support, you know, I’ve had problems with Nafta, I mean, I don’t — if we’re not comparing it to anybody specifically it’s hard to say where I’m going to disagree.
NC: How about Governor Paterson?
CK: But I’m a traditional Democrat, so that’s what I want to fight for, those are the values I want to fight for.
NC: Is there any issue on which you and Governor Paterson disagree that you can think of?
CK: Well, I think Governor Paterson has — I can tell you two of the areas where I think he’s done great work. Which is, alternative energy —
NC: That wasn’t the question. Is there anything on which you two disagree?
CK: No, I’m not going to talk about my disagreements with Governor — I think he’s done a great job as a leadership, yeah, absolutely.
DH: Two powerful, respected people are allowed to differ.
CK: They are. They are.
DH: We just wonder where we’ll find out that you differ.
CK: Well, you’ll find out over time. You know, as issues come along.
DH: What about Mike Bloomberg? I mean, you worked in his administration.
CK: Yeah.
DH: He’s not currently a registered Democrat, although he has been in the past, and some say, you walk like a duck, et cetera. But, where do you differ with him?

CK: Well, I think what people are really looking for is for people to work together, and so, and, you know, you can laugh at that, but it’s something I take really seriously and I think that we need Republicans and Democrats, all Democrats, you know, people need to look at what we have in common and what we can get done here. I mean, health care’s a perfect example, you know, all the stakeholders are at the table. Barack Obama and Hillary Clinton had different plans, but, you know, I think the goal now is to get quality affordable health care and there’s many ways of going at it. And I think the point now is to find something that’s going to work, that’s going to reduce costs and get more people covered. So I think, you know, now is the time for people to come together and focus on compromise. I think that’s one of the things I have learned from my uncle. I mean, he’s worked with Republicans, Democrats, anybody who can get the job done.
NC: Do you plan to vote for the mayor in 2009?
CK: I plan to vote for the Democrat.
DH: What if he doesn’t get on the Democratic line?
CK: I plan to vote for the Democrat.
NC: Last question and then we’ll let you go. What’s your favorite place to visit in New York State aside from New York City and Long Island?

CK: What’s my favorite place to visit? Um, you know, there’s lots of beautiful places in New York and I have friends, you know, I’ve been to the Catskills, I’ve been up to the Adirondacks. I like to go to historical sites. So I loved visiting the battlefield at Saratoga.
NC: I think we’re done.
DH: I think so, yeah.
NC: Thank you very much for your time.
CK: Thank you.
DH: If I can just throw one more question out there —
CK: I think we’re done.

[‘you know’ is used 144 times in the transcript above]

Saturday, December 20, 2008

Madoff's scheme

Madoff Scheme Kept Rippling Outward, Across Borders

By Diana B Henriques

New York Times 20 December 2008

By the end, the world itself was too small to support the vast Ponzi scheme constructed by Bernard L. Madoff.
Initially, he tapped local money pulled in from country clubs and charity dinners, where investors sought him out to casually plead with him to manage their savings so they could start reaping the steady, solid returns their envied friends were getting.

Then, he and his promoters set sights on Europe, again framing the investments as memberships in a select club. A Swiss hedge fund manager, Michel Dominicé, still remembers the pitch he got a few years ago from a salesman in Geneva. “He told me the fund was closed, that it was something I couldn’t buy,” Mr. Dominicé said. “But he told me he might have a way to get me in. It was weird.”
Mr. Madoff’s agents next cut a cash-gathering swath through the Persian Gulf, then Southeast Asia. Finally, they were hurtling with undignified speed toward China, with invitations to invest that were more desperate, less exclusive. One Beijing businessman who was approached said it seemed the Madoff funds were being pitched “to anyone who would listen.”

The juggernaut began to sputter this fall as investors, rattled by the financial crisis and reaching for cash, started taking money out faster than Mr. Madoff could bring fresh cash in the door. He was arrested on Dec. 11 at his Manhattan apartment and charged with securities fraud, turned in the night before by his sons after he told them his entire business was “a giant Ponzi scheme.”

The case is still viewed more with mystery than clarity, and Mr. Madoff’s version of events can only be drawn from statements attributed to him by federal prosecutors and regulators as he has not commented publicly on the case. But whatever else Mr. Madoff’s game was, it was certainly this: The first worldwide Ponzi scheme — a fraud that lasted longer, reached wider and cut deeper than any similar scheme in history, entirely eclipsing the puny regional ambitions of Charles Ponzi, the Boston swindler who gave his name to the scheme nearly a century ago.
“Absolutely — there has been nothing like this, nothing that we could call truly global,” said Mitchell Zuckoff, the author of “Ponzi’s Scheme: The True Story of a Financial Legend” and a professor at
Boston University. These classic schemes typically prey on local trust, he added. “So this says what we increasingly know to be true about the world: The barriers have come down; money knows no borders, no limits.”

