By petedirenzo
Tuesday, December 16, 2008

If you can’t trust your golf buddy, who can you trust?
It’s a question that the membership of Florida’s swank Palm Beach Country Club has been left to ponder with the revelation that one of its members, financier Bernard L. Madoff, bilked at least 100 of them out of millions of dollars. Maybe even billions.
Madoff, who was arrested last week for allegedly masterminding a $50 billion fraud scheme, used his memberships at several golf clubs to recruit investors. But Palm Beach C.C., where Madoff bated about a third of the members, proved particularly lucrative. The New York Times reported that some members spent hundreds of thousands on dues not so much so they could play golf or gab in the grillroom, but merely to get on Madoff’s radar. “He had this reputation that … he’s what Wall Street’s all about,” Ross B. Intelisano, a lawyer representing a collection of Palm Beach members, told the Times. “It’s all about a handshake, and people trusted him.” That sort of trust may be gone now, Mr. Intelisano said. “People may not really trust the guys they play golf with,” he said. That may sound like a tiny ripple in what is one of the largest financial fraud cases in history, but to golfers who take joy in whiling away a Sunday at the club and forging tight bonds with their fellow members, such a shift in club mores would be significant. (Did Jimmy really sell you a life insurance policy? Or are you in fact funding his gambling habit? And that case of Thin Mints you bought from Frank—are you regretting you paid for them in advance?) Thanks to Madoff, blind faith and peace of mind are no longer guaranteed with your club membership.
Just ask the Palm Beach posse, which hailed Madoff as one of the club’s most admired, trusted and well-liked members. Who could have possibly predicted the evil he was concocting? “I’ve been in the investment business for 28 years and I have never heard of anything like it,” says Casey Alexander, a golf-industry analyst at Gilford Securities in New York. Alexander is also a competitive amateur golfer and a member at Colonial Springs Golf Club on Long Island, so he’s well versed in the nuances of the golf club subculture.
“It’s like a quid pro quo that is extremely unacceptable,” Alexander says of members buying memberships simply to cozy up to Madoff. “You’d have to be super rich to not blanch at it. But I guess if you have millions and millions of dollars, pay for play is acceptable.” 
Madoff’s reach in the golf world extends far beyond the hedge-lined confines of Palm Beach. He’s also a member at Boca Rio Golf Club in Boca Raton, Fla.; Fresh Meadow Country Club in Great Neck, N.Y.; Atlantic Golf Club in Bridgehampton, N.Y; Glen Oaks Club in Old Westbury, N.Y.; and Old Oaks Golf Club in Purchase, N.Y., according to news reports and the GHIN handicap system, which lists Madoff as a 9.8 handicap (though he hasn’t posted a score in more than eight years). It’s unclear how much business Madoff conducted at these haunts, though one financial blogger estimates he swindled at least a billion dollars from the Boca Rio contingent.
Alexander says he has several friends who belong to Fresh Meadow, and though he hasn’t yet spoken to any of them about the Madoff fallout, he expects the “tentacles” of the scheme to extend deep into the club scene. There’s also the matter of golf-oriented non-profits that might have had money tied up with Madoff. David Fay, the USGA’s executive director, told me the first thing he did when the scandal broke was to check if the USGA had entrusted any of its sizable portfolio to Madoff. “Thankfully not,” he says.   
Ultimately the scandal should force golfers — and investors — to reconsider how and with whom they conduct their business on the course or at the club. Golf has long been a lubricant for deal-making, but this episode is a grave reminder that investors ought give more thought to the pedigree and practices of their fund managers than those of their fourball partners.
“I hope this makes people examine what they’re doing and where they’re investing,” says Tom Patri, a Golf Magazine Top 100 Teacher who splits time at tony Friar’s Head on Long Island and The Quarry in Naples, Fla. “I don’t think a handshake over a vodka and tonic is enough due diligence.”

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