Their Golden Years Just Became Dimmer

Effects of Madoff's Alleged Ponzi Scheme Have Pulled the 'Financial Rug' Out From Under Three Generations of a Family

The choice is really no choice at all: Either Ellen Siegler keeps working well beyond her planned retirement age or her mother, 98-year-old Sarah, who suffers from Alzheimer's disease, leaves her assisted living facility with no comparable place to go.

It's worse for Ellen's brother Irv Siegler. His home in Corning, N.Y., and other basic living expenses are covered, but the $781,000 he saved for his retirement is gone. And Ellen's son, now a junior at the University of Michigan? His parents had hoped to pay for law school so he could take a low-paying public interest job without worrying about debt, but that plan might be in jeopardy, too.

Although Ellen is affluent by any standard, Bernard L. Madoff's alleged $50 billion Ponzi scheme is rippling through three generations of her family as surely as the recession is devastating hundreds of thousands of people. She and her husband, Dev Barnes, 65, will not lose their home in Washington's Chevy Chase neighborhood to foreclosure or declare bankruptcy; in fact, none of her money was invested with Madoff. But her family is fundamentally altering its plans in an example of how the alleged swindle has reached beyond the very wealthy people who have received most of the attention so far.

"In one day, the financial rug was yanked out from under us," said Ellen, 64, an attorney with the Transportation Security Administration. "We're not rich, but we had carefully planned for retirement for many years, and now my mother cannot afford to pay next month's rent."

Madoff's client list, released by the U.S. Bankruptcy Court last month, does not distinguish between millionaires such as Larry King and someone like Sarah, whose last $300,000 is almost certainly gone. Its 13,567 entries include almost 250 from the Washington area, some of them charities and foundations. Collectively, the region's investors appear to have lost tens of millions of dollars.

The Sieglers are stunned by their losses but feel no sense of the shame others have expressed. "What do we have to be embarrassed about?" Irv asked. "We're victims -- the crime was committed against us. Madoff is the one who should be embarrassed for cheating so many people."

The Sieglers do not appear to belong on Madoff's client rolls, where it was not uncommon for individuals to have $10 million or even $100 million invested. For Sarah, who also has severe hearing loss and glaucoma, the money was paying the bills at the Aspenwood assisted living center in Silver Spring.

Yet in one respect, the Sieglers' Madoff story is similar to those of many of the multimillionaires on the list. It began on a golf course in West Palm Beach, Fla.

In the 1980s, Sarah and her late husband, Abe, retired to a tiny condominium in a Florida retirement community to enjoy a life of leisure in the sun. Abe was a high school dropout who worked for a handbag manufacturer in New York. He was too frugal to buy a house and spent less than $20,000 on the West Palm Beach condominium. One day on the golf course, a friend mentioned an investment opportunity that would earn modest but steady returns each year to supplement the Social Security checks he and his wife lived on.

Although wary of deals that sounded too good to be true, Abe thought it was a safe bet. He asked his friend to connect him to a banker who invested his money with Madoff, and soon he began receiving monthly statements chronicling his account's growth. Irv, a teacher, put about $30,000 in his own Madoff account in 1988.

Ellen and her husband considered doing the same but decided against it -- not because they thought they couldn't trust Madoff, but because Dev was worried about a conflict of interest. He worked for the Environmental Protection Agency, and some of the corporations Madoff invested in had lengthy pollution records.

"There were no red flags, and at that time, a 10 or 12 percent return was not particularly huge," said Irv, 63, now retired. "I was reviewing statements every month, and everything lined up to the penny. It's pretty amazing now that he could fake all that."

The day after Madoff was arrested in mid-December, Irv and Ellen were on the phone with each other by 6:30 a.m. Hoping against reason that there was some sort of mistake, Ellen sent a fax to Madoff's office, requesting a withdrawal from her mother's account, as she had many times before. This time, there was no response.

"There was shock and then denial," she said. "Every morning I woke up hoping it was all a bad dream. It took a while to realize it was really happening."

Since then, life has been a blur of government claim forms and a future of spending the money saved over 40 years on Sarah's needs instead of their own. Irv hopes to see a bit of his money returned, but because the family had regularly gotten some money from Sarah's account, they don't believe they will ever be reimbursed for the rest.

"We have to assume it's gone and plan based on that," Ellen said. "It's been a huge emotional load, but it's better than denial."

In January, Ellen and Dev, who is retired, met with their financial adviser to discuss whether they had enough money to pay Sarah's $5,000 in monthly bills without assistance from her Madoff account. The answer was unequivocal: Take her out of Aspenwood, the adviser said, and find an assisted living facility that accepts Medicaid. Next, they turned to a geriatric care consultant, who said that removing Sarah from her home of 12 years would have devastating effects on her health and mental state. Assisted living facilities typically do not accept Medicaid, and because Sarah is physically healthy, many nursing homes wouldn't take her.

After a family meeting, Ellen, Dev and Irv decided to ignore the financial advice and dig into their savings to split Sarah's bills. That means Ellen will not be able to retire in the next few years, as she had planned.

"It's like having a second child in college all of a sudden," she said. "But we had been planning for the first one practically since he was born, and we didn't get any advance warning on this."

Ellen and Dev are committed to insulating their only child, Ethan, from the effects of the loss. They still hope to contribute to his law school fund, but he will almost certainly have to take out student loans. Because he plans to enter public interest law rather than the more lucrative private sector, paying off the loans could take many years.

For Irv, who retired at 55, a pension and other savings will provide enough to live on. His Madoff investment, for which he saved every monthly statement over 20 years, was for traveling and upgrading his motorcycle collection, his two passions. He had withdrawn only small amounts from the account twice but planned to take about $50,000 a year beginning in 2010.

"I've never lived extravagantly, and I'm not going to start now," he said. "But I won't be able to pick up and visit friends in California all the time like I had planned."

Irv and Ellen agree that the silver lining is that their father is not around to see the results of his investment and that their mother does not know about the losses. "If she knew she couldn't pay for it herself, she'd pack up and walk out," Ellen said.