While many of the known victims of Bernard L. Madoff Investment Securities are prominent Jewish executives and organizations — Jeffrey Katzenberg, the Spitzers, Yeshiva University, the Elie Wiesel Foundation and charities set up by the publisher Mortimer B. Zuckerman and the Hollywood director Steven Spielberg — it now appears that anyone with money was a potential target. Indeed, at one point, the Abu Dhabi Investment Authority, a large sovereign wealth fund in the Middle East, had entrusted some $400 million to Mr. Madoff’s firm.

Regulators say Mr. Madoff himself estimated that $50 billion in personal and institutional wealth from around the world was gone. It vanished from the estates of the North Shore of Long Island, from the beachfront suites of Palm Beach, from the exclusive enclaves of Europe. Before it evaporated, it helped finance Mr. Madoff’s coddled lifestyle, with a Manhattan apartment, a beachfront mansion in the Hamptons, a small villa overlooking Cap d’Antibes on the French Riviera, a Mayfair office in London and yachts in New York, Florida and the Mediterranean.
Just as the scheme transcended national borders, it left local regulators far behind. Its lies were translated into a half-dozen languages. Its larceny was denominated in a half-dozen currencies. Its warning signals were missed by enforcement agencies around the globe. And its victims are now scattered from Hollywood to Zurich to Abu Dhabi.

Indeed, while the most visible pain may be local — an important charity forced to close, an esteemed university embarrassed, a fabric of community trust shredded — the clearest lesson is universal: When money goes global, fraud does too.

Bernie Who?

In 1960, as Wall Street was just shaking off its postwar lethargy and starting to buzz again, Bernie Madoff (pronounced MAY-doff) set up his small trading firm. His plan was to make a business out of trading lesser-known over-the-counter stocks on the fringes of the traditional stock market. He was just 22, a graduate of Hofstra University on Long Island.
By 1989, Mr. Madoff ‘s firm was handling more than 5 percent of the trading volume on the august
New York Stock Exchange, and Financial World magazine ranked him among the highest-paid people on Wall Street — along with two far more famous financiers, the junk bond king Michael Milken and George Soros, the international investor.
And in 1990, he became the nonexecutive chairman of the Nasdaq market, which at the time was operated as a committee of the
National Association of Securities Dealers.
His rise on Wall Street was built on his belief in a visionary notion that seemed bizarre to many at the time: That stocks could be traded by people who never saw each other but were connected only by electronics.

In the mid-1970s, he had spent over $250,000 to upgrade the computer equipment at the Cincinnati Stock Exchange, where he began offering to buy and sell stocks that were listed on the Big Board. The exchange, in effect, was transformed into the first all-electronic computerized stock exchange. “He was one of the early innovators,” said Michael Ocrant, a journalist who has been a longtime skeptic about Mr. Madoff’s investing success. “He was known to promote the idea that trading would be going electronic — and that turned out to be true.”

He also invested in new electronic trading technology for his firm, making it cheaper for brokerage firms to fill their stock orders. He eventually gained a large amount of business from big firms like A. G. Edwards & Sons, Charles Schwab & Company, Quick & Reilly and Fidelity Brokerage Services. “He was really a low-key guy. No one knew him outside of the sphere of market makers and people in the trading and brokerage business,” said Richard B. Niehoff, who was president of the Cincinnati exchange in the mid-1980s.

Mr. Madoff’s push to modernize trading did not make him popular with the traditional traders on the floor of the New York Exchange, as more of its orders were sent to his firm — partly because he was faster and cheaper, but also because he paid for those orders. Mr. Madoff pioneered a controversial practice called “payment for order flow.” He would pay big players like Fidelity and Schwab to send their customer orders to his firm instead of to the New York Exchange or other regional exchanges.

The floor traders at those traditional exchanges claimed he was, in essence, paying bribes and that brokers steering business to him were not really getting the best prices for their customers.
Those complaints led to Congressional hearings, but Mr. Madoff made no apologies. He insisted the order-flow payments were necessary to inject greater competition into the marketplace and reduce the near monopoly of the Big Board.

As the debate received more attention, Mr. Madoff became increasingly better known in the financial world. By the end of the technology bubble in 2000, his firm was the largest market maker on the Nasdaq electronic market, and he was a member of the Securities Industry Association, now known as the Securities Industry and Financial Markets Association, Wall Street’s principal lobbying arm. Still, one Wall Street heavyweight who knew him in those days said he remained “a self-effacing kind of guy,” more likely to spend time on the Riviera than at parties with other traders.

Local Hero

Unlike some prominent Wall Street figures who built their fortunes during the heady 1980s and ’90s, Mr. Madoff never became a household name among American investors. But in the clubby world of Jewish philanthropy in the New York area, his increasing wealth and growing reputation among market insiders added polish to his personal prestige. He became a generous donor, then a courted board member and, finally, the money manager of choice for many prominent regional charities.

