The old place was swanky.

It has a 24-hour doorman and river views, but the real appeal of 377 Rector Place—a building that is about as bland as a luxury tower can be—lies in its name: Liberty House. Particularly if one is about to start a 10-year prison sentence.

The New York Post reports that Peter Madoff and wife Marion have moved into a $3,200-per month one-bedroom rental in the Battery Park City building. For someone who has agreed, as part of plea bargain, to the criminal forfeiture of $143.1 billion, including all real estate and personal property, a rental is definitely the way to go.

The new place: not bad. Way nicer than prison.

Of the couple's vast, ill-begotten fortune, Marion was allowed to keep $771,733, an amount that still seems like a fortune to most of us, if not a vast one.

Madoff frère pleaded guilty in June to helping his brother bilk investors out of out billions, although he maintained that he had no idea that by falsifying business records he was helping to perpetrate what may go down in history as the greatest Ponzi scheme of all time.

A claim that was dismissed by US District Judge Laura Swain as “frankly, not believable,” according to the Daily News

The Madoffs needed someplace to stay, having just sold their 7-room co-op at 975 Park Avenue for $4.6 million.

While the provenance of Mr. Madoff's former pad might bother some potential buyers, all proceeds of the sale go to victim restitution. Sources have said that the Madoffs weren't even allowed to keep their dishes and other basic household items. Time for an Ikea run?

Mr. Madoff has less than a month to enjoy his liberty, Liberty House or the view of Lady Liberty in the New York Harbor. He's scheduled to start serving his sentence on February 6, thanks to a delay he was granted to attend his granddaughter's Bat Mitzvah.

As for the properties belonging to the rest of the Madoff clan, they will likely hit the market in the not-too-distant future as prosecutors and trustees make their way through the massively complicated fraud case. These include Andrew Madoff's $4.3 million apartment at 433 East 74th Street and Mark Madoff’s $6 million Soho apartment at 583 Broadway Avenue, where he committed suicide. Both of the brothers' Greenwich homes are also in the mix.

kvelsey@observer.com

The government came for Ruth and Bernie Madoff's penthouse years ago, but the real estate holdings of the rest of the family have taken a little longer to claim, as the courts untangle the many complications of recovering cash stolen by the clan.

But now a two-bedroom Park Avenue co-op owned by Bernie's brother Peter has finally hit the market, The Wall Street Journal reports. And lis penden notices have been filed against properties belonging to Madoff's son Andrew and late son Mark, according to The New York Post. Altogether, the homes are worth more than $20 million.

The sixth floor co-op that Peter Madoff owned at 975 Park Avenue is now on the market for $4 million, which is $100,000 less than Mr. Madoff and his wife Marion paid for it in 2004, according to The Journal, not counting the cost of renovations. Not that the sale price matters to the couple.

Neither Mrs. nor Mr. Madoff—who pled guilty to fraud charges in June—will get the proceeds of this sale or the sale of their house on Long Island, which is currently on the market for $5.29 million. The monies will be turned over to the U.S. Marshals Service, as part of an agreement that Mr. Madoff and his family signed as part of his guilty plea.

But Mr. Madoff won't need the place anymore anyway. He'll be living in far less lavish accommodations—a prison cell—when he begins his 10-year sentence later this year. As for Ms. Madoff, she can buy a more modest pad with the $771,733 she's allowed to keep as part of the settlement (we'd recommend Yorkville).

The properties belonging to Bernie Madoff's two sons and their families have not yet hit the market, but the lis penden notices warn potential buyers that they really aren't really the Madoff family's to sell. Trustee Irving Picard has a claim to both Andrew Madoff's $4.3 million apartment at 433 East 74th Street and Mark Madoff's $6 million Soho apartment at 583 Broadway Avenue, where he committed suicide (we doubt that one will sell anytime soon anyway). The government is also going after both of the brother's houses in Greenwich. Just how much the government can claim depends on the resolution of the $255 million suit against Madoff's relatives.

kvelsey@observer.com

Eric Stein

The U.S. Attorney and Postal Inspection Service announced Tuesday that Eric Stein, age 53, had been arrested and charged "with running an investment scam through Return-A-Pet LLC--a Manhattan-based company he operated..." Authorities who investigated Stein's business say he may have lined his pockets with up to a half-million dollars over the last 3 years by hoodwinking consumers into buying "sham Return-A-Pet distributorships using false and misleading advertisements."

