Other than a few small pieces here and there, the media has been surprisingly uninterested in Frank Avellino and Michael Bienes, the two longtime Madoff fundraisers. We say it’s surprising, in part, because of all the people in Madoff’s orbit, they have the most interesting and revealing story.
They’ve been allied with him the longest, they got dinged by the SEC in the early 90s for their fundraising, and most recently, Frank Avellino’s housekeeper said she lost all her money in his fictitious investment firm.
Finally, the NYT gives their story a good recap — though it’s all details we’ve discussed before, including the oddity of Avellino’s housekeeper, who was told her money was gone 10 days before the Madoff fraud came public.
What’s most useful in the piece is the account of the 1993 SEC investigation, and how Avellino and Bienes manage to wiggle out of any serious penalties:
On Nov. 17, 1992, as part of the deal, a federal judge ordered Price Waterhouse to audit the financial statements of Avellino & Bienes.
The accountants soon learned that Avellino & Bienes did not keep conventional books, only the basic ledgers necessary to prepare tax records. Price Waterhouse then asked Mr. Avellino to put together records for 1992. He declined.
“My experience has taught me to not commit any figures to scrutiny when, as in this case, it can be construed as ‘bible’ and subject to criticism,” Mr. Avellino wrote somewhat ungrammatically. “In this present instance, quite severely. I explained how the profit and loss can be computed from the records you now hold in your possession that Bernard L. Madoff and I supplied.”
Even after learning of the missing records, the commission did not reopen its investigation.
The case then took an unusual turn. Mr. Avellino and Mr. Sorkin complained about Price Waterhouse’s fees and demanded that federal Judge John E. Sprizzo, who was overseeing the case, quickly end the audit.
“I am not a cash cow, and I will not be milked,” Mr. Avellino wrote in an affidavit.
By the end of January 1993, both the securities investigation and the Price Waterhouse audit were effectively over. But in a hearing over the disputed fees in April, Judge Sprizzo sharply criticised Mr. Sorkin, who acknowledged that Avellino & Bienes had agreed to the audit in part to avoid a deeper investigation.