A spokeswoman for the New York Community Trust, Ani Hurwitz, recalled a Long Island couple who asked the trust in 1994 to invest their proposed $20 million fund with Mr. Madoff. “We have an investment committee that oversees all investments, and they couldn’t get anything out of him, no information, nothing,” Ms. Hurwitz said. “So we told the donors we wouldn’t do it.”
But many charities did entrust their money to Mr. Madoff, to their eventual grief. The North Shore-Long Island Jewish Health System, for instance, reported that it had lost $5.7 million on an investment with Mr. Madoff that was made at the donor’s behest. (That donor has pledged to cover the loss for the hospital system, its spokesman said.)

Other groups saw the handsome returns on those initial investments and put more of their money into Mr. Madoff’s firm, their leaders said. “Look, for years we made money,” one said.
Most successful business executives intertwine their personal and professional lives. But those two strands of Mr. Madoff’s life were practically inseparable. He sometimes used his 55-foot fishing boat, Bull, as a floating entertainment center for clients. He used his support of organizations like the
Public Theater in Manhattan and the Special Olympics to build a network of trust that began to stretch wider and deeper into the Jewish community.

Through friends, the Madoff network reached well beyond New York. At Oak Ridge Country Club, in suburban Hopkins, Minn., known for a prosperous Jewish membership, many who belonged were introduced to the Madoff firm by one of his friends, Mike Engler.
The quiet message became familiar in similar pockets of Jewish wealth and trust: “I know Bernie. I can get you in.” Mr. Engler died in 1994, but many Oak Ridge members remained clients of Mr. Madoff. One elderly member, who said he was too embarrassed to be named, said he had lost tens of millions of dollars, and had friends who had been “completely wiped out.”
Dozens of now-outraged Madoff investors recall that special lure — the sense that they were being allowed into an inner circle, one that was not available to just anyone. A lawyer would call a client, saying: “I’m setting up a fund for Bernie Madoff. Do you want in?” Or an accountant at a golf club might tell his partner for the day: “I can make an introduction. Let me know.” Deals were struck in steakhouses and at charity events, sometimes by Mr. Madoff himself, but with increasing frequency by friends acting on his behalf.

“In a social setting — that’s where it always happened,” said Jerry Reisman, a lawyer from Garden City, N.Y., who knew Mr. Madoff socially. “Country clubs, golf courses, locker rooms. Recommendations, word of mouth. That’s how it was done.”

At exclusive retreats like the Palm steakhouse in East Hampton, Mr. Madoff would work the tables or receive friends at his own, building a following that came to include lawyers, doctors, real estate developers and accountants. Tomas Romano, a manager at the Palm, recalled that “people always came to talk with him” at the restaurant. “He was very well known.” At his golf clubs — the Atlantic in Bridgehampton and the Palm Beach Country Club in Florida, for example — he frequently shot in the 80s, but often seemed far more interested in his fellow members, many of whom became investors, than in the game itself.

With his wife, Ruth, a nutritionist and cookbook editor, they were considered affable and charming people. “They stood out,” Mr. Reisman said. “Success, philanthropy, esteem — and, if you were lucky enough to be with him as an investor, money.” He added: “That was the most important thing; he was looked on as someone who could make you money. Really make you money.”

The Go-Betweens

By the mid-1990s, as Mr. Madoff’s wealth and social standing grew, he had moved far beyond the days when golf-club buddies were setting up side deals to invest with him through their lawyers and accountants. Some of the most prominent Jewish figures in high finance and industry began to court Bernie Madoff — and, through them, he reached a new orbit of wealth.
He could not have had a more effective recruiter than Jacob Ezra Merkin, a lion of Wall Street who would be president of the Fifth Avenue Synagogue. Mr. Merkin’s father, Hermann, was the founding president of the synagogue and Herman Wouk, the author, wrote its constitution.
As a direct descendant of the founder of modern Orthodox Judaism and a graduate of Columbia’s English department and Harvard’s law school, Mr. Merkin easily held his own in a congregation that included such luminaries as the author Elie Wiesel, the deal maker
Ronald O. Perelman and Ira Rennert, a wealthy financier perhaps best known for building one of the biggest houses and compounds in the Hamptons.

Mr. Merkin was fluent in Jewish and secular studies, as comfortatle quoting Psalms as William James. In 1985, after a few years of practicing law at a top-tier firm, now known as Milbank, Tweed, Hadley & McCloy, he started the investment firm that would become Gabriel Capital Group. He contributed to a popular textbook on investing, lived in an art-filled Park Avenue apartment and continued his family’s legacy of generosity. Philanthropies embraced him. He headed the investment committee for the UJA-Federation of New York for 10 years and was on the boards of Yeshiva University, Carnegie Hall and other nonprofit organizations. He became the chairman of GMAC. Installed in these lofty positions of trust, Ezra Merkin seemed to be a Wall Street wise man who could be trusted completely to manage other people’s money. One vehicle through which he did that was a fund called Ascot Partners.