This is familiar territory for Eric Stein.

The scam was huge. So big it even turned heads in Nevada. So big that when Stein, one of the main suspects, went on the run, his glamour shot made it onto America's Most Wanted. We're referring to Eric Stein's first scam, which was eventually covered by CNBC's American Greed, a documentary series exploring major league con games.

In that case, which occurred in the late 1990s, Eric Stein and a handful of co-defendants (one was memorably named Ina Liberty Bell) bamboozled investors into buying into direct response infomercials. The pitch was an attractive 50 percent return on a minimum $5,000 investment in only 3 months. Stein took that money, played the mogul and also used it to keep drawing investors back into his web. He was charged with securities fraud and racketeering. Stein and his cohorts collected nearly $20 million.

According to the U.S. Attorney's press release about Stein's arrest on Tuesday, Return-A-Pet "provided enrolled pet owners with access to a toll-free number that was staffed 24 hours-a-day and printed on the pet’s ID tag, in order to help lost pets be returned to their owners."

On Return-A-Pet's now defunct website the service explained:

The Return-A-Pet registry is designed to give you peace of mind while protecting your privacy. Our system makes it easy for the person who finds your pet to get your beloved family member back to you quickly and safely.

Return-A-Pet distributors purchased a $5,000 package (Stein was apparently fond of that base $5000 fee to buy into his deals) which supposedly included 425 enrollment kits. If you just wanted a trial package of 10 kits, you could get away with paying just $100 to check it out.

People bought in, wiring fees ranging from $5,000 up to $50,000 to Stein's business bank accounts in Manhattan or mailing checks to his office on Fifth Avenue. Stein, who also may have used the alias "Robert Philips" when dealing with irate "distributors," allegedly kept the money. Court documents contain statements from victims in Texas, Georgia, Kentucky, North Carolina and South Africa who recounted conversations with both "Philips" and Eric Stein.

Stein ran Return-A-Pet while still on supervised release for the scheme for which he'd been convicted in Nevada.

Speaking to CNBC 4 years ago about his big con, Eric Stein explained techniques he used to fool investors into thinking the business was legitimate, like fake references about how great it was. He also said, "Greed does not lead you down a road to success; it leads you down a path of destruction."

Stein currently faces charges of mail and wire fraud. If convicted on both counts, he could face up to 40 years in prison.

Eric Stein: A con man in his own words - YouTube.

Via the U.S. Attorney for the Southern District of New York's office, basically:

From November 2000 through June 2005, CUTI and WILLIAM TENNANT, the former Chief Financial Officer ("CFO") and Senior Vice President of Duane Reade, engaged in a scheme to misrepresent Duane Reade's financial performance. The scheme involved: 1) the reporting of inflated income from fraudulent real estate transactions; and 2) the artificial reduction of expenses through fictitious credits from vendors who did work for Duane Reade.

Mr. Cuti was also hit with a decent tab, payable to Preet Bharara & Co.:

In addition to the prison term, Judge BATTS sentenced CUTI, 65, of Saddle River, New Jersey, to three years of supervised release. CUTI was also ordered to pay a $5 million fine and a $500 special assessment fee. Restitution will be determined at a later date.

Filed under "Things Your Club Card Won't Help With." Meanwhile, while Duane Reades across the city are shinier than ever, alas, they still have long lines. Though now, with one less person to wait in them.

UPDATE. Mr. Cuti's defense team writes in with their statement:

While at the helm of Duane Reade, Mr. Cuti led the growth of the company from a small drug store chain to a local institution

[...with long lines...]

in less than ten years, dramatically changing the landscape of New York City in the process.  Duane Reade became one of the largest commercial retail tenants in the City in terms of the number of stores and square footage.

Mr. Cuti is deeply disappointed with the sentence imposed by the court.  As the court determined, neither Duane Reade nor any investor could be shown to have lost money as a result of the transactions at issue.   Nor was it demonstrated that Mr. Cuti personally profited from the transactions.   Mr. Cuti plans to vigorously appeal the verdict.

fkamer@observer.com | @weareyourfek

Financial difficulties relating to that case forced Guldi to dismiss his representation, and for the last month he has run his own defense. His lack of expertise in criminal law, along with his flair for the dramatic, have turned what was meant to be a one-week trial into a monthlong circus. The fireworks peaked at the end of last week, when Guldi himself took the stand, delivering his testimony in a lengthy narrative whose scope stretched all the way back to his day of birth.

