The Madoff Scheme: The Early Years

It’s time to start asking the most basic questions about Bernie Madoff’s operation. For starters, who are Frank Avellino and Michael Bienes? These two men ran an accounting firm, Avellino & Bienes that began raising money for Madoff in 1962, according to an SEC complaint filed in 1992. They were, it seems, the earliest enablers of his scheme and perhaps his earliest victims.

On Saturday, we reported on the connection between Avellino & Bienes and Madoff. The SEC accused the men of selling unregistered securities and running an unregistered securities firm that promised investors a steady double-digit return. Both men were ordered by the federal courts to cease this operation and fined $300,000. According to the SEC, Avellino and Bienes had for decades run a business that was so profitable that they basically ceased being accountants all together in order to raise money to invest with Madoff.

Our questions: (a) how did Avellino and Bienes meet Madoff and (b) why did they entrust him with investor money? In 1962, Madoff had been in business for only two years. He was unknown and had almost no track record. Yet these two men, who were apparently around his age, began investing money with him. It is unlikely that they were investing their own money. It seems that even at this early stage they were raising money from outside investors for Madoff to manage. Who were these early investors?

There’s precious little information available on Avellino and Bienes. Both men are now apparently very wealthy. According to the SEC, both had been keeping the excess returns from the half billion or so they had invested with Madoff. That is, they promised outside investors a certain return and kept any amounts earlier. The SEC fined them only $300,000, leaving them with a fortune made from their scheme.

Both men have become respected members of Society. Avellino now owns homes in New York City, Florida and Nantucket. He’s active in several charities, cultural institutions and museum boards.  Bienes lives in London, where he is known as a a sharp dresser and generous donor to cultural and charitable causes. According to an article written about Bienes and his wife, “they dress to kill, they like to party, and they’re legendarily good hosts.” 

“Currently, Bienes and Avellino run a company called Mayfair Bookkeeping Services,” a blogger for the Broward County New Times writes. “Perhaps coincidentally, Madoff has a financial base in Mayfair, England, where the Evening Standard reported that he kept his “dynastic piggy bank.”

 

 

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