It was one of an unknown number of deals that prominent financial figures set up in recent years and marketed to investors, who thought they were tapping into the acumen of some Wall Street titan, like Mr. Merkin.

As it turned out, their money wound up in the same place — in Bernie Madoff’s hands.
These conduits began to steer billions of dollars into the Madoff operation. They operated below the financial radar until Mr. Madoff’s scheme collapsed, when investors suddenly got letters from the sponsoring titan disclosing that all or most of their money was probably gone.
Ascot itself attracted $1.8 billion in investments, almost all of which was entrusted to Mr. Madoff. New York Law School put $3 million into Ascot two years ago, and has now initiated a lawsuit in federal court that accuses Mr. Merkin of abdicating his duties to the partnership.
Mortimer Zuckerman, the billionaire owner of The Daily News, rebuked Ascot in a televised interview, saying he had been misled about what Mr. Merkin had done with some $30 million from Mr. Zuckerman’s charitable foundation.

Behind a wall of lawyers, Mr. Merkin did not take calls this week. In the “Dear Limited Partner” letter he sent on Dec. 11, he noted that he, too, was one of Mr. Madoff’s victims and suffered big losses alongside his investors. He has taken steps to wind down his Ascot, Gabriel, and Ariel funds. Still, some of his clients are stunned, and angry, to learn what Mr. Merkin did with their millions, while collecting an annual management fee of 1.5 percent of the assets for his services.
But before the losses and the outraged cries of betrayal, this was a heady way to steer money into an operation that has now been branded, by its own architect, as a Ponzi scheme. And nothing illustrates what a quantum leap it was for Mr. Madoff than the connections that led
Tufts University to entrust him with $20 million in 2005.

Tufts did not actually send a check to Bernard L. Madoff Investment Securities. Rather, it invested in Ascot Partners, Mr. Merkin’s partnership. Mr. Merkin had been a major investor in a company whose board included James A. Stern, the chairman of the Tufts investment committee and a principal in a major private investment firm in New York called the Cypress Group.

Behind these veils of paperwork and partnerships, Mr. Madoff’s reach now extended into the top tiers of Jewish finance and philanthropy, where he rubbed shoulders with corporate directors and prominent hedge fund managers. But there were wider worlds to conquer.

The Circle Grows

Walter M. Noel was the courtly public face of the Fairfield Greenwich Group, the investment firm he started in 1983. A native of Tennessee, Mr. Noel had spent time at larger firms, notably at Chemical Bank, where he headed its international private banking practice, before setting out on his own. From the beginning, the Noel family was built on access to prestigious social circles. Mr. Noel’s wife, Monica, was part of the prominent Haegler family of Rio de Janeiro and Zurich, and their daughters would marry into international families that provided additional connections for the firm.

In 1989, Mr. Noel merged his business with a small brokerage firm whose general partner was Jeffrey Tucker, a longtime New Yorker who had a law degree from Brooklyn Law School and a résumé that included eight years with the enforcement division of the Securities and Exchange Commission. Again and again, this pedigreed experience was emphasized by Fairfield as it built itself into a fund of funds, investing in other hedge funds. It boasted to its prospects that its investigation of investment options was “deeper and broader” than those of most firms because of Mr. Tucker’s experience in the regulatory ranks.

Though he is not nearly as prominent as the Noels, who move in the forefront of Connecticut society, Mr. Tucker benefited just as much from Fairfield’s success. Indeed, last year he led a coalition of thoroughbred racing interests that sought to bid for New York State’s horse-racing franchise. But it was Mr. Tucker who introduced Fairfield to Mr. Madoff. In the early 1990s, Fairfield began placing money with him, according to George L. Ball, the former president of E. F. Hutton and Prudential-Bache chief executive who knows Mr. Noel socially.

That began a long partnership that helped the Fairfield firm earn enviably steady returns, even in down markets — and that lifted Mr. Madoff into a global orbit, one that soon extended his reach into some of the most fabled banking centers of Europe.

If the wealthy Jewish world he occupied was his launch pad, the wealthy promoters he cultivated at Fairfield Greenwich were his booster rocket. The Fairfield Sentry fund was one of several so-called feeder funds that became portals through which money from wealthy foreign investors would could capitalize on Mr. Madoff’s investment prowess — collecting those exclusive, steady returns that had made him the toast of Palm Beach and the North Shore so many years ago.
The Sentry fund quickly became Fairfield’s signature product, and it boasted of stellar returns. In marketing materials, Fairfield trumpeted Sentry’s 11 percent annual return over the last 15 years, with only 13 losing months. It was a track record that grew increasingly attractive as markets grew more volatile in recent years.

