the madoff affair

Sherry Shameer Cohen


She worked at Fairfield Greenwich Group, a Madoff feeder fund, for 11 years, and left the firm in 1998. This is the edited transcript of an interview conducted on April 1, 2009.

[What was your role at Fairfield Greenwich?]

I was a registered sales assistant, which meant I had my Series 7. I could put in trades. And Walter [Noel] just needed me to do general secretarial work, administrative work and be there when he and his family were on vacations, which was a lot.

So you were holding the fort while they were having fun?

I was holding the fort while they were having fun. But part of their fun was cultivating new clients.

So they had to go out and socialize?

Constantly. But they loved it, because it's not just knocking on doors and making phone calls, like the mere mortals in the industry do. They were on the ski slopes; they were on the beaches. They had great fun -- dinners out at very expensive places.

Walter had joined both the Knickerbocker and the Doubles Club. And so he'd meet a lot of clients there and prospects there. He chose the location of his office [in Greenwich, Conn.,] because it was very convenient to New York. He just crossed the street, took the train, and he was in New York. ...

Who was Walter Noel? What was his background?

He had a degree from Vanderbilt University [in Nashville], and then he got his J.D. from Harvard. I'm not sure what he did for his first job. He worked in Nigeria for a while, and [his wife,] Monica, was with him in the early days. ... He ended up working for Chase, I believe, Chase Manhattan Bank, as what they call a private banker. And they moved to Switzerland. ... At some point, he decided to branch out on his own. ...

And describe him for me -- his personality, his strengths and weaknesses.

His strengths are that he was very, very presentable. He's tall, very distinguished-looking. And he had a nice voice for the most part. And he looked like a real Southern gentleman. Not too much of a drawl. In fact, virtually no drawl at that point.

“Don't ask, don't tell: That seems to be their unofficial policy. As long as the money comes rolling in, why ask?”

I'm not sure how to describe it -- as a strength or a weakness. Most men take a back seat to their wives. It's the woman who sets the tone in the home. And Monica had social ambitions. And she grew up pretty much in luxury -- not major, major luxury, but without a real middle class. You were either pretty rich or you were pretty poor in Brazil.

Do you know how they met?

Yes. They met on a ski slope. She was studying at Wellesley, and I'm not [sure] what he was doing at that time. He's 12 years older than she is. ...

Talk to me a little bit about those sort of early years [at] Walter Noel & Associates. ...

... He was a very conservative investor. He went through Value Line's weekly picks. It was every Friday morning. It comes out with the five stocks that are more likely to go up, and he would choose those. ...

It was, as he called it, a boutique investment firm. And he didn't have all that many clients, except for this one big Brazilian client. ...

And he was subletting space ... to Fred Kolber & Co. At that time, Fred Kolber & Co. was Fred Kolber himself; his brother, Mark; and Jeffrey Tucker. ... Walter was very impressed with their trading, not just the strategies, but the returns.

And remember, in 1987, in October, there was a market crash. And a lot of people didn't think they were going to get out of it. I mean, Walter thought he was not going to get out of it. But Fred Kolber did fairly well. ... And then when [Walter] saw Fred Koburn's return, he said: "Let's do something together. I have clients overseas. We can take this offshore. I can raise the money for you." And fast-forward, Jeff Tucker was the one who introduced him to Bernie Madoff, and that's when things really started to accelerate. ...

So Jeffrey Tucker, who was he?

Jeffrey Tucker was a partner with Fred Kolber & Co., and he was very proud of the fact that he was a former SEC [Securities and Exchange Commission] lawyer. This was his calling card, basically. It made it sound very legitimate.

So his connection to the SEC mattered a lot?

Not exactly. It didn't really matter. ... In retrospect, I don't know how long he was with the SEC, and I don't really know what he did for the SEC. He may not have had a very high-ranking position. He may not have been there for very long. He may not have been very good at his job. I don't know that. The more I think about it, as things unfold with Fairfield Greenwich Group, I'm really beginning to question those credentials.

But it sounds like a wonderful thing for Walter to say: "Hey, one of our partners is a former SEC lawyer. It doesn't get any better than this. We are totally legitimate." ...

What was their [relationship]?

