I was fleeced by Madoff

The financial guru's Ponzi scheme cost me 30 years of retirement savings. How could he do this to me -- and why did I let him?

Published January 7, 2009 11:57AM (EST)

I was standing in my kitchen wondering what to have for lunch when my friend Taj called.

"Sit down," she said.

I thought she was going to tell me she had just gotten the haircut from hell. I laughed and said, "It can't be that bad."

But it was. Before the phone call I had 30 years of retirement savings in a "safe" fund with a brilliant financial guru. When I put down the phone, my savings were gone and my genius financial guru, Bernie Madoff, was in handcuffs. I felt as if I had died and, for some unknown reason, was still breathing.

Since Madoff's arrest in December on charges of running a $50 billion Ponzi scheme, I've read many articles about how we Madoff investors should have known what was going on, how believing in Madoff was no different than believing there were WMD in Iraq. And I wish I could say I had reservations about Madoff before "the Call." I wish I could say I knew better about getting such consistently good returns, but I did not. Besides, everything I "knew better" about -- stocks, smart financial advisors, real estate -- had also proved disastrous: Our financial advisor embezzled a quarter of our money 10 years ago, I lost another third in the stock market during the boom times, and we bought our house at the top of the market and sold at the bottom. Considering that, Madoff seemed like a respite -- his fund showed occasional losses, along with small, steady gains. (I'm keeping a list of people who want to be notified of our next investment so they can sprint in the other direction. Feel free to add your name.)

It was always more important for me to find work that I loved than to be rich. I know this is a ridiculously privileged attitude since so much of the world must concern itself with getting food. But I was (and still am) one of the privileged: I've always had clean water, clothes to spare, enough to eat. And so I spent years washing dishes and being a maid so that I could write poetry. Then I spent more years as a sales clerk and an avocado-and-cheese-sandwich maker in a health food store so that I could write nonfiction. I lived out of the back of a station wagon, brushing my teeth and washing my face in public bathrooms so that I could keep writing. I started my first groups for emotional eaters, a topic about which I've written six books, in someone else's living room. I chose to do what I had to do for money so that I could do what I wanted to do for love. And when the money started coming in, when my book was on the New York Times Bestseller List, it was like getting a paper bag filled with Monopoly money. I had no idea what to do with it, no way of relating to the fact that I now had hundreds of thousands of dollars. Or, as James Grant, editor of Grant's Interest Rate Observer, says, "Insofar as there is a lesson in history, it's that human beings are not good with large sums of money, anything over $136."

Did I hear that diversification was smart? Absolutely. Did I choose to ignore that advice because I also got conflicting advice about Madoff being, as someone said, "the Jewish equivalent of T-bills"? Yes. I chose to find very smart people who (I thought) were as smart in their fields as I was in mine, and I chose to listen to them.

Since the Call, I have chanted the mantra of "How could you, why did you, what's the matter with you?" Another, even meaner version of this is, "It serves you right. You thought you were above it all, different than everyone else. Well, guess what, honey? You're not." I have also been eager to blame someone else -- anyone else -- for the mess I am in: my friend Richard, who offered to let my husband and me into his Madoff fund; my accountant, who encouraged me to put all my money in one place; my friends, who all did the same thing. Where does the blame end? My father taught me to take risks, to accumulate wealth. He said it didn't matter how I did it. But this was after 40 members of his family were killed in Auschwitz and his motto became, "God abandoned us. There is no such thing as morality, and it's every man for himself." Do I blame my father, who has been dead for eight years? Or is it Hitler's fault that I put my money into a Ponzi scheme?

Unlike many people who lost everything in Madoff, and unlike so much of the world, I still have money to live day-to-day. I am still teaching, and I am still writing, and there is still nothing else I would rather do. But still. I go to sleep at night oscillating between ranting about Madoff and being terrified that we won't be able to keep our house. Then I realize that, for me, the real suffering is not living without money; it's living with this rage. The devastation is horrible, but if I don't allow myself to feel this, then I can't learn what there is to learn. I will not see, for instance, that I participated in the fraud by being willing to close my eyes about what Madoff was doing.

I often asked Richard, the head of our feeder fund, how Madoff made such consistently good returns. Although Richard tried to explain it to me, it was clear he didn't know, either, because I'd leave our meetings still unable to explain to anyone else how it worked. But that didn't deter me. And so, rather than put my money where my values were -- into real things, real people, real companies -- I allowed myself to be part of this insane leveraging of money upon money. I allowed myself to be sucked into the belief that as long as I was giving away large chunks of money, as long as I was doing good work in the world, it was OK to participate in a venture that was not contributing to anything in which I believed. I engaged in the money split to which we as a culture subscribe: We say we believe in wind energy, but we put our money into oil. We say we believe in education and healthcare, but we put our money into advanced weaponry. We say we want to stop violence, but we allow genocide in Darfur. I can't change the culture's behavior, but I can change my own.

Over and over again, I've asked myself: Why didn't I secure the most basic of all things -- shelter itself? Why didn't I pay off my mortgage? And if I don't engage in blame, I see the answer clearly: because I believed in something else more -- I believed in accumulating. And when you believe in accumulating, you see what you don't have, not what you have. My relationship to money was no different from my relationship to food, to love, to fabulous sweaters: I never felt as if I had enough. I was always focused on the bite that was yet to come, not the one in my mouth. I was focused on the way my husband wasn't perfect, not the way he was. And on the sweater I saw in the window, not the one in my closet that I hadn't worn for a year.

Although I never would have chosen this path, and although it still feels terrifying at moments, I know I can never see the whole picture in the chaos of the moment. And sometimes, sometimes I am aware that there's an unimaginable, uncharted world on the other side of this loss, like stepping through the Narnia wardrobe.

On this side of the loss, there is the necessity -- the urgency-- of staying in the moment. This breath. This step. This splash of sun. The money I lost will never come back. But if I wander into fear -- what if my husband or I get sick and we can't pay the medical bills, what if there is an accident and we can't work, what will we do when we get old -- I'm lost, too.

By Geneen Roth

Geneen Roth is the bestselling author of seven books, including her latest, "The Craggy Hole in My Heart and the Cat Who Fixed It."

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Bernie Madoff Stock Market U.s. Economy