Though Fairfield Greenwich has its headquarters in New York City and its founder, Mr. Noel, operated from his hometown, Greenwich, Conn., a recent report showed that foreign investors provided 95 percent of its managed assets — with 68 percent in Europe, 6 percent in Asia, and 4 percent in the Middle East. Friends and associates say that Mr. Noel’s sons-in-law spent much of their time marketing the firm’s funds in either their home countries or regions where they had their own family connections.

One of his most visible representatives was Andrés Piedrahita, a Colombian who had married Mr. Noel’s eldest daughter, Corina, and was eventually named a Fairfield founding partner. Based in Madrid and London, Mr. Piedrahita became one of the firm’s most visible representatives in the world of European banking and investment. But his brothers-in-law also had international roots. Yanko Della Schiava, who married Lisina Noel, was the son of the editor of Cosmopolitan in Italy and of the editor of Harper’s Bazaar in Italy and France. Philip J. Toub, who married Alix Noel, is the son of a director of the Saronic Shipping Company, in Lausanne, Switzerland. Matthew Brown, who married Marisa Noel, is the son of a former mayor of San Marino, Calif. All three joined Fairfield, eventually becoming partners in marketing.

Thanks to the efforts of Mr. Piedrahita, Mr. Della Schiava and others, Fairfield reaped many millions of dollars in investor capital from Europe. The firm set up feeder programs with institutions like Banco Santander, Swedish Bank Nordea and Banque Benedict Hentsch. All became conduits that carried fresh money to Mr. Madoff.

Among his new investors were the Mugrabis, extremely wealthy art collectors from Colombia who have lived in New York for more 20 years. It was their longtime friendship with Mr. Piedrahita that led them to invest in the Sentry fund. “We had very little money with the fund — just under a million dollars — so I am not that upset personally,” said Alberto Mugrabi, a son of the family patriarch. “It was a very informal thing. We know Andrés since forever, from Bogotá, he’s a great guy, and he says to us, ‘This is the Madoff thing, he’s the master.’” He added: “I trusted Andrés. I still trust him.”

The World

Mr. Madoff’s higher profile in the highly competitive world of hedge fund management intensified the skepticism about his remarkably consistent returns. Rival money managers complained that when they sought to replicate his trading strategy based on the statements the Madoff firm sent its clients, they found it wasn’t possible.
There was a scattering of inconclusive regulatory investigations — efforts so unavailing that the chairman of the S.E.C. in Washington has ordered an internal investigation to determine how the agency could have missed so many red flags and ignored so many credible complaints over the years. But foreign regulators were not any quicker to notice Mr. Madoff’s oddities — or the rapidly expanding pool of money entrusted to the various feeder funds he serviced.

There was the small Austrian merchant bank, Bank Medici, which had $2.1 billion invested in funds that ultimately wound up under Mr. Madoff’s control. It collected those investments through two main funds, the Herald USA Fund and the smaller Herald Luxemburg Fund, sold to banks, insurance companies and pension funds since 2004.

The funds, which were closed for private investors, were incredibly popular among investors and no questions were ever asked about its constant returns of about 7 percent, said a former employee at the bank who declined to be identified because he is not authorized to talk to the news media.

Bank Medici sold the funds to investors around the world from its offices in New York, Vienna, Gibraltar, Zurich and Milan. About 93 percent of the funds’ investors are outside Austria. Just last month, the Herald USA fund won Germany’s annual Hedge Fund Awards for “proving consistency in turbulent times.“ Peter Scheithauer, chief executive of Bank Medici since September, accepted the award, saying Bank Medici’s products “should represent mainly one thing: security and returns in good as well as bad times.“ But as he prepared to brief his management board on potential losses connected to the Madoff investments on Friday, he sounded downbeat. “It’s a real tragedy,” Mr. Scheithauer said. “It’s not just us, it’s so many other people as well. If only we knew, but he was paying out fine until just recently.”
Bank Austria, which is now owned by UniCredit of Italy, owns a stake in Bank Medici and also wound up investing with Mr. Madoff through a range of different funds offered under the name Primeo by its hedge fund unit, Pioneer Alternative Investments.

Mr. Madoff was not a well-known presence on the social circuit in Switzerland. Instead, Swiss money managers would go to him, visiting his offices in the Lipstick Building in Midtown Manhattan. Seeing Mr. Madoff there was a bit like visiting the Wizard of Oz: despite his unerring success in generating smooth returns, he seemed quite ordinary, lacking the flamboyance of other well-heeled money managers. “He did not look like a huge spender; seemed like a family man,” said one veteran Geneva banker, whose firm had money with Mr. Madoff but insisted on anonymity because of the likelihood of lawsuits from angry clients. “He talked about the markets.”

The only thing that struck the Swiss banker as odd was the bull memorabilia strewn about his office. “It seemed strange for a guy to have all these bulls, little sculptures, paintings of bulls,” he recalled. “I’ve seen offices with bears. This was bulls.” But the aura of exclusivity was the constant, he said. “This was the usual spiel: ‘It’s impossible to get in, but we can get you some if you’re nice.’ He made it look difficult to get into.”