They got along very well. Walter is a very personable person. Jeffrey is … not as outgoing. He is the type of person who is more laid back in many, many ways. He loved horses, and there's a good part of the time that he spent at the horse track, not at Fairfield Greenwich Group.

Sometimes he would come in with this yellow slicker and the yellow pants, looking as if he was, I don't know, mucking out stalls or fishing or something. He just did not look very professional. Walter was far more image-conscious in how he dressed at the office. ...

Jeffery is more reserved than Walter. He is kind of closed about his personal life. I knew very little about him and his wife. He would talk about how she was a real clotheshorse, and she would sometimes get up at 4:00 in the morning to call Milan to see if they had this particular dress that she wanted. ...

I understand that it was Jeffery Tucker that was sort of the main conduit to Madoff.

Yes. ... Madoff is not somebody that would have crossed paths with the Noels other than through a third party, such as Jeff Tucker. He was not glamorous. He was not that type of person. Jeff, even though he was well-to-do -- he lives in an apartment on Fifth Avenue ... overlooking Central Park, great neighborhood, but he wasn't flashy. ...

And how did they divide the responsibility? ...

Walter was selling. Jeffrey is not a salesperson. ... Walter had all the contacts in Europe and in South America, at least Brazil.

... One day Jeffrey Tucker meets Madoff.

Right. ... Jeffrey just told Walter, "I've got this guy who's got really impressive returns." You know, ... "Let's look into it. Maybe there's a product we can develop." ...

[Was there] a buzz in the office, like something good's going to happen?

No, no, no. I don't think so, because I never met Madoff. Madoff never came to Fairfield Greenwich's location at that time. Everything was done in New York. But what was happening was once they created Fairfield Sentry to invest exclusively with Madoff, people were getting very excited about that, because they were convinced that they were going to continue to have these wonderful returns.

And when I asked Corina [Noel Piedrahita, a hedge fund administrator herself, daughter of Walter Noel and wife of Andrés Piedrahita, head of London's Fairfield Greenwich office,] about this, I said, "I don't understand how this works. And why is this so wonderful?" And she said: "Well, it's a hedge fund. They don't do very well compared to some of the other ones, ... but when the market falls, they're not going to do that badly."

And there was one month where it went down about half a percent, and everybody was like, you know, wiping their brow, "Oh, we only lost half a percent." And that was their investors as well as Fairfield Greenwich Group. So from that point of view, it's like we hit upon something that's really, really good. ...

Describe the Noels' wealth at that stage. ...

Walter was mowing his lawn before I met him. He stopped after that. They were getting a lot of [Brazilians] to do a lot of the work around the house. And they were constantly refinancing their homes. They had an apartment in New York [on] Park Avenue and the house in Greenwich [on] Round Hill Road, which is one of the best addresses you could possibly get. Both addresses were fantastic.

They didn't have as much money as they liked to pretend they did. Refinancing really meant that they could afford to go on these type of vacations. In fact, once a year, they would go for just about a month. They would rent the Greenwich house out to people for about $8,000 a month, and that would help defray their expenses. They stopped doing that after Madoff came into the picture, because the money just kept coming in.

So you could visibly see a difference in their lifestyle?

Absolutely. It accelerated. ... They were very comfortable before they met Bernie Madoff, ... but not enough to continue to finance the lifestyle that they wanted, which was fabulous vacations, renting a place in Southampton every year, going on exotic trips, and skiing every year in Switzerland and going to the islands, I guess, in the winter to get away from the cold weather. They kept making additions to their houses. But they were constantly refinancing. They were still living above their actual means.

But anybody who saw them would say, wow, this family is really, really well-to-do. They used to drive Fords, and then they ended up leasing luxury cars, because it just didn't look right to have these Plain Jane cars.

Very ambitious?

It's more of a social ambition. What drove them was not so much creating wealth for the sake of the future so that they would have a nice retirement package. This was about being able to finance a lifestyle that some people only dream about.

They read about things in W and in Town & Country, and they wanted that sort of lifestyle. They really wanted it. They went to all these galas where they spent $250 and up a ticket. This was exciting for them. This is what gave them a charge. It was [attending] benefits for the Central Park Conservatory and other worthy causes. They wanted to be in society.

Did you like them?

I think that Walter and Monica are very, very likable people.