When the assistant district attorney questioned him, the cross-examination turned to bickering, and the judge stepped in. "This is getting out of hand!" he said, and threatened to cut the questioning short.

In his summation, Guldi reiterated his earlier point that could never have misappropriated money from his bank, as the prosecution claims, because the money was his to begin with. He referred to himself as "Jabba the Hutt with pockmarks," and with a smile asked the jury for mercy.

"My fate, my career and the impact on my family are in your hands," he said. In a few days, the prison tailor will know if he has to start stitching a Jabba-sized jumpsuit. 

"Tan can be yellow," Mr. Guldi pointed out, straining to seem nonchalant, his belly dangling over his leather belt. "Is it possible the check was red?"

"I don't believe so," said the witness, Ethan Ellner.

"Blue and yellow are only two of the primary colors," said Mr. Guldi. A prosecutor's objection struck that remark from the record, and the bizarre trial whirled onward.

For more than three weeks, before 12 jurors and a steadily growing audience of press and local citizens, Mr. Guldi has huffed and puffed, invoking everything from steroids to Lord Voldemort in a desperate attempt to discredit his accusers and salvage his good name. He has turned what was meant to be a weeklong trial into a war of attrition, and he is just getting started.

In March of 2009, the district attorney's office charged Mr. Guldi, Mr. Ellner and three others with an incredible mortgage-fraud scheme, one whose $82 million haul ranks among the largest in state history. This strange investigation touches on almost every aspect of life in Suffolk County, including the Hamptons, and stretches to Manhattan in the form of mortgage trial codefendant Donald MacPherson, who owns the SoHo Journal and a downtown fetish photography studio. Five months after the allegations of mortgage trickery, Mr. Guldi was arrested a second time and charged with insurance fraud. Because of its comparative simplicity--four felony counts, as opposed to a staggering 110--the insurance trial began first.

Although only a prelude to the main event, this trial, expected to conclude sometime within the next week, is no trifle. Each charge carries a minimum five-year sentence, and a conviction would mark Mr. Guldi as a criminal in the eyes of future juries, making the already daunting mortgage-fraud trial, tentatively scheduled for later this year, an even steeper climb.

In his opening statement, Mr. Guldi made a play for the jury's sympathy. "I lost everything," he said, his normally powerful voice lowered for effect. He is not accused of setting his house on fire, but of pocketing the insurance company's $853,000 check, which was supposed to be deposited in escrow and put toward the home's reconstruction. Instead, Mr. Guldi, prosecutors say, stashed the money in a private account and left the destroyed home to fester.

"This insurance check was my money, not the bank's," he told the room, with mournful sincerity. "They're prosecuting me for taking my own money!"

Mr. Guldi is a bulging man, with a great squeezed reptilian neck, brillo-pad hair and pockmarks dotting his face. He has a penchant for colorful bow ties. In court last Monday, his tie was orange, his suit tan, with bits of fraying visible along a shoulder seam and a pant leg. Besides occasional barks of laughter, Mr. Guldi's expression was mostly stern; at one point, he stared down a giggling toddler in the back of the courtroom.

Raised in Westhampton Beach, the 56-year-old millionaire has been a fixture of political life in Suffolk County for two decades. He used the wealth that came from a successful real estate law practice to put three sons through college and raise two more children with his second wife.

The 2008 recession, however, devastated his business; his second marriage collapsed; and a fire destroyed his sprawling Westhampton Beach home, which was also the house he grew up in. A few months after Mr. Guldi's arrest the following year, District Attorney Thomas Spota froze his assets, forcing him to slowly sell off his possessions and dismiss his legal representation.

"I can't count the number of times that the electricity's been off at [his] office, or he's lost computer service at home, or the cell phones have gone off," said Terri Scofield, a loyal ex-girlfriend of Mr. Guldi's who has chronicled his court battle on the message board 631Politics.com. Her daily transcripts of the court proceedings, taken down in longhand, include not just every moment of legal minutiae, but also fanciful flights of observation, like her note on Feb. 4 that "I almost dry retch when I notice number eight is picking his nose AGAIN!"

