By Kathleen M. Howley
Sept. 10 (Bloomberg) — Bernard Madoff slept there. That notoriety may help sell the felon’s Manhattan penthouse and waterfront homes in Palm Beach, Florida, and Montauk, New York, as the government seeks to recoup losses from the largest Ponzi scheme in history.
“White-collar crime, if it’s big enough, creates the kind of hype that ultimately could help a property realize more than its market value,” said Richard Maltz, vice-president of David R. Maltz & Co. The Plainview, New York, auctioneer in June and July sold three properties owned by Marc Dreier, who’s serving 20 years in prison for defrauding hedge funds.
Madoff’s three U.S. homes, along with three boats and personal items, are being sold by federal authorities to reimburse victims of the $65 billion fraud. Yesterday, the U.S. Marshals Service picked Jim McCann and Burt Minkoff of the Corcoran Group to broker the sale of the Palm Beach property and Anne Corey and Serena Boardman of Sotheby’s International Realty to handle the Manhattan penthouse. No prices were set.
Last week, Madoff’s 3,000 square-foot (279 square-meter) house on the eastern tip of New York’s Long Island, went on the market for $8.75 million. In June, the U.S. Department of Justice estimated its value at $7 million.
“We’re obviously looking for maximum proceeds here to give to victims who lost so much from Bernard Madoff,” said Roland Ubaldo, a deputy U.S. Marshal in New York.
Madoff, 71, pleaded guilty in March to 11 counts of fraud and money laundering. He was sentenced to 150 years. He isn’t appealing.
In Dreier’s case, his 3,000-square-foot apartment at One Beacon Court on Midtown Manhattan’s Lexington Avenue sold for $8.2 million, about 15 percent more than the auctioneer had estimated, said Maltz. Dreier was convicted for defrauding the funds of more than $400 million and stealing money from clients. Dreier lived in the apartment while under house arrest before he was jailed in July.
“International notoriety only helps the sale, as long as the owner didn’t commit a violent crime like murder,” said Maltz. Dreier’s two Southampton properties sold for $6.6 million and $3.8 million at a June auction, Maltz said.
Notoriety doesn’t always lead to higher prices. Merrill Lynch & Co.’s former chief energy trader Daniel Gordon, who pleaded guilty to embezzling $43 million, auctioned his Connecticut home in 2004 for $3 million. It was $600,000 less than he paid two years earlier for the 22-acre property in Old Lyme.
The estate, with basketball and tennis courts, had been the weekend getaway of Gordon, who was 24 years old when he oversaw Merrill’s global energy markets unit in 2000.
WorldCom Inc. agreed in May 2003 to sell a Canadian ranch once owned by former Chief Executive Officer Bernard Ebbers for $68.5 million. In 1998, he paid C$100 million, $68 million then. Ebbers is serving a 25-year prison sentence for leading an $11 billion fraud.
Madoff’s properties are being sold by real estate brokers rather than auctioneers. The ground floor of the Montauk property has 20-foot-high vaulted ceilings, a living room with a pebble-stone fireplace, and a swimming pool steps from the Atlantic Ocean, according to video footage made available to Bloomberg News. The master bedroom on the second floor overlooks 182 feet of beachfront, said Joan Hegner of Corcoran Group, the listing agent. Federal agents seized the home in July.
Madoff’s Manhattan penthouse at 64th Street and Lexington Avenue occupies two floors in a building on the Upper East Side. It was seized July 2 by federal marshals who ordered Madoff’s 67-year-old wife, Ruth, to leave. The government put the apartment’s value at $7.5 million.
The Palm Beach property has a private dock on the shore of Lake Worth, a lagoon that opens to the Atlantic. It was seized April 1 by agents from the U.S. Marshals Service. The Justice Department estimated it was worth $7 million.
“People will be underwhelmed when they see the Palm Beach house — the location is great but the house is so dated it will probably be knocked down,” said David Fite of Fite Shavell & Associates Palm Beach Real Estate. “A lot of people would love to see that happen to Bernie Madoff’s home.”
The 6,475-square-foot house, built in 1973, has five bedrooms and seven bathrooms, according to Palm Beach County property records. It was bought in 1994 for $3.8 million in Ruth Madoff’s name, according to the deed.
Palm Beach Notoriety
Previous owners of the property include Herbert and Roxanne Pulitzer, whose 1982 divorce trial scandalized local residents with details of drug use and adultery at the estate.
The Madoff property sales won’t include the art, furniture or items used to decorate the homes. Those assets were forfeited to federal authorities and eventually will be sold.
Madoff’s three boats, including a 55-foot yacht named “The Bull,” will be sold at auction on Nov. 17 at the Fort Lauderdale headquarters of National Liquidators, a boat resale company.
“We’ve heard from several potential bidders who are interested in both the quality and notoriety of purchasing a ‘piece of history,’” Matt Amata, vice president of National Liquidators, said in an e-mailed statement.
Madoff’s crimes have generated international interest that will widen the pool of potential buyers, Fite said. A Google Internet search using Madoff’s name resulted in 33.2 million Web pages, compared with 21.6 million results using the name Edward Kennedy, the U.S. Senator who died last month.
“There’s a lot of baggage associated with the Madoff properties because of the notoriety of the owners,” said Fite. “Whether that leads to a higher price remains to be seen.”
To contact the reporter on this story: Kathleen M. Howley in Boston at firstname.lastname@example.org.
Original story can be found here.
Last Updated: September 10, 2009 00:01 EDT