I think that the next generation had supreme self-confidence, confidence that I kind of wish I would've had, except that it really got to be too much. They were sometimes arrogant. They had a tremendous sense of self-entitlement. And I wasn't the only one who thought that. And I wasn't the only one who thought that they were very, very aggressive. ...

Aggressive in what sense?

It was just a general aggression about going after whatever it is they want. And they really could care less whose toes they stepped on. It was all about them. ... I think that for the Noels, the unofficial motto was, "If we act rich, we will become rich." It's a self-fulfilling prophecy.

... Was Walter Noel working pretty hard before Madoff?

Oh, yes. The whole family worked very, very hard to achieve their ambition. And as I said, working at this business was what was financing their social life. They couldn't have done it without it. It was a very exciting way of making business. ...

It was wining and dining people in very fancy places. It was meeting people in Gstaad, [Switzerland,] and meeting people in Mustique, or wherever it is that they were going to. You know, they wanted to be in that circle anyway. And of course, in return, they wanted the money to continue to finance that so they could meet more people. ...

So Fairfield Greenwich joined with Tucker. ...

It's actually Walter Noel who joined with Tucker and Fred Kolber. And it became Fairfield International Managers. And then they changed the name of the company to Fairfield Greenwich Group. Fairfield represented all of the offshore funds, and Greenwich all the domestic investors. ...

[What at that time is strange to you about] Madoff sending statements? What is Fairfield Greenwich doing?

Fairfield Greenwich Group likes to call itself money managers. But basically, Walter and eventually his sons-in-law were really just glorified salesmen. They were selling somebody else's product. And there's nothing wrong with that if they find other managers who could do better than what they can do for their clients.

And Walter had a very hard time selling Fairfield Sentry. People didn't understand: "What is so wonderful about this thing? How am I going to make this money?" ... So finally he got Bernie Madoff to send him statements, and then he said to me -- he gave me a whole stack of papers and said: "Here, make copies of this. I need, like, X number for my next trip."

So I looked at these things, and I said, "Something is very strange." Every bank statement, every brokerage house statement that I've ever seen, is usually on a very thick paper, and it's got a big logo emblazoned on it, and it's got lots and lots of small print on the front and on the back. You know, sometimes it would explain what this number means or what this reference means, and here's a phone number to call, and if you think there's a mistake, and yada yada yada.

None of that was on there. It just looked as if it came off a typewriter or [a] dot matrix [printer]. This is how far back it goes.

And so I said, "Walter, let me do something with it." And I put it all on a spreadsheet so it would force me to analyze what was in that portfolio. And it was a very, very conservative portfolio, not unlike my own, except they had a lot more holdings. But I kept thinking: "I don't understand this. Is it possible that I chose the wrong stock in every single industry so that my own returns are about half of what he's getting?"

And then there were, I think, some stock options. And all that seemed, on the surface, very, very legitimate. But the annual returns just weren't quite right. But they were convinced that Bernie Madoff knew what he was doing.

Well, fast-forward to last December, or maybe last November. I'd met somebody who works for a hedge fund, and her company was approached by Madoff to invest with them. And she works in the [compliance] department, and she said: "OK, ... let me see the statements. Let me see the transactions." And they said, "Well, Mr. Madoff works in kind of an antiquated way." So I'm surprised that that was still going on at that level.

I mean, it's so easy these days to perpetuate a fraud with something that looks more impressive, but here it looked so unprofessional. And apparently that was going on even years later. And that's why I don't understand how could they not question any of these things. It doesn't look like a normal statement.

[Did they get the statements regularly or did Walter have to ask for them?]

Walter had to ask for those statements. ...

So tell me a bit about the marketing machine that was Fairfield Greenwich. What exactly was this marketing machine doing?

It wasn't so much a marketing machine. To me, a marketing machine means that you have training, and you have people who are specifically trained to sell a product. It was all part of the social/business networking that Walter was doing, and eventually his sons-in-law also. ...

He would show them the returns on this fund and that fund, and then he would show them, ... if they invested, what type of reports they would get. And [there] would be, again, no letterhead, nothing, not even a cover sheet. But it managed to work for them.

And you're at this stage no longer making trades, because you have Bernie supposedly doing the trades?

Exactly. ...

