Madoff Was 'Smooth as Silk' Says His Insurance Broker

(MoneyWatch)  Billion-dollar scam artist Bernie Madoff wasn't big on insurance. But when he did buy it, he was "smooth as silk," says his insurance broker.

In this tell-all era, everyone from former vice presidential candidate Sarah Palin to lover-and-leaver of a vice presidential candidate's daughter Levi Johnston is coming forward to bare his or her soul, so why not Bernie Madoff's insurance agent? At an industry conference held this week by the Minneapolis-based Professional Liability Underwriter Society, broker Christopher Cavallaro of Garden City, New York told of his somewhat strange relationship with the Wall Street con man. The speech was picked up by The National Underwriter.
Cavallaro was introduced to Madoff by a retail insurance agent who happened to be Madoff's brother-in-law. While Madoff apparently didn't offer Cavallaro the opportunity to invest, he definitely gave his brother-in-law the business. Like so many other relatives and friends, he lost millions when Madoff's Ponzi scheme collapsed.

Cavallaro could have become suspicious when Madoff refused to buy a professional liability policy, which would have protected him in the event he was ever guilty of negligence, errors, omissions or failed to render professional services. Each year Cavallaro offered and each year Madoff refused. Perhaps the fraudster worried that the insurance company might catch on, something that both the Securities and Exchange Commission and the Department of Justice failed to do. At any rate, whichever company Cavallaro would have used should thank its lucky stars it never got to insure him.

Madoff did, however, have to purchase a $25 million financial institution bond from the broker because he ran a clearing house that cleared trades for Fidelity, Vanguard and others, Cavallaro said.

But when the scandal broke, Madoff's broker said the bond carrier, whom he wouldn't name, immediately rescinded the bond, returned the previous year's policy, and sent the check he'd gotten from Madoff to the bankruptcy trustee. Together with Bernie's "Sitting Bull" yacht, personalized Met's jacket and other gaudy items that have been auctioned, this will help pay back the victims - a little.

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