Bernie Madoff's golf memberships provided the perfect venue to run the largest Ponzi scheme in history
On another flawless afternoon in Palm Beach, Fla., Susan Markin breaks out a golf ball emblazoned with the image of a man who bilked her for more than a million bucks. The man's face, smug and shameless, has haunted Markin lately, smirking from the covers of magazines and tabloids, smiling wanly for the cameras on the evening news. It is the unrepentant face of financial scandal, and Markin can't shake it. It has even tracked her to the tee box, imprinted as a logo on her ball, which Markin acquired as a gag gift from a friend. "Part of me wants to laugh, but mostly I'm just sickened," she says.
Markin waggles her driver and uncoils into impact, smashing the ball, and with it the dimpled mug of Bernard L. Madoff. "They say to trust your swing," she says. "But it's hard to know what else you can trust these days."
As the summer golf season kicks into gear, a similar lament echoes across many of the country's poshest clubs, where fallout from history's largest Ponzi scheme has struck particularly close to home. Of the thousands of investors swindled by financier Bernie Madoff, scores were golfers, as was the scam's architect himself. Through his own memberships, and those of associates who wrangled investors for him, Madoff enjoyed access to swank private clubs in Florida, New York, Boston and beyond. He used their grounds to prey on the game's fat cats, whose trust (and trusts) was the lifeblood of his ploy. Some of Madoff's alleged victims were household names, including four-time major winner Raymond Floyd, whose name appears on a list of Madoff clients that was released as part of a court filing. But most were merely wealthy, pursuing their pastime in privileged anonymity on the same fairways where Madoff chased his ball.
For many of these clubs, already staggered by a deepening recession, the scandal hit like a body blow. Up and down the East Coast, club members have resigned in droves, some casualties of the economy but many of them cleaned out by a man who'd changed his spikes beside them in their locker rooms. Last December, days after Madoff confessed, management at Glen Oaks Country Club on Long Island (where Madoff's brother, Peter, was a member and Madoff himself played) called an emergency meeting at which some 20 members resigned on the spot, according to a veteran club pro with knowledge of Glen Oaks. (The club did not return several phone calls seeking comment.) At North Shore Country Club, another Long Island haunt full of Madoff investors, membership has reportedly plummeted from 175 to 110 in the wake of the scandal, driving speculation that the 95-year-old club might not live to see its 100th birthday. And at Palm Beach Country Club in Florida, the club hardest hit by the scheme, staff responded to news of the scandal by stripping Madoff's name from his locker and shipping his sticks to his New York penthouse — small consolation to members who reportedly could no longer afford their dues.
"It's hard to overestimate the impact that this has had on the golf world," says Casey Alexander, a senior golf-industry analyst at Gilford Securities in New York. "If you talked to members of almost any high-end club, you'd find someone who was affected, or who knows someone who was."
If the scale of Madoff's scheme stands unrivaled, the spirit of it is not unique. In plundering golf's riches, Madoff placed himself in the company of other prominent scam artists whose purportedly shady dealings have only recently come to light. In 2008, Minnesota businessman Tom Petters was indicted for his suspected role in a $3.5 billion Ponzi scheme that tapped country clubbers from Chicago to St. Paul. Not to be outdone, Sir Allen Stanford, a knighted Texas financier whose close ties to the PGA Tour included sponsorship deals with Vijay Singh, Camilo Villegas and the Tiger Woods Foundation, stands accused of making off with $8 billion. Tour pro Henrik Stenson is among those wondering where his money is. "Not all my money," Stenson told a reporter in February. But "quite a big part" of his personal wealth.
The full toll that Madoff took on golf may never be known. The tally so far registers in grim estates: a staggering $1 billion-plus purportedly swindled from the membership of Palm Beach CC; a reported $100 million from those at Hillcrest and Oak Ridge country clubs in Minnesota; and on. But the damage to the game can't be measured in dollars alone. In his wide-ranging betrayal, Madoff not only stole a fortune, he frayed the social fabric from which golf is stitched. His still-unraveling scheme has left some players questioning the sense of trust supposedly inherent among golfers, and others contemplating the cruel irony of having joined clubs that were built to keep the riffraff out, only to discover that the worst kind of riffraff was already in.
