The swindler and the philanthropist: A tale of two men

Five hundred and forty-five million dollars. Fifty billion dollars. Money that most people could not fathom possessing, much less losing in the blink of an eye.

But Carl Shapiro and Bernard “Bernie” Madoff aren’t most people.

Despite the vast difference in their current lives – Madoff serving out a life sentence in North Carolina’s Butner Federal Correctional Complex while Shapiro, now 97, still hands out grants and endowments – they have much more in common than meets the eye.

Although the two men were born 25 years apart, Shapiro in 1913 and Madoff in 1938, they became close friends as adults. Both Jewish, both successful, both had homes in Palm Springs as well as the northeast and both made waves in philanthropy circles. One of Shapiro and wife Ruth’s daughters, Ellen, married a close associate of Madoff’s, Richard Jaffe, further uniting the two families.

Carl and Ruth Shapiro (on right), with daughter Ellen and Robert Jaffe (left)

As they matured, it seemed that both Shapiro and Madoff were on the path to greatness, both financially and philanthropically. Shapiro built his fortune on the women’s clothing brand Kay Windsor, which he later sold to Vanity Fair. Then, through investments largely handled by Madoff, Shapiro continued to grow his millions to over $1 billion. He and his wife founded the Carl and Ruth Shapiro Family Foundation in 1961 and established themselves as some of the leading Boston philanthropists.

The foundation, which lists its grant-making interests as “Arts and Culture, Education, Health and Hospitals, Jewish Causes and Social Welfare,” has over 40 years given millions to Brandeis University, the Dana-Farber Cancer Institute and other Boston area hospitals, the Breast Cancer Research Foundation, Jewish Federation of Palm Beach County, Combined Jewish Philanthropies of Greater Boston and many other organizations.

Meanwhile, Madoff was enjoying success of his own, on Wall Street, as his investment firm Bernard L. Madoff Investment Securities LLC grew to rank in the top 1% of US securities firms. An archived copy of his firm’s website proclaims that Madoff Investment Securities LLC, founded after Madoff left law school, was different than other firms because “the owner’s name is on the door.”

“In an era of faceless organizations owned by other equally faceless organizations, Bernard L. Madoff Investment Securities LLC harks back to an earlier era in the financial world[…]” the website stated. “Clients know that Bernard Madoff has a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm's hallmark.”

Madoff, too, was making his name by donating millions to various charities and causes. Both Madoff and Shapiro were on top of the world, or so it seemed. Soon, though, it would all come tumbling down.

In July of 2008, the multi-million Carl J. and Ruth Shapiro Cardiovascular Center opened at Brigham and Women’s Hospital. It was a peak moment for the Shapiros and their foundation. The center is the most advanced facility for cardiovascular research and medicine in the world, the first Leadership in Energy and Environmental Design (LEED) certified hospital building in New England, and hosts one of the foremost cardiovascular teams available.


However, just five months later, Shapiro, his investor and thousands of other Americans all received a terrible blow. On December 11, 2008, Madoff was arrested and charged with securities fraud. In the days that followed, a huge Ponzi scheme was unraveled. Madoff had lost his clients $50 billion.

Madoff's mug shot

Investors all over the country lost significant amounts of money. Jewish organizations and nonprofits were particularly affected, as many of them entrusted their entire endowments to Madoff. The Shapiros have stated they lost $545 million of personal money, with the foundation itself losing nearly half of its assets, some $145 million.

The family and foundation attempted to distance themselves from Madoff, releasing a statement. "Though I have had a personal relationship with Mr. Madoff for more than 50 years, any decisions I or my family foundation made to invest with him were based on his apparent business acumen, sense of integrity and commitment to sound investing principles,” Shapiro said. “I also want to be abundantly clear that at no time did I ever formally introduce individuals as potential investors with Mr. Madoff. In fact, we agreed when our friendship began that I would not introduce him to potential clients. I wanted to avoid putting him in the awkward position of having to say no to a friend of mine."

After losing nearly half their assets, the Shapiro Foundation was forced to tell 80 Boston nonprofits, as well as several in Florida, that its wallet was closed for 2009. A benignly-worded statement released by the Foundation announced, “The Carl and Ruth Shapiro Family Foundation regrets to announce that it will not award any new grants or make any new capital pledges in 2009. The Foundation made this difficult decision as a result of losing a significant portion of its assets due to the fraudulent actions of Bernard Madoff, head of Bernard L. Madoff Investments, LLC. At this time the full impact of the Foundation’s financial losses is still being determined.”

