Carl Shapiro, Madoff’s Big Investor, Dies at 108

Carl J. Shapiro, the Boston philanthropist and onetime “cotton king” of New York City’s garment district who forfeited more than half a billion dollars in the aftermath of Bernard Madoff’s Ponzi scheme, has died. He was 108.

He died March 7 at his home in Boston, according to an online death notice.

The longtime head of apparel company Kay Windsor Inc., Shapiro was among the earliest and biggest clients of Bernard L. Madoff Investment Securities LLC, opening an account in 1961. His son-in-law, Robert Jaffe, was vice president of Cohmad Securities Corp., which shared offices with Madoff’s firm in Manhattan and brought new investors to his business.

Carl Shapiro, Madoff’s Big Investor, Dies at 108

By most accounts, Madoff was a legitimate money manager during Shapiro’s early years as a client. But by 2008, when Madoff’s fraud unraveled, he was delivering eye-opening returns to his clients only by using money from new investors to pay off older ones -- the textbook definition of a Ponzi scheme.

At first blush, Shapiro appeared to be among the biggest victims. He had an estimated $545 million on Madoff’s fictitious books at the end, including $250 million he had given Madoff just weeks before the fraud was exposed. Madoff had requested that infusion of capital from Shapiro in a last-gasp bid to keep the scheme going. The charitable foundation that Shapiro ran with his wife, Ruth, had an additional $145 million in assets on Madoff’s books.

‘Fictitious Profits’

But to Irving Picard, the court-appointed trustee seeking to recover money on behalf of Madoff’s victims, Shapiro was no victim.

“Mr. Shapiro and his family received more than $1 billion of fictitious profits -- i.e. other investors’ money -- over the course of their dealings with Madoff, rendering them among the largest beneficiaries of Madoff’s Ponzi scheme,” he said in a court filing.

In December 2010, Shapiro, Jaffe and 18 other family members reached an agreement with Picard to forfeit $550 million for distribution to Madoff creditors, plus $75 million to the U.S. Justice Department, contingent on tax refunds, to settle civil claims. In a statement through their lawyer, Stephen Fishbein, the family members said they were pleased the settlement would “allow substantial funds to be distributed to those hurt most by Madoff’s fraud.”

Shapiro and his family were never charged with wrongdoing, and they denied legal liability. Shapiro said in a statement that he had invested with Madoff “based on his apparent business acumen, sense of integrity and commitment to sound investing principles.”

Madoff Work

He had started with Madoff in the 1960s after becoming interested in arbitrage trading of convertible bonds, an endeavor that required swift execution, Diana B. Henriques wrote in “The Wizard of Lies,” her 2011 book on Madoff.

“In those days it took three weeks to complete a sale,” Shapiro said, according to Henriques. “This kid,” he said, referring to Madoff, “stood in front of me and said, ‘I can do it in three days.’ And he did.”

Fox Business Network reported in May 2013 that Madoff, interviewed at the federal prison in North Carolina where he is serving a 150-year sentence, claimed that Shapiro and three other longtime investors -- Stanley Chais, Jeffry Picower and Norman Levy -- had participated in his fraud by instructing him to backdate stock transactions to achieve certain targets for fictitious profits.

Shapiro, by then the only surviving member of the foursome, denied the allegation. “Carl Shapiro was as shocked as everyone else when Madoff confessed to a Ponzi scheme,” Fishbein said in a statement on Shapiro’s behalf. “This after-the-fact statement by an admitted liar and convicted thief deserves no credibility whatsoever.”

Carl Jeffrey Shapiro was born on Feb. 15, 1913, in Boston, the middle child of three, and the only son, of Aaron and Annie Shapiro.

‘Cotten King’

He cut short his studies at Boston University during the Great Depression to work at his father’s coat business, which he steered into dress-making and, in 1939, incorporated as Kay Windsor, according to his daughter, Rhonda Zinner.

The name was inspired, she said, by Duke of Windsor, the title given to King Edward VIII after his 1936 decision to abdicate the British crown so that he could marry American divorcee Wallis Simpson.

While setting up his 120-sewing-machine plant in Boston, Shapiro took on the task of convincing stores that cotton dresses could be stylish. A 1957 New York Times article reported that Shapiro had succeeded in turning the cotton dress, once relegated to being worn in the house and in summertime, into a “year-around ‘work horse’” that generated an estimated $22 million in annual revenue for the company.

“Mr. Shapiro, a 43-year-old Bostonian, is the self-styled ‘cotton king’ of the dress industry,” the Times wrote. “His empire includes a 25-booth showroom at 1400 Broadway, a shipping and cutting plant in New Bedford, Massachusetts, and 28 contract factories throughout New England making garments.”

While many garment makers assigned one partner to sales and another to production, Shapiro did both, splitting his time between New York and New Bedford.

Philanthropic Turn

VF Corp., formerly known as Vanity Fair Mills Inc., acquired Kay Windsor in 1971. Shapiro stayed on as chairman of the Kay Windsor unit and a VF director until 1976, when he turned full-time to philanthropy.

Carl Shapiro, Madoff’s Big Investor, Dies at 108

With his wife, Ruth, who died in 2012, Shapiro became a leading benefactor of arts and education in the Boston area. They gave more than $72 million to Brandeis University, where several buildings carry their name. Other recipients included Boston Medical Center and Boston’s Museum of Fine Arts, and, in Florida, the Norton Museum of Art, the Palm Beach Opera and the Kravis Center for the Performing Arts.

The $145 million lost by the Carl & Ruth Shapiro Family Foundation in the Madoff fraud represented almost half its total assets, the Boston Globe reported in 2008.

The couple had three daughters, Ellen Jaffe, Linda Waintrup, and Rhonda Zinner, who died in 2014.

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