Ms. Scofield, a hyperkinetic citizen journalist, has known Mr. Guldi for nearly 20 years, and she describes a very different man from the stubborn crusader on display in Judge Doyle's courtroom. On the phone last week, she called him "wickedly funny," "fairly spiritual" and "big on thrill," a downhill skier with an abiding love for his children and his Harley.

"He'll do stuff like outrun the cops," she told The Observer. "He calls the bike his vibrator."

Mr. Guldi was not born rich. He comes from a family of electricians with deep roots in the area--they did the wiring for the Vanderbilt estate on the North Shore--and he trained to join the business before deciding to go into law. Building a fortune as a property lawyer in the booming Hamptons real estate market, he was elected to the Legislature in 1993.

"When he was engaged in legislation, he was very engaged," said Vivian Viloria-Fisher, one of Mr. Guldi's fellow legislators. "When he didn't deem it to be important, he wasn't." Meetings of the Guldi-dominated Ways and Means Committee dragged on, she said, "because he would talk and talk and talk."

He embraced big causes, opposing development that threatened the East End's parks and sponsoring legislation for sweeping housing reform. In 1995, he spearheaded a campaign for pool safety, after finding a neighbor's child drowning in his backyard pool. He dove in to save the child, but the boy died soon after.

Although impressed by the ease with which he "sold the room," Ms. Viloria-Fisher remembered Mr. Guldi as a man who talked down to his aides and had "a sense of immunity to those rules that govern everybody else." That he is defending himself is appropriate, she went on, because "there's no other lawyer as brilliant as he thinks he is."

In 2003, Mr. Guldi ran for reelection against Jay Schneiderman, and the race turned vicious as only local politics can. In one debate, he accused Mr. Schneiderman of taking money from drug traffickers; at another, he declared that the U.S. attorney's office had investigated Mr. Schneiderman for fraud.

These were not outright lies, but distortions of innocent facts: The fraud charges were determined to be baseless, and the supposed drug trafficker was in fact a donor to Mr. Schneiderman who had helped the F.B.I. arrest one of his own employees for smuggling--an act of courage that won him the Presidential Medal of Honor.

"He didn't lie, he just skirted, he shaped the truth in a crafty, clever way," said Mr. Schneiderman, who won the election and sent Mr. Guldi back into private practice.

According to Ms. Scofield, he was happy to be out of politics, because putting three boys through college, paying alimony and supporting an ex-wife who didn't work was impossible on a legislator's salary. Returning to private practice also meant more money for his hobbies, which included collecting rare guitars and flying small planes. But then in late 2008 came an expensive divorce from his second wife, who took their two young children and moved out--"as soon as he stopped marking $50,000 a month," said Ms. Scofield.

As badly as 2008 ended, 2009 started off worse when the district attorney's office raided Mr. Guldi's offices in Westhampton Beach, leaving with nearly all his computers and 49 boxes of files. Soon after came the arrest for mortgage fraud, and the legal battles that have consumed his past two years.

Although it seldom received sweeping headlines, mortgage fraud was the It Crime of the past decade. The massive scope of this quiet crime wave, supported by the same easy lending bubble that led to the recent recession, did not become apparent until the market's 2007 collapse. New York was one of the hardest hit--a LexisNexis survey released last summer placed the state second in national mortgage fraud, outpaced only by Florida.

The indictment explains several different ruses Mr. Guldi used to fool banks into making unwise loans. A typical instance involved a house in Water Mill owned by Mr. Guldi's father, which went into foreclosure in 2005, the result of an unpaid $1.5 million mortgage. In 2008, Mr. Spota's office alleges, the defendants falsified the property's title, making it appear that the house carried no mortgage at all. Using a stolen identity--a "straw buyer"--they purchased the house with a new $1.8 million mortgage, pocketing the money and letting the bank foreclose on the property.

With homes valued so highly, profits piled up quickly. Marcus Asner, who formerly headed the Southern District's Major Crimes Unit and now works in white-collar defense at Arnold & Porter, said the $82 million charge in the Guldi case was the largest he had heard of in the region. The complexity of such a scheme, he said, would be staggering. "In a case like this, someone would have to manage a number of straw buyers for a number of properties all at once," he said.