Still, the foundation fulfilled its promise to honor its existing grants, totaling nearly $13 million. Information for 2010 is not publically available.

On March 12, 2009, Madoff pled guilty in court to eleven offenses. He was charged with counts of securities fraud, investment advisor fraud, mail fraud, wire fraud, international money laundering to promote fraud in the sale of securities, international money laundering to conceal the proceeds of fraud in the sale of securities, money laundering, making false statements, perjury, making a false filing with the Securities and Exchange Commission and theft from an employee benefit plan.

That summer, on June 29, 2009, Madoff received the maximum sentence of 150 years in federal prison, where he remains today with a release date of Nov. 14, 2139. His assets, including multiple homes, were sold to begin the long process of paying back his victims.

At Madoff’s sentencing, several of the people who lost their life savings told their stories. One man’s testimony illustrated just how far Madoff had fallen from an esteemed businessman and philanthropist. “What can we say about Madoff,” said Burt Ross. “That he was a philanthropist, when the money he gave to charities he stole from the very same charities he ultimately devastated; that he was a good family man when he leaves his grandchildren a name that mortifies them?”

Ross became increasingly heated, adding, “What Bernard L. Madoff did far transcends the loss of money. It involves his betrayal of the virtues people hold dearest – love, friendship, trust – and all so he can eat at the finest restaurants, stay at the most luxurious resorts, and travel on yachts and private jets. He has truly earned his reputation for being the most despised person to be in America today.”

Other victims called Madoff inhuman or “a beast,” or told the judge, “The man sitting in this courtroom robbed me. […] He discarded me like road kill.” Michael Schwartz summed up the sentence Madoff would receive, imploring, “Your honor, I say this without any malice […] I only hope that his prison sentence is long enough so that his jail cell becomes his coffin.”

Cartoon of Madoff after sentencing, via toonpool.com

Although federal authorities investigated Shapiro due to his close relationship with Madoff, to determine if he had any prior knowledge of or part in the fraud, charges have never been made against him and the family has largely escaped the kind of scathing hatred Ross exhibited toward Madoff. The Shapiros and Shapiro Foundation have been able to continue on without extensive damage to their family name.

At least, until recently. Just days ago, it was announced that Shapiro will be forced to forfeit $625 million to authorities, more than he allegedly lost in the collapse of Madoff’s firm and more than he and Ruth are currently worth.

Ruth and Carl Shapiro

In a statement released by the Department of Justice and the US Attorney for the Southern District of New York, Manhattan U.S. Attorney Preet Bharara said: "For almost 40 years, Carl Shapiro invested hundreds of millions of dollars with Bernie Madoff but withdrew far more. By requiring him to forfeit this money -- more than he is currently worth -- the Government and the SIPA Trustee have sent an important message: those who profited as a result of Bernard Madoff's fraud should disgorge those profits, which are rightfully other people's money.”

Bharara promised investigators will continue to track down the profits of Madoff’s scheme to return to the rightful owners, adding “And, to be clear, the criminal and civil forfeiture investigations relating to the Madoff fraud are very much ongoing."

Reiterating Bharara’s sentiments, FBI Assistant Director-in-Charge Janice K. Fedarcyk added, “The investigation of prodigious fraud, like that of Madoff, remains one of the FBI's top priorities. From robbers to fraudsters, the FBI will continue to bring to justice crooks who steal."

It is too soon to know whether Carl Shapiro and his family will have to lose their homes and property as Madoff did to pay back the government, or whether their family name will be forever written next to Madoff’s in the history books, or if their charitable Foundation will stand the $625 million test put before them.

Two men, two billionaires, two philanthropists. The world has labeled one a treacherous swindler, the other, a generous benefactor. At least for now.


By Kathleen Morrison



The Carl and Ruth Shapiro Family Foundation's website can be found HERE.
For information on the Shapiro Cardiovascular Center at Brigham & Women's Hospital, go HERE. 
To view an archived copy of Madoff's investment securities firm website, go HERE.
For documentation of US v. Madoff and related cases, go HERE.
To read a transcript of Madoff's guilty plea, go HERE.
To read a transcript of the sentencing and victim's stories, go HERE.
For details on Madoff's prison facilities, go HERE. 

For financial information on The Carl and Ruth Shapiro Family Foundation, go HERE.

To view the press release announcing Shapiro's $625 million forfeiture, go HERE. 

Read the latest from the Boston Globe about Shapiro HERE. 

For up-to-date news on Madoff and the payouts, go HERE.

Some photos courtesy of the Boston Globe and Boston Herald websites.