"It's like incest," Susan Markin says. "There's a sense of pain and shame, and it's all the more intense because this awful thing was done to you by someone you knew."
A former Palm Beach town councilmember and 5-handicap, Markin met Madoff only once in person, years ago at a cocktail party. She found him arrogant — "not the kind of guy you'd want to spend an evening with" — but someone to whom you might entrust your funds. In 2005, through a friend's connection, Markin did just that with roughly 5 percent of her portfolio.
At the time, Madoff and his wife, Ruth, were members of Palm Beach CC, a palm-shaded retreat on the north side of the island from which Markin (in the wake of a contentious divorce from another Palm Beach member) had recently resigned. The club, which was founded in 1952 as the Jewish answer to the nearby WASPy Everglades Club, has long been regarded as the mirror image of its cross-town counterpart, replete with niggling dress codes, a nose-up attitude and $350,000 initiation dues.
"It's the golf world's version of the Stockholm Syndrome," says Laurence Leamer, a Palm Beach resident and author of the new book, Madness Under the Royal Palms, a social history of the Palm Beach elite. "One club won't let you in, so what do you do? You build a club that's just as snobbish and superficial as the one that discriminated against you."
In this exclusive setting, the kind of place where a member boasting of his private jet risked being one-upped by another member who owned three, Madoff established a club within the club. He kept to himself, playing mostly in a twosome with his wife, steering clear of the usual backslapping and banter. He wouldn't accept just any investor; if you had to ask, you either lacked the cash or the right connections. After a round, he'd linger quietly by the snack bar, sipping iced tea while other golfers engaged in clubby post-mortems, tallying their scores or their net worth. His reluctance to talk business in social settings served the dual purpose of enhancing his genteel image while shielding him from questions about his methods that might have caught him off guard.
"The country club world is not a real world," says one long-time Palm Beach member, who requested anonymity for fear of upsetting other members. "But the thing about Bernie was that he seemed so normal. He didn't say much, but when he did, he'd talk to you about family, books, politics, current events. He was an intellectual. Everyone else at the club talked about shopping, money, superficial conversations. He talked about real things. They talked about air."
Like the policies of the most restrictive golf clubs, Madoff's aloofness played on the insecurities of outsiders yearning to belong. It wasn't unheard of for wannabe investors to fork out Palm Beach's exhorbitant dues just to get closer to the "club" that mattered most. Those who made it in with Madoff reveled in their good fortune, like a working stiff who scores a tee time at Augusta National.
"I played golf with his wife. They invited me to dinners at their home, and drinks on their yacht," says another Palm Beach member, who was fleeced for millions. "They were the sweetest, warmest people, and we had wonderful times. The only way I can reconcile that side of them with what they did is to think of them as being like the Sopranos. They go to your wedding one day, and kill you the next." Though she held onto her membership in the wake of the scandal, the former Madoff friend says she is considering resigning.
"I don't know if I can stand the atmosphere anymore," she says. "I joined for the golf, because I love the game. But the rest of the scene, it's just not me."
Golf provides a window into a person, but people still see what they want to see. At private outposts like Atlantic Golf Club on Long Island, no one cast suspicion on Madoff's 9.8 handicap, even though he'd gone eight years without recording a score. Fellow members liked to say that his game was "as consistent as his returns."
"He played his personality," says a seasoned teaching pro who watched Madoff play golf in Florida and New York. "His swing was smooth and natural-seeming, just like him."
But no sooner did the scandal break than reassessments of Madoff's game began. Looking back at a charity tournament he played in with Madoff last year in Cabo San Lucas, an unnamed golfer told the Financial Times that it was clear the financier had sandbagged; the supposed 9.8-handicapper had claimed an index of "14 or 15." What's more, Madoff's consistent scoring, once regarded as a virtue, appeared in retrospect to be a warning sign: the rounds he'd recorded, most clustered within four shots of one another, stood out now as statistically unlikely, no more probable than the profits he'd claimed. "Very few people have such a low standard deviation in their scoring average," said Kevin O'Connor, the USGA's senior director of handicapping, of Madoff's steady mid-80s scoring. "It's highly unlikely to have such a tight scoring profile." Madoff, it turned out, had swindled every golfer, regardless of whether he'd swiped their funds.
