After shock, Madoff fraud victims struggle to cope

BOSTON (Reuters) – As the shock wears off, hundreds of angry individuals are struggling to come to grips with how they fell victim to disgraced financier Bernard Madoff’s allegedly $50 billion fraud, according to psychologists.

“People are horrified. They are frightened of being exposed. They don’t know how to go on,” said a Boston-area psychologist who asked not to be identified because he works with many wealthy patients who said they were afraid of being identified in public.

Experts said that with so many millionaires, charity directors and hedge fund managers trusting their fortunes — often for decades — to a man that many top-tier endowments and advisers had avoided, the case could become a classic study in groupthink.

Many duped investors have been left with a sense of betrayal so strong that it will cause severe psychological scars, said Dr. James Grubman, a psychologist who counsels wealthy families in the Boston area struggling with the emotional issues of having money.

There are separate questions about Madoff himself and his psychological makeup, experts said. For one, how could a man who operated what prosecutors have called the world’s biggest Ponzi scheme, easily cheat friends — people with which he celebrated birthdays and weddings.

For years, Madoff moved effortlessly among the moneyed elite in Palm Beach, Boston, New York and the French Riviera, discreetly talking business at clubs, and charming dowagers at charity balls, according to people who know him.

Believing in the 70-year old investor, long revered for delivering steady, consistent returns, was easy, lawyers and psychologists agreed.

“He gave his investors a lot of intangibles,” Grubman said. “He allowed people to feel they were part of an exclusive club, part of the ‘in crowd’ and ultimately deemed worthy of investing with him.”

One family who Grubman counsels lost $12 million with Madoff, and will now have to sell their mansion in an affluent Boston suburb and take three children out of private school, he said.


Armed with a long list of references, Madoff carefully created an aura of demand that distinguished him from other investment advisers who often bullied investors for money.

Wealthy families jockeyed for a chance to invest their money with Madoff, the man who, in one example, helped increase clothing manufacturer Carl J. Shapiro’s fortune.

Shapiro, an icon in the Jewish philanthropic community, pledged $27 million to support cancer care at the Dana-Farber/Brigham and Women’s Cancer Center this year, making his latest gift to local hospitals and museums.

Shapiro has lost about half a billion dollars through Madoff’s funds, people familiar the matter said.

“It didn’t matter that Madoff didn’t have Harvard University or Duke University as clients,” said Dr. Gary Tobin, president of the Institute for Jewish & Community Research, a think tank. “He had everyone else.”

Now, “people feel duped, violated, and hysterical. Those are the emotions I am seeing,” said Scott Berman, a partner at law firm Friedman Kaplan, who is representing people whose money vanished when hedge fund firm Fairfield Greenwich invested with Madoff.

“I have been asked by investors, ‘Was this guy insane?,” said Grubman. While he never met Madoff, Grubman said he suspected “this was likely not a mental illness but is rather more consistent with being a sociopath.”


Madoff also apparently succeeded in compartmentalizing the different parts of his life, psychologists said, noting that people who mastermind long-running frauds can often split off their outward person from internal stress.

“I don’t think anyone knows what really made Madoff tick,” Tobin said.

“Either he operated from the delusions of pathological gambler who thought he could make it up in the next round and wasn’t really cheating anyone, or the other explanation is that he really is an evil guy,” Tobin said.
(Tags: Bernard Madoff, Scandal)