Did you have any visibility then as to the kind of returns that were coming in and the amount of people sending checks and checks being sent back for the money that was being invested in Madoff? I mean, it was billions of dollars.

At that time, it wasn't billions of dollars. ... There actually were very few checks that were being processed in house. Most of the money was being transferred by wire. Remember that Walter's thing was creating these funds for offshore investors. ...

What was Citco?

Citco is a corporate services [firm], banking for offshore investors. They have a lot of places in the islands. ... Basically, they were doing all of the banking. They were sending out wire transfers for commissions; they were taking in money from investors; they were wiring money to Madoff and to anybody else where there was an investment. ...

And was there an attempt to diversify the fund and find other managers?

They did have other funds, and that's what Fairfield International was all about, and Fairfield Sentry. And they did have a few other funds. ... [But] they realized that the money was -- or what they thought was the money --was with Madoff. And so that's the one that they really pushed. I don't know what the other monies -- I think $7 billion -- was invested in.

So most of the money was invested in Sentry from the beginning? That was their cash cow?

No, I wouldn't say most at that point, but a good part of it, probably about 50 to 60 percent perhaps. ... It grew probably toward the end of the '90s. ... I don't remember exactly when Madoff came into the picture, but ... probably about a year later is when Andrés [Piedrahita] had merged his Littlestone Associates with Fairfield Greenwich Group. ...

Andrés Piedrahita, [Walter Noel's son-in-law] -- can you recall the first day you met him ...?

I don't remember the first day and exactly when I met him. When he and Corina were dating, Corina let it out that her parents were not that impressed with him. But she loved him, and she kind of tried to be quiet until they finally accepted the fact that this was the man for her.

He was very, very gregarious. He's a good-looking man, and he's fun; he's charming. And I think that's his biggest appeal. And Corina is a little bit more realistic, down-to-earth. But it was like being taken for a ride with him. At least that's the way I saw it. ...

They were both very socially ambitious. They loved fun. They loved glamour. They got a charge out of saying, "We're going to France for a wedding," instead of saying, "I'm going to New Jersey for a wedding." ...

For example, when they bought the house in Greenwich, naturally they had a nanny for their kids. They bought the house in Greenwich because Alexander was on the way, and he [Andrés] wanted to have all of the servants, any servants that they have or would have, to be in uniform. ... This was the thing that he really wanted to impress people with. ...

So the marketing team was essentially the family? ...

The family and some of Andrés' friends, and ... Corina.

Describe this bunch of salesmen. Where did they come from?

... Andrés was the first son-in-law who joined, and he brought a lot of people. ... Then the other sons-in-law started to join the firm. Philip Toub actually joined the firm before he got married to Alix. He didn't really have a job before, or nothing that was really very lucrative. ... And then eventually Yanko [Della Schiava]. And Matt Brown had his own investment firm, his own hedge fund. And then he joined. The only one who stayed out of it was Marco Sodi, who was Ariane's husband. ...

Was this unusual, a family business?

Not at all. It's not exactly unusual for somebody who starts a business, especially something that is thriving, to have his nearest and dearest, because who else would he trust? They want to continue the family, the businesses. There was somebody that was in it for Walter.

Walter was not the type who could retire, whether he wanted to or not. Remember, he had been refinancing. By the time he was 65, he still had a lot of debt because of the homes that he owned. And that was before he bought the last two homes.

And are the sons-in-laws finance experts? Did they have MBAs from Wharton School of Economics?

I don't think so. I think that would have been mentioned. ...

Did anybody understand what the split-strike conversion was?

Not at all. Not at all. That's one of the reasons why they had a hard time selling Fairfield Sentry in the beginning, because nobody understood this investment strategy. And it was not until they saw that the investment portfolio looked legitimate that they said, "OK, let's invest in it." ...

The split-strike thing, I don't think they really questioned, as long as they saw returns coming in. ...

Did you understand the split-strike conversion?

No, I did not. ...

But you want to know something? This almost set the stage for everything else that's been going on in the fall of the financial markets; that there were all sorts of investment strategies [and] creative financing and things that people could not explain then, but they got into it because they kind of figured, "Well, if I don't do it now, I'm going to lose out."

Do you think that they were asking questions of Bernie?

