Toomre Capital Markets LLC ("TCM") has been rather amazed by both the number of and the sophistication of the various individuals, institutions and charities that have been victims of the Bernie Madoff fraud. (Yes, under American law, one is presumed innocent until one either pleads guilty or is convicted by a jury of one's peers. However, given that Bernie Madoff apparently confessed to his brother Peter Madoff, his two sons, Andy and Mark Madoff and the FBI agents on the morning of his arrest, TCM is this particular scandal will henceforth forgo using the term "alleged".) Like many in the finance industry, TCM has been surprised that a fraud of this magnitude could have been perpetuated against so many investors for so long by a firm that flew relatively below the radar.

As TCM has written about previously in the post Update on Bernie Madoff Scandal and Feeder Funds, one of the keys to Bernie Madoff's fraud were the various "feeder funds" that in essence bundled investment monies from multiple investors and then deposited much, if not all, of those funds with Bernie Madoff. Apparently the five largest of these "feeder funds" were Fairfield Greenwich, Tremont Capital, Banco Santander, Bank Medici and Ascot Partners. Other "gate keepers" who apparently funneled funds to Bernie Madoff included Jerry Breslauer, Richard Spring, Bramdean Alternatives, Prospect Capital, Stanley Chais, Cohmad Securities Corp. , and Robert M. Jaffee (pictured to right in picture by Greer Gattuso/Palm Beach Daily News).

According to a December 21st 2008 article in The Boston Globe entitled Bernie Madoff's Man To See, Robert M. Jaffe, 64, of both Weston, Massachusetts and Palm Beach, Florida cut quite the figure, even in the rarefied world of high society in Palm Beach. "With his impeccably coiffed hair, a golf game to envy, and a $17 million waterfront mansion, he was a man to be seen. He was also the man to see, if you wanted in on a sure thing - Bernard L. Madoff's investment." Apparently Mr. Jaffe "relished his access to wealthy friends and investors at country clubs and charity galas" and hence attracted "an A-list of the powerful and famous, as well as his closest friends, family - and himself" to Bernie Madoff's fraud.

Mr. Jaffe served as a Vice President of Cohmad Securities Corp., a broker/dealer that apparently was set up primarily to bring in investment management clients for Bernie Madoff. In Palm Beach and Boston, Mr. Jaffe offered coveted access to the now infamous New York investment firm and apparently this MBA dropout functioned more as a symbol of the extraordinary wealth and status Madoff clients could achieve. Driving "a green 1954 MG TF British convertible, [Jaffe] seemed to find more success doing business on the golf course than in the boardroom. And it showed in his game: Jaffe was the club champion earlier this year at Palm Beach Country Club."

The article continued, "Massachusetts investigators are looking into questions such as whether Jaffe or his firm failed to protect investors they steered to Madoff. In an interview, Massachusetts Secretary of State William F. Galvin said he had subpoenaed Jaffe to better understand Madoff's operations. 'Maybe Mr. Jaffe didn't know' about the alleged fraud, Galvin said, 'but he certainly was a key player in getting people to invest.'"

Later in December 2008, Massachusetts Secretary of State William F. Galvin's Securities Division issued a subpoena for Robert Jaffe to appear for formal questioning about his relationship with Bernie Madoff. The date of that appearance was originally scheduled for Tuesday January 6th. However, that appearance was postponed for a week until Tuesday January 13th while Mr. Jaffe secured new legal representation. Mr. Jaffe is now represented by noted securities lawyer, Stanley S. Arkin, and (likely based on the advice of counsel) did not show up for the rescheduled appearance since he was ill and could not travel from Florida. Massachusetts regulators then offered to travel to Florida to take Mr. Jaffe's testimony on January 16th. However, that offer was refused.

As a result, on Wednesday January 14th 2009, Massachusetts regulators filed a complaint in Suffolk Superior Court that seeks to compel Robert Jaffe to comply with a subpoena that had ordered him to testify yesterday. In the complaint, regulators allege that Mr. Jaffe "has attempted and may further attempt to delay, hinder or avoid appearing." A hearing on the complaint is now set for January 21st at 10 AM in Boston.

One has to wonder what Mr. Jaffe might testify to when he eventually appears before these regulators. Will he claim that he too was duped by Bernie Madoff? Or will he invoke his Fifth Amendment right to avoid self-incrimination? Certainly what information, if any, he has will help regulators better understand how Bernie Madoff was able to defraud so many and apparently sophisticated investors of so much.

Toomre Capital Markets LLC looks forward to learning more about the activities of and what exactly Robert Jaffe knew as Bernie's "go to guy." Reader thoughts and comments are welcome.