Merkin, Madoff and Dwek make Forward Top 50 in Scandal Category

That was the scandalous year that was. So bad, the Forward added a category for Scandal and had no trouble deciding who ought to be featured. Some scandals quickly cool and fade away. These will linger and simmer for years.


Losing: Convicted Ponzi schemer Bernard Madoff and financier and money manager J. Ezra Merkin.

Bernard Madoff
Bernard Madoff leapt this past year from relative obscurity to prominence: He’s probably the most hated landsman in American Jewish history. Meyer Lansky had his gang; the Rosenbergs had their comrades and supporters. Madoff, 71, has only his fellow inmates in the North Carolina federal prison where he’ll spend the rest of his life. Madoff, who founded his own Wall Street investment firm in 1960, pleaded guilty in March to operating what has been called the largest financial scam in history. He admitted that he had spent years running a gigantic Ponzi scheme, taking cash from new clients to pay off earlier ones without ever investing their money. As a result, thousands of ordinary people lost their life savings. “I knew what I was doing was wrong, indeed criminal,” he said in his plea allocution. Madoff contended that he began his scam in 1991 and acted alone. However, others — including his brother, Peter; his sons, Mark and Andrew; and a niece, Shana — are suspected of involvement. Also suspected: hedge-fund manager J. Ezra Merkin, a prominent Jewish philanthropist who had associated with Madoff since the early 1990s. Neither Merkin nor Madoff family members have been charged, and all have denied any wrongdoing. Madoff’s scheme collapsed late in 2008, just months after the financial crisis hit and new clients dried up. It is estimated that clients lost a staggering $65 billion (at least $45 billion of it in paper losses from fake profits). Among the hardest-hit were Jewish institutions he had worked with, including Yeshiva University and Hadassah. Several private foundations collapsed altogether, in turn wreaking havoc among the charities they supported. The only people left with kind thoughts of Madoff were the late-night comics who have turned his name into a perpetual punch line.

J. Ezra Merkin
When the Madoff scandal broke last December, questions arose about the actions of J. Ezra Merkin, scion of a family of major Modern Orthodox philanthropists, chairman of GMAC, and money manager to a slew of prominent Jews and Jewish institutions. Investors in his funds claimed to have had no idea that Merkin, 55, had entrusted $2.4 billion of their money to Bernard Madoff. This year, New York Attorney General Andrew Cuomo, New York University and New York Law School are among those who are suing Merkin for his alleged role in funneling money to Madoff. They allege that Merkin got rich off investment fees while feeding billions of dollars from non-profit endowments and individual fortunes into Madoff’s billowing Ponzi scheme. Since the scandal broke, Merkin has lost control of his hedge funds, stepped down as chairman of GMAC, resigned as president of the prestigious Fifth Avenue Synagogue, and sold off his extensive collection of paintings by the artist Mark Rothko. He also resigned his seat on the board of directors at Yeshiva University, where the influential Rabbi Joseph B. Soloveitchik once held a chair sponsored by Merkin’s father, Hermann. But some question who is truly at fault here — Merkin or the credulous investors who didn’t question their steady returns. And what about the Ramaz School and Y.U., which saw no conflict of interest in allowing Merkin to serve on their boards and, in Y.U.’s case, on its investment committees, while allowing him to “manage” — and earn fees on — millions of dollars worth of their donated income? As the legal process unfolds, Merkin’s apparent role as a conduit between Madoff and Jewish institutions is likely to take center stage.

Solomon Dwek
No one could have predicted Solomon Dwek’s spectacular second act. Dwek, the son of a prominent Syrian rabbi, was disgraced in 2006 after bouncing a check for $25 million. He was charged with bank fraud and forced into bankruptcy after his real-estate business went bust. His failure as a real-estate mogul led directly to a new career, as a cooperating witness in a sprawling FBI sting. This summer, Dwek emerged as the informant whose secretly recorded conversations led to the arrest of 44 prominent rabbis and politicians in New Jersey and Brooklyn on charges ranging from corruption to money laundering to organ trafficking. Pages of criminal complaints chronicle the exploits of “the CW,” or cooperating witness, reportedly Dwek, as he allegedly brokered payoffs and kickbacks. He is said to have been given an Apple Jacks cereal box filled with $97,000 as part of a money-laundering scheme. Those charged in the investigation include three New Jersey mayors, two state assemblymen and five rabbis. The arrests reshaped New Jersey politics, and exposed Dwek’s insular Syrian Jewish community to unwanted public scrutiny. Many Syrian Jews reacted angrily, denouncing Dwek for allegedly informing on his own people. Dwek, 36, has kept an understandably low profile since the arrests, but his work will keep federal investigators and prosecutors busy for years to come.

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