Frequently, of course, he'd done that, too. Hall of Famer Raymond Floyd's name appears on Madoff's client list, although when reached by phone Floyd denied having invested with the financier. "I was not with Bernie Madoff," he said. When asked why his name is on the list, Floyd declined further comment. In 2005, Floyd and fellow pro Nick Price appeared on a list of victims of another Ponzi scheme run by the KL Group, a West Palm Beach operation that had swindled investors out of an estimated $213 million.
"Golfers as a social group are more likely than others to be effectively lied to by people they meet," says Alexander, the golf-industry analyst. "They have an expectation that people are adhering to an ethical code of conduct. When someone breaks that code, the sense of violation is intense."
Most golfers abide by the game's rules. But for some, what the Madoff case makes clear is that the game is no more honorable than the people who play it, and the people who play it are no better or worse than anyone else. It seems a simple truth to swallow, but it has gone down hard. "It's had a devastating effect and created a terrible atmosphere," says a member of Pine Brook Country Club, a Boston-area club where Madoff spun his web. "People are looking over their shoulders, wondering who might be out to stab them in the back."
After learning that they'd welcomed the least desirable sort of golfer into their midst, clubs where Madoff played varied in their efforts to expel him. At Fresh Meadow Country Club on Long Island, Madoff was never formally banished, according to a club employee; his membership was simply allowed to expire when his annual dues came up. As of this spring, Madoff's clubs and other possessions continued to languish in Fresh Meadow storage. "It's just kind of been an unresolved question," the employee says. "What do you do with them?" Fresh Meadow management did not respond to inquiries.
At Palm Beach CC, meanwhile, management's decision to get rid of Madoff's sticks looks like a good one — better, anyway, than many of the members' investment deals. Of the club's 300 members — among the heaviest hitters in a town renowned for its extravagant wealth — a reported one-third held accounts with Madoff with a combined value of an estimated $1 billion-plus. One club member alone, the philanthropist Carl Shapiro, lost a reported $550 million.
"A lot of people are reluctant to talk about it," says Markin, the former Palm Beach CC member. "But the most reluctant are the men. These are guys who saw themselves as financial Mensas, and to have been swindled in this way is incredibly humiliating. It undermines their entire sense of identity."
Though Palm Beach members have closed ranks in the wake of the scandal (those untouched by the scam have reportedly pitched in to cover dues that others can no longer afford), not everyone shares in the solidarity. Recently, a club employee says, people with access to the club have been snooping around, searching for Madoff souvenirs.
Other Madoff memorabilia has already spilled onto the links. Earlier this year, Walker Manzke, a New Yorker who lost his job at a hedge fund and whose family lost money to Madoff, launched a line of golfballs that he branded Sleaze-balls. The two-piece Wilson Ultras bear an image of Madoff's smirking face, with wry product descriptions on their packaging, including "optimum spin for maximum duplicity." At $17.95 a sleeve, the balls sold out their initial run of 300 sleeves, and Manzke has produced another 3,000 cases. He has also expanded his offerings, launching a line of Allen Stanford balls. "There's no shortage of candidates," Manzke says. "These days, it seems like everyone's a crook."
By late February, weeks before Madoff pleaded guilty in a federal courthouse in Manhattan, Sleazeballs with his image had made their way from New York to Susan Markin's golf bag in south Florida. Markin, who appreciated the black humor, was now beating one of the balls around, refusing to let her bad luck sour her on the game she loves. "I could wallow, but what good would that do me?" Markin says. "All the more reason to try to enjoy myself."
With a soft breezing blowing off the nearby ocean, Markin swings a short iron and stuffs her Sleazeball pin-high on a short par-4. But her bid for birdie wanders long and left. Markin frowns. Her assessment of the putt might also have applied to Bernie Madoff.
"Figures," she says. "I should have known the thing wouldn't go straight."