Sarah Mandell and her husband, Bob Chew, wanted to cut their expenses and lead a "simpler life," so in 2004 they sold their house in Los Angeles and set out for the mountains of Colorado.
To secure their future, they took the money from the house and invested it with Stanley Chais of Beverly Hills. It seemed like a safe bet: Chais was a wealthy investment advisor and trusted family friend who had produced strong returns for Mandell's relatives for two decades.
"You would think in 20 years, if there was something wrong with this, it would have been uncovered," said Mandell, a personal chef.
Eventually it was, but too late for Mandell, 45, and Chew, 55, a marketing consultant. The couple learned days ago that their $1.2-million investment account had been obliterated in an alleged $50-billion fraud run by New York financier Bernard L. Madoff with the help -- knowingly or not -- of Chais and others who funneled investors' money to him.
The fallout has been enormous, hitting hardest in Jewish communities here and abroad, racking charities and families that had invested directly with Bernard L. Madoff Investment Securities or through "feeder funds" like Chais'. Many who lost money were in the entertainment industry, Hollywood heavyweights and nonmarquee names alike.
Madoff, 70, a former chairman of the Nasdaq Stock Market, has been charged with securities fraud and is said to have confessed to running a Ponzi scheme, in which newer investors' money was paid out to earlier ones. His company's assets have been frozen and a receiver has been appointed to manage what's left.
Chais, 82, did not respond to interview requests. Last week, he told the Jewish Journal that he and his family also were swindled and had lost "a huge amount of money." The Chais Family Foundation, which in 2007 reported assets of $178 million and charitable contributions of nearly $8.2 million, also was wiped out and has shut down.
Whether Chais was merely a victim is the $250-million question in a federal lawsuit filed last week in Los Angeles, alleging that is the sum scores of investors gave to him and his Brighton Co., a limited partnership formed to manage their money.
The complaint charges that Chais and his firm were involved in "false, misleading, unlawful, unfair and fraudulent acts and practices," but it offers no hard evidence that he knew the money was being pumped into a Ponzi scheme.