New Frontiers

What began as a quietly coveted investment opportunity for the lucky few in the Jewish country clubs on Long Island became, in its final burst of growth, a thoroughly global financial product whose roots were obscured behind legions of well-dressed, multilingual sales representatives in the financial capitals of Europe.

Indeed, often with the assistance of feeder funds, Mr. Madoff was now in a position to seek and procure money from Arab investors, too. The Abu Dhabi Investment Authority, one of the largest of the world’s sovereign wealth funds, with assets estimated earlier this year to be approaching $700 billion, wound up in the same boat as Jewish charities in New York: caught in the collapse of Bernie Madoff.

In early 2005, the investment authority had invested approximately $400 million with Mr. Madoff, by way of the Fairfield Sentry Fund, according to a profile of the firm that it prepared for a prospective buyer in 2007. Fairfield Sentry had more than $7 billion invested with Mr. Madoff and was his largest investor; now, it says, it is his largest victim. The investment authority, in turn, was one of Fairfield Sentry’s largest investors. Even after the investment authority took two significant redemptions from the fund, in April 2005 and 2006, its stake the following year of $132 million made up 2 percent of the fund’s assets under management.

The 2007 report lists Philip Jamchid Toub, one of Mr. Noel’s sons-in-law, as the firm’s “agent” with the Abu Dhabi investors, presumably meaning the person who manages the relationship with the particular clients. Mr. Toub, a Fairfield Greenwich partner, is married to Alix Noel and is the son of Said Toub, a wealthy shipping executive from Switzerland. Other investors for whom Mr. Toub is listed as the agent include the Safra National Bank of New York and the National Bank of Kuwait.

And Fairfield was finding new fields for Mr. Madoff to cultivate. In 2004, the firm turned its eyes to Asia, forming a partnership with Lion Capital of Singapore, now Lion Global Investors, to create Lion Fairfield Capital Management, a joint venture meant to introduce Asian investors to the firm. “Many investors believe that Asia holds the best global opportunities for hedge funds over the next two to five years, as compared to the U.S. and Europe,” Richard Landsberger, a Fairfield partner and director of Lion Fairfield, told HedgeWorld in 2006.

Yet it appears that Sentry remained Fairfield’s chief focus in this new vineyard. Among the institutions that had invested in the fund are Korea Life Insurance, which has about $30 million to $50 million in the fund; a Taiwanese insurer, Cathay Life, with about $12 million; and Samsung Investment and Securities, with about $6.3 million.

As Fairfield moved into Asia, another feeder fund, Stellar US Absolute Return, was incorporated in Singapore in 2006 to funnel investors’ capital into Sentry. According to data from Bloomberg News, Stellar borrowed $3 for every dollar of investor money it received, in an effort to extract higher returns.

Last year, Jeffrey Tucker went to Asia to educate potential investors in Beijing and Thailand about hedge funds, seeking to allay their concerns about previous blow-ups in the industry like Long-Term Capital Management, a Connecticut hedge fund that had been rescued under the supervision of the Federal Reserve Bank of New York when its exotic derivative investments brought it to the brink of a costly collapse.
“China is moving slowly as the reformers become familiar with what we do,” Mr. Tucker told HedgeWorld in November 2007. “It’s the same thing in Thailand. There are misunderstandings about hedge funds.”


The Scheme Collapses

But even with all the money pouring in, it was not enough, not in a year in which financial markets were plunging.

Suddenly, people wanted cash — even the people who had trusted their cash for so long to Mr. Madoff. Time was running out for history’s first worldwide Ponzi scheme.
But he maintained a brave face at the family firm that he had founded before his sons Mark and Andrew were born, and where they now worked, the firm where his brother Peter had labored at his side for decades, the firm that remained a stock-trading powerhouse on Wall Street.
But that trading business lived on the 18th and 19th floors of the Third Avenue tower, called the Lipstick Building, that was home to Bernard L. Madoff Investment Securities. Mr. Madoff operated his vast but largely unseen “asset management” business from the 17th floor, aided by a small staff that had been with him for years and a computer system separate from the trading business.

His family knew Mr. Madoff had an investment management business, but Mr. Madoff had always kept it separate. Moreover, he explained that he placed his trades through “European counterparties” rather than use the trading desks his sons oversaw.

But Mark and Andrew felt their father had been under increasing tension as the markets grew increasingly difficult this fall. In early December he remarked to one of them that he was struggling to raise $7 billion to cover redemptions. He seemed tired and drawn, but so was just about everyone else during the turbulent weeks of late November and early December.
Then, early on Dec. 10, he shocked his sons by suggesting that the firm pay out several million dollars in bonuses two months ahead of schedule. When pressed by his sons for a reason, he grew agitated and insisted that they all leave the office and continue the conversation at his apartment on East 64th Street.

