Investigators probing Bernard Madoff’s alleged $50-billion scheme are looking at the role played by an investment firm that he co-founded with an old friend from Long Island that recruited hundreds of investors from New York, Boston and Florida.
Cohmad Securities and its vice president, Robert Jaffe of Palm Beach and Boston, have already been subpoenaed by Massachusetts regulators in connection with the federal investigation of Bernard L. Madoff Investment Securities.
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The company, which seemed to function almost as a Madoff subsidiary, was founded by Madoff and his friend and former neighbor, Maurice “Sonny” Cohn, a little more than two decades ago. Cohmad – a name fashioned out of the first three letters of Cohn and Madoff – had its New York offices in the same midtown Manhattan building as Madoff’s investment firm.
Cohn, a benefactor of Long Island’s North Shore-Long Island Jewish Health System, owns about 80 percent of Cohmad, according to the Wall Street Journal; Madoff is a minority stakeholder, along with Cohn’s daughter, Marcia, and Madoff’s brother, Peter.
Another stakeholder is Jaffe, a debonair philanthropist who helped recruit dozens of investors from his stomping grounds around the Palm Beach Country Club and the suburbs of Boston.
Jaffe, who is listed as Cohmad’s vice president, has another major tie to Madoff: He is married to Ellen Shapiro Jaffe, daughter of 95-year-old apparel mogul Carl Shapiro, a decades-old friend of Madoff’s who was one of his earliest and largest investors. By the end, Shapiro is said to have had $545 million with Madoff.
It’s a strange turnabout for Jaffe, a 64-year-old bon vivant who was sought out in Palm Beach high society, at least in part because he could deliver access to Madoff whose legendary fund guaranteed steady, if unremarkable returns.
A champion golfer with multiple country club memberships, Jaffe seems to have done many of his deals on the golf course or on the party circuit.
He is also a fixture of the philanthropic worlds of both Palm Beach and Boston, where he rubbed shoulders with prospective investors on boards ranging from the Palm HealthCare Foundation, which he chairs, to the American Cancer Society’s Palm Beach chapter to Boston’s Beth Israel Deaconess Medical Center.
“He was a very fastidious dresser. Never had a hair out of place,” Richard Rampell, a Palm Beach accountant told Reuters. “He stands ram-rod straight and has sort of a dashing presence,” Rampell added, likening him to characters found in novels by F. Scott Fitzgerald, author of The Great Gatsby.
But if Jaffe helped Madoff recruit an ever-expanding list of high-net-worth clients, he is now a target of fury.
At the ritzy Mar-a-Lago Club, an angry investor who lost millions with Madoff confronted Jaffe at a party last month. His son’s engagement party at the Palm Beach Country Club was abruptly canceled. And after he failed to show up for an interview with Massachusetts regulators Tuesday, the secretary of state filed suit to force Jaffe to testify.
A spokesman for Jaffe said he is under a “doctor’s care” and that he had no knowledge of the alleged fraud and was a victim himself.
“Was he out selling Madoff? Yes. Did he use his contacts to sell the product? Yes. But he’s as much a victim,” Lawrence Sperber, a Boston lawyer who has a home in Palm Beach and has known Jaffe for more than 40 years, told the Boston Globe. “I don’t think he had any idea. And he’s messed up his relationship with the rest of the world.”
Cohmad’s filings show that the company, which had fewer than 650 client accounts, made 99.7% of its sales from brokerage services to Madoff’s larger broker-dealer, according to the Journal.
In its audited financial statements for the 12 months ending June 30, 2008, Cohmad said revenue from Madoff Securities totalled $3,736,829. Its total sales for the same period were $3,748,397.
Steven Paradise, a Vinson & Elkins lawyer representing Sonny and Marcia Cohn, denied that either of them knew of the alleged fraud or solicited investors for Madoff – and that both had lost money with him. “To the extent Mr. Jaffe was soliciting investors for Madoff, he was not doing so through or for Cohmad,” he said, adding that Cohmad paid rent to Madoff to lease its space.
Madoff, 70, was charged Dec. 11 with securities fraud for allegedly running a Ponzi scheme — paying one set of investors with money from another. He is free on $10 million bail, pending trial.
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