Absolutely not. For them, what you see is what you get. And if somebody lived well, lived in a nice home -- and Bernie's apartment apparently was worth God knows how many millions back then, and certainly multimillions now -- and they drove a fancy car, and they dressed well, and they ate at expensive restaurants, it was a given: These people are rich.

But it wasn't like you would hear Walter Noel on the phone with Bernie Madoff, asking him about how it was going that month?

How it was going, yes, but certainly no deep questions. I mean, they didn't need to know the details. It's like too much information, don't bore me with the details. And they wouldn't have gotten it anyway. ...

In your time, did Bernie Madoff ever come to Fairfield Greenwich, visit the office?

Never. Never. And we did have some visitors. We had some Swiss clients and we had Prince Pavlos of Greece come, because he was starting a hedge fund. And so I met him. But we never, never, never met Madoff. He never came here. ...

When you're looking at the marketing materials, Fairfield Greenwich claims that it did more in-depth due diligence than any other hedge fund.

Well, I know that there was absolutely no due diligence done when I worked for them. ... And we now know that whatever they had for a due diligence department didn't seem to do a very in-depth analysis. ...

They were charging a performance fee and a management asset fee. What were the things that they were promising? What were they charging?

They were charging 20 percent of the performance fee. That was considered their incentive for performance. You have a variation of that on Wall Street with everything, which is how these CEOs manage to get these huge bonuses, even though performance actually wasn't existing at that point.

But that's just the way it is. And people didn't seem to mind. And I don't understand why, because the returns were relatively meager for that 20 percent. But for whatever reason, they managed to convince people this was so important to them. And they were getting commissions as well.

... Do you know how much money they had under management in 1990?

... No, but it certainly wasn't a billion. It didn't even hit $1 billion then.

When did it hit $1 billion?

That was after I left.

So you don't think they were that big in the early '90s --

Definitely not. It was really the late '90s when things really started to accelerate. ...

How much money did you have to have to get into Fairfield Sentry?

... All you needed was $100,000 to get into Fairfield Sentry or Greenwich Sentry. By today's standards with other funds, that's really very, very little money. It's a very tiny entry fee. ...

What about the operation itself? Was it full of accountants that were comparing Madoff's returns to what the stock market was [doing]? ...

There was absolutely no verification of what Bernie's statements were. Basically, we just plugged the numbers in, and we used whatever the NAV [net asset value] was for the month. There was absolutely no verification. There were no accountants there, except for somebody named Ed Schecter who would come once in a while. But he certainly didn't do that kind of accounting. It was just basically the taxes and the general accounting. It was nothing that was really deep.


It's a very good question. ... I don't think that Jeff and Walter wanted anything too deep anyway. I remember talking to Jeff at that time I had started to transition into becoming a writer, and I said to him: "You know, you're doing really great stuff. Wouldn't it be great to, like, pitch stuff up to Forbes or Fortune or something like that?"

And he says: "No, no, no. I don't want too much attention being drawn to us. I don't want too many people calling." And that should have tipped me off, because most companies want more customers. The more customers they have, the more money they make. It's wonderful. And if they don't have the support staff, they can always hire more people. It's a great problem to have. But they didn't want that kind of problem. ...

And when you're sitting there with these Bernie Madoff statements that would come in every month, [what was listed in the portfolio]?

It was a very conservative portfolio. ... They were companies that people heard of. They were Fortune 500 companies. There was nothing that would raise any eyebrows. And at the end, there was some sort of options. And that's not exactly uncommon in any portfolio, but it was certainly nothing that would cause any concern.

Have you heard that he went to cash every once in a while? Did you understand that?

Yes, I did know that they went to cash, and that was one of the selling points. This guy knows what to do. He's got a really good pulse on the market, and there's times he thinks you shouldn't be investing in the market, so you just put it in cash. And that's one of the things, again, that people felt very comfortable with him. They didn't think they were going to lose their money.

If he was invested in cash, what would you see on a statement?

There would just be a money market fund. But that's certainly standard in the industry. ...

The year 1992, do you remember Bernie being in the headlines?

No, I don't.

So the 1992 investigation of Avellino & Bienes [accounting firm] didn't -- there wasn't a buzz in their office?

None at all. There was, but no concern.