It was there, at midmorning, that he told his sons that his business was “a big lie” and, “basically, a giant Ponzi scheme.” There was nothing left, he told them — and he fully expected to go to jail.
The questions have piled up since then: Could Mr. Madoff have sustained this worldwide fraud for so long by himself? Why didn’t regulators, in Washington and abroad, catch him sooner? And will anything be recovered for investors, some of whom have lost every penny?

But when the news of his arrest began to spread on Dec. 11, the first thought that struck an old friend who had known him as a pioneer on Wall Street, was, “There must be an error. It must be another Bernie Madoff.” Then he added, “But then, there is no other Bernie Madoff.”

This article was reported by Diane B. Henriques, Alex Berenson, Alison Leigh Cowan, Alan Feuer, Zachery Kouwe, Eric Konigsberg, Nelson D. Schwartz, Michael J. de la Merced, Stephanie Strom, Julia Werdigier and Dirk Johnson.

Wednesday, December 17, 2008

Madoff: apt description by J K Galbraith

Madoff, Galbraith and the [em]bezzle

Andy Smith

Independent 16 December 2008

I have just rediscovered this beautifully written passge from pages 152 to 155 of 'The Great Crash 1929' by J.K. Galbraith, which explains precisely why the Bernard Madoff scandal has hit us now, in the midst of a banking crisis, why something of that sort was inevitable, and why we can expect more of the same:

"To the economist embezzlement is the most interesting of crimes. Alone among the various forms of larceny it has a time parameter. Weeks, months, or years elapse between the commission of the crime and its discovery. (This is the period, incidentally, when the embezzler has his gain and the man who has been embezzled, oddly enough, feels no loss. There is a net increase in psychic wealth.)

At any given time there exists an inventory of undiscovered embezzlement in - or more precisely not in - the country's businesses and banks. This inventory - it should perhaps be called the bezzle - amounts at any moment to many millions of dollars. It also varies in size with the business cycle.

"In good times people are relaxed, trusting, and money is plentiful, But even though money is plentiful, there are always many people who need more. Under these circumstances the rate of embezzlement grows, the rate of discovery falls off, and the bezzle increases rapidly.

In depression all this is reversed. Money is watched with a narrow, suspicious eye. The man who handles it is assumed to be dishonest until he proves himself otherwise. Audits are penetrating and meticulous. Commercial morality is enormously improved. The bezzle shrinks".

One of the uses of depression is the exposure of what auditors fail to find. Bagehot once observed: "Every great crisis reveals the excessive speculations of many houses which no one before suspected."

There is only one word that is out of date. It is the word 'millions'. Substitute 'billions' and the passage is timeless.

Friday, December 05, 2008

A Father's death at home with his family around him

My Dad had the best death

Very few people pass away at home. The writer, whose father died in his bed, explains the benefits for everyone of a dignified departure

Michael Bywater

Sunday Times 30 November 2008

A week ago today, my sister took a nap on the sofa. She had been holding my father’s hand all night. An odd hand to hold: just bones and sinew and bruised paper skin, bent into a claw from Dupuytren’s contracture. He hadn’t had it fixed because it kept his grip vice-like on his putter and made his short game lethal, even though he’d given up golf almost a decade ago when the osteoporosis kicked in. A testicle had been removed shortly beforehand because of prostate cancer; and some 65 years before that, he’d had the other testicle removed after the discovery of a tumour. Nature had it in for Dad.

Eighteen months ago he got tired of my sister nagging at him for getting too thin, and booked himself in for a chest x-ray. As a retired doctor, he knew perfectly well what they’d find, and so they did: small-cell lung cancer. Forty a day in his prime, though he’d brought it down a bit. Let’s say about 750,000 fags, conservatively. A week before the cancer more or less silenced him for good, he said: “This smoking. I never inhaled, you know.” (Nor did he: he was a perma-nent-fag-in-the-corner-of-the-mouth man.) “So, really,” he continued, “what’s doing for me is passive smoking.”

The fact remains, passive or active, it was doing for him, and the prostate cancer was doing for him too, and eventually one or the other or maybe both got into his brain. Here, in front of me, is a slightly shaky note in his hand, listing various specialists and his own tentative diagnosis: papilloedema. The vision goes odd. The tumour’s in the brain. When you’re 87 and skin-and-bone, thin as prison soup, that means the show’s over.

So a week ago today, my sister, who had been holding his hand all night, took a brief nap on the sofa. He was fine. His breathing steady, if a bit shallow. No discomfort. You get a very dry mouth when you’re half in, half out of the world, teeth out and mouth open, but she’d dealt with that.
“I’m going to moisten your lips, Daddy,” she’d said. (He had gone blind a couple of weeks earlier, but wouldn’t admit it.) “Would you like water or glycerine?” He’d gathered his strength, sucked air into his racked lungs and through his switched-off larynx articulated with saloon-bar clarity: “Gin.”
And gin he got. And there she was, on the sofa, drifting off to the sound of his breathing, and a few minutes later she woke slightly perplexed, wondering what had changed, and realised that what had changed was that Dad wasn’t breathing any more. He had just . . . stopped.

