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How Did Stars Get So Swindled by Madoff?

Thu., Jan. 8, 2009 5:25 PM PST by Leslie Gornstein

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Didn't you once talk about how many people work for stars? If so many people work for them, how could a big celeb like Kevin Bacon get taken by financial advisor Bernard Madoff?
—Pubster, San Jose

Indeed, stars are excellent collectors of two things: money and people. Angelina Jolie prefers her person collection to come small and swaddled, but most other celebrities like to amass adults: assistants (anywhere from one to three per person) as well as multiple agents, nannies (three per child) and the like.

As for how an alleged fraudster financier like Madoff could penetrate all those celebrity toadies—he is accused of bilking millions from Bacon, his wife, Kyra Sedgwick, Steven Spielberg and many others—the answer may surprise you...

And that's this: When it comes to money management, stars and regular people pretty much do things the same way: from an incurious distance.

"Yes, there are lots of people working for celebrities," financial planner to the stars Michael Eisenberg explains to me, "but they are all getting the same information, or lack of information, as everyone else. Doesn't matter if there's 1 eyeball or 40 eyeballs involved."

Yes, Eisenberg says, before feds charged Madoff last month with directing an alleged Ponzi scheme, there were early signs that the investment wizard might be a little...different.

For example, Madoff released his own financial statements instead of funneling them through a big firm like Fidelity, Eisenberg says. But then again, for a while it looked like Madoff was making tons of money for his glitzy clients. And there's nothing about a celebrity's entourage that would make them any more or less suspicious in those circumstances, Eisenberg says.

"If your best friend says this guy has an investment firm and he has been showing returns 10 to 12 to 13 percent on an annual basis—well, is this guy actually doing the investing? Does it matter?"

I know, right? Especially when you, as the celebrity, have magazines to pose for and lunches to take and good meetings to have.

As for exactly how much Madoff allegedly stole from clients, it's still not clear. The Bacons have not said how much is missing. However, they may have to hold a personal auction to make up for the loss. I'll keep you posted.

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