And do you remember the MARHedge report (PDF) and the Barron's article on --

No, I don't. ... As I said, Walter and Jeff did not seem to be too concerned with the details on that.

... How were they keeping up on the market?

Oh, we got The Wall Street Journal and The New York Times, and they would get Fortune and Forbes, and they would read things like that. But they were not money managers, really. I mean, yes, trading whatever Value Line says, "This looks like a really good pick," is not the same as actually managing money. There's a big difference. ... I don't mean to put down anybody who sells mutual funds, but they were selling somebody else's product.

And making a lot of money.

And making a lot of money. It's a structure that their clients seemed to agree to and didn't balk, as long as they were getting good returns.

How much money are we talking about?

When they had money there? I know that they had $50 million -- not necessarily in Fairfield Sentry but in various investments from Walter's big client. And I don't know the part of what Andrés had, because I didn't see his client registry, but they probably had, like, $7 [million], $8 million in Fairfield Sentry. ...

Of their own personal wealth.

Of their own personal wealth. I don't remember their investing their money at that point in with Sentry. They only put their clients' money there. ...

So where were they investing their profits? I mean, where did Walter Noel have his money?

I don't think they invested the profits as a firm, because they were constantly taking the fees and the commissions. I mean, this was a big thing. Corina was very much involved in this, and she would give me a list of names and amounts to send to Citco to have them process the wire transfers. That was their bread and butter.

So they would spend the money they got?


They weren't reinvested?

They did not reinvest it. I don't remember ever see[ing] -- but then I wasn't the accountant for the firm. ...

Did you put your money in Fairfield Sentry?

No, I didn't. ... That would be like inside information. I couldn't do that. It's illegal. ...

But did you want to?

No, I didn't. I know there's a part of me that wants to separate church and state from where you work. Just in case anything happens, you don't want your money tied up.

And as I said, I didn't feel comfortable. Something didn't feel right. I couldn't articulate it other than [that] my own returns in a similar portfolio were not as good as Madoff's. I mean, look, I'm not a financial genius, but I'm not that stupid either. ...

Do you think the Noel family, Jeffrey Tucker, knew that Bernie Madoff was a Ponzi scheme?

I do not believe for one nanosecond that they knew it was a Ponzi scheme at the time, not while I was there. Maybe, maybe, maybe, maybe, maybe later they thought something might be a little shady. But then, they had brushes with shady people before, and I think that as long as the returns were fine, they didn't think they had anything to worry about.

At least Walter and his family had way too much to lose. Actually, so did Jeff. Jeff's got this great apartment in New York. He had this horse farm up in Saratoga or somewhere in upstate New York. His wife needed a lot of money to shop, she didn't work. They had no children, they had dogs. One dog anyway, a poodle. They had too much to lose. Why would they want to jeopardize that?

I don't think that they knowingly tried to defraud anybody. However, as stories break, you realize that they knew something wasn't exactly right.

And they didn't ask.

Don't ask, don't tell: That seems to be their unofficial policy. As long as the money comes rolling in, why ask? Why jeopardize something? ...

Somebody told me that the whole entire family lost [$60 to] $80 million. [Is that] a lot of money for this family?

Sixty million dollars is a hell of a lot of money for this family. People seem to assume that they were always rich, but they weren't always rich. And when Walter was about 65 years old, he had mortgages up the wazoo. They were constantly refinancing. They didn't own cars. …

... How did you find out [Madoff was arrested]?

I read it in the newspaper. And I was so shocked to realize that Fairfield Greenwich Group had so much money, and so much of it invested in Madoff. I remember they had really pushed that investment, but I did not realize it had climbed so high. When I used to look up the Web site from time to time, I was shocked at how many people worked for the firm. It's like, how did it grow so quickly? ...

Look into the money. It's very, very important, because the problem that has really been created from all this is not just that this was a Ponzi scheme, but that there's a trust that has been broken, and maybe irreparably. I know I certainly would be very, very reluctant to give my money to a money manager. I lost money in a mutual fund once, and I thought, well, this was just mismanagement. But now I'm beginning to wonder, do I trust anybody? All these CEOs who were taking huge salary compensations from companies that were bleeding, and then now the dividends have been cut -- this is public trust, and it's not there anymore. ...

posted may 12, 2009

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