The National Audit Office said last week that dying patients aren’t being treated with dignity and respect. Only one in five deaths in England occurs in the home, even though two-thirds of people say that is where they would prefer to die. Not enough funding. Not enough support. The usual suspects. Others can pick over the bones of the report. I don’t have time; I have a father to bury. But if there’s a better death than my father’s, I can’t imagine it.

We brought his bed downstairs towards the end, and there he lay, fading peaceably in his own sitting room, surrounded by his dogs and grandchildren and cats and people coming in and out.
I say “peaceably”, but there were episodes of purest tyranny. My sister had given him one of those wireless dingdong doorbells to summon her, and he exercised it to the limit. But although he had been denunciatory, condemning her to me, and me to her, and his doctors (who had actually called everything perfectly) to anyone who’d listen, once he was on his deathbed he became affable and loving. Right until the end, when it just dwindled to a tiny white spot, like an old television, before going out entirely with an inaudible plink, his personality was entire.

“This seeing the sick endears them to us, us too it endears,” wrote Gerard Manley Hopkins in Felix Ran-dal, and of course it does. My father, widowed almost a decade ago, was touched and stroked more in his last weeks than in the intervening years.

I had forgotten what he felt like; being English, we had not embraced since I was a toddler. Now, helping him to his unsteady feet to try to pee, I held him time after time. I knew his weight and his smell, and remembered him holding me up in the night to pee when I was a little one, being potty-trained. He was little now, and, just like me back then, he couldn’t go. This is the point at which most people would go into hospital or hospice. But the inadequate services provided for the dying were in his case so much more than adequate that it seems to me that the National Audit Office must have been writing about another country.

Beyond all praise were Sinead and his other carers, who came in to wash him and help him up (when he was still getting up); Penny and Judith and Jane and Claire from the Hospice at Home service; the district nurses Carolyn and Steph; and everyone who came to help my sister look after him.

There are, I think, three keys to a good death such as my father’s. The first is that the crucial person is the district nurse. It’s she who coordinates everything. When I explained to my father’s GP that he was perhaps making not-unreasonable assumptions: retired doctor, daughter living with him, nice house in posh road, so everything fine – but that it wasn’t fine – he sent along the nurse, and everything kicked in with remarkable speed. Help – stuff and people – arrived swiftly.

The second is this: in my father’s case, nobody lost their nerve. Urinary retention, for example, is horrid for the sufferer, and that’s the point at which many dying people find themselves taken into hospital because the family can’t cope. Measuring doses of morphine may go against the grain, but it’s not hard: 2mg, wait 10 minutes, another 2mg, wait 10 minutes, and so on until the pain or the distress eases. There’s the question of squeamish-ness, too. Being a doctor, my father had none – so when we helped him up and held him, as he shook with strain, on his Zimmer frame to pee, it bothered him not a jot. Fortunately, it didn’t bother my sister or her children, or indeed her boyfriend. They are all animal people – mainly horses – and as easy about bodies as any doctor.

And the third, crucial, thing in Dad’s case was that my sister was already there. She had fled back to the family home after her marriage exploded; and when he started to die, she cared for him with the devotion of a lioness with a frail cub. A week before the end, I had suggested coming via the hospital to get a catheter kit, but didn’t get beyond the word “hospital”.

“He is not going into hospital,” she growled. “But . . .” “He is not. Going. Into. Hospital,” she repeated. “He wanted to die at home and that is where he will die.”
And so he did, but perhaps he could not have done so without his daughter’s care. She gave up her job and looked after him for his final weeks, which struck her as only reasonable but I think may be rare.

I did what I could but it was insignificant in comparison, and leads me to think that it’s not the state services that are letting people down, but our family structures. The carers of the dying are either too old and frail themselves, or simply . . . too busy.

After my father faded out and stopped breathing, we toasted him in champagne. His granddaughter sat beside his corpse, stroking his head as he gently cooled. We reincorporated him into the family in his new role as ancestor, and he lay in his bed in the sitting room until tea-time. None of this could have happened in hospital. We all knew him better as a result. We had handled him, held him, caressed him. Repaid him. And felt him cool, and understood that he was gone.

This could not have happened, of course, without the services of Hospice at Home, Macmillan nurses and NHS district nurses – which certainly did not fail him. But neither could it have happened without my sister.

She and I had been semi-estranged for many years; and the fact that she’d had to move back home had distressed and perplexed Dad no end. I had listened for 3½ years to him ranting about it. But all that stopped towards the end.

If dying at home has many known benefits, here’s another one: the old man, at the very end of his life, achieved something remarkable, one final gift. In the very jaws of death, he reunited his family.