Bernard Madoff built a major investment shop largely on smoke and mirrors -- convincing investors that his fund was a safe and consistent return when it was mostly a house of cards.
And yet the relationship between Bernard L. Madoff Investment Securities and its investors wasn't entirely one-sided. One of the greatest recipients of the Wall Street veteran's largesse -- beyond those who cashed out before his fund was exposed as a scam -- was the Democratic Party, whose candidates, committees and causes received thousands of dollars in donations.
The Democratic Senatorial Campaign Committee received $100,000 in donations from Madoff during the past four years. Sen. Chuck Schumer, who headed the DSCC until stepping down this year, separately has received $39,000 from Madoff since 1998.
Will the committee return these funds -- taken, in part, from duped investors? Matt Miller, a spokesperson for the DSCC, replied that "it is under review."
Or take, for example, Sen. Frank Lautenberg. The New Jersey Democrat left the bulk of his family's charity -- which donated to causes like breast cancer research, the NAACP, and performing arts -- to Madoff's stewardship, his foundation's lawyer told the Associated Press. But as of now, there is no telling where the funds went and what is left. The Senator, one of the wealthiest members of the Senate, received a $7,600 donation from Madoff to his Victory Fund in 2007 -- a pittance compared to the cash his charity likely lost.
An aide to Lautenberg said that the office would be "ridding ourselves of the contributions" but had not yet determined the best method of doing so.
Other Democrats who received Madoff money include Jeff Merkley, the incoming Oregon Senator, who took in $2,300 in donations this past April; Ron Wyden, the Oregon incumbent, who received $4,000 in donations in March 2003; Dick Gephardt, the former Speaker of the House, who got a check for $2,000; and Rep. Ed Markey, who was sent two checks of $2,000 each in June 2004.
Peter Madoff, Bernard's brother, was even more lavish with his contributions, spending more than $66,000 on candidates and committees in the past decade, including to Sens. Hillary Clinton ($2,300 in 2008, $4,600 in 2007), Chuck Schumer ($6,000 in total) and Ron Wyden.
Taken as a whole, these donations say little more than that the Madoffs were Democrats -- though there are a scattering of Republican officials to whom they donated. Certainly it would be beyond reasonable to expect political figures in Washington to have known that Madoff was duping investors when very few on Wall Street were raising alarms. For figures like Lautenberg, moreover, the loss of cash from his charity foundation far exceeds the relatively minor donations his campaign committee received.
But the extent of the donations has the potential to create headaches for the party. At the very least, it ties some major Democrats to the financial industry at a time when Wall Street's popularity has never been lower.
"With the bailout, one wonders to what extent the Democratic votes may have been influenced in the House and Senate by that," said Stephen Wayne, a political science professor at Georgetown University. "My guess is that, with the exception of the people like Schumer and Rahm Emanuel, who headed the committees that raised money, I'm not sure anybody was aware of Madoff... What struck me was that in Election Day surveys, 56 percent of the people said they opposed the [financial market] bailout. It wasn't an issue because both candidates were on the same side of it. What [these donations do] is fuel the cynicism that many people on Main Street have, that they are being raked over by big corporation and investment firms and executives who make millions of dollars."