Some of the straw buyers were reportedly employees of Arena Studios, a fetish photography outfit on Broome Street, now shuttered. When the shop's owner, Mr. MacPherson, was arrested, along with his wife, the New York press had a field day--painting her as dominatrix and him as an S&M mogul. (Mr. MacPherson "took a beating" on his East End investments, joked The Daily News.)

Last month, at a small cafe near the SoHo Journal's offices, Mr. MacPherson, 66, spoke very carefully about the crimes he and Mr. Guldi have been accused of committing. A dignified man, he is tall, with long gray hair and thick, caterpillar-like eyebrows. Whether by accident or design, the former fetish entrepreneur comes across more like a classics professor than a crook.

"I see my primary occupation as a journalist," Mr. MacPherson told The Observer. Though he owns a home and several businesses in the Hamptons, his priority has never been real estate, he said, but maintaining Soho's "sadly neglected" artistic heritage. Like Mr. Guldi, he is drawn to large causes. He opposes the proliferation of billboards in the neighborhood, for one. Perhaps more importantly, he has fought to recover statues by an artist named Bob Bolles, forgotten pieces of artwork that, as Mr. MacPherson explained, were removed from a park on Broome Street in 2000 and left to rot on Randall's Island.

Mr. MacPherson met Mr. Guldi through his former attorney Thomas McVann, a partner in the Guldi firm. Over the course of the decade, he said, he worked occasionally with Mr. Guldi without ever becoming close.

"I think he's a little bit crazy," said Mr. MacPherson, "but I mean that as a compliment." When pressed on this apparent paradox, he described his co-defendant as "a very opinionated individual who believes strongly in his point of view."

Mr. Guldi had been planning a bid to reclaim his old seat in the Legislature when the arrest warrants came down, and he did not let the indictments stop him. After securing release on a $500,000 bail, he went on with his plans for the September primary against his old opponent, Jay Schneiderman.

"That's the boldness of the man," said Ms. Viloria-Fisher, the sort of behavior that "sometimes makes you wonder whether he knows what the boundaries should be."

"It was strange that he still considered himself viable," said Mr. Schneiderman, who won handily. "Granted," he said, "it's not a big choice: George Guldi or myself." He joked that Mr. Guldi got less votes than he did indictments, which is not quite true. Although indicted on 110 counts, in the September primary Mr. Guldi received 163 votes.

The prosecution's key witness is Mr. Ellner, a lawyer alleged to have assisted in the mortgage scheme. A year ago, he pleaded guilty to fraud charges and has been testifying against Mr. Guldi as part of his plea bargain. Burly and bearded, wearing a gold chain and cowboy boots, he recalled the story of a car ride in which he claims that Mr. Guldi laid out his plan to abscond with the $853,000 check, a damning tale to which Mr. Guldi offered a blistering response.

The cross-examination began with a warning from Judge Doyle. "Both of you went to law school," he said. "Act courteously."

Courtesy faded fast. Attempting to discredit the witness, Mr. Guldi painted him as a steroid abuser, a perjurer and a snitch. In an attempt to depict his former associate as a chronic betrayer of friends, he asked how many of the people Mr. Ellner had testified against had also attended his wedding. Then he asserted that Mr. Ellner had opened up his own mother to an accessory charge by telling her of some of his crimes.

"Isn't it a fact, Mr. Ellner," he asked coolly, "that by that testimony, you threw your mother under the bus?"

That and many other questions were quickly struck down by Judge Doyle, who began saying "sustained" before Assistant District Attorney Thalia Stavrides had a chance to rise from her seat and object. The frustration of watching Mr. Guldi defend himself began to affect her, and she spent much of the afternoon rubbing her temples, eyes screwed shut.

In his continuing effort to characterize Mr. Ellner as a villain, Mr. Guldi has recently attempted to establish a connection between the witness and Steve Levy, the Suffolk County executive who left the Democratic Party last year in a failed attempt to gain the Republican nomination for governor. Mr. Levy, who is up for reelection in the fall, has admitted to recommending Mr. Ellner for about $85,000 in county work, and Mr. Ellner, on the stand last week, said that he had donated more than $8,000 to the executive's campaign. But Mr. Guldi has not been able to do any more than imply that a bribe was made.

In the first days of the trial, he served Mr. Levy with a subpoena that was later quashed. Since then, Judge Doyle has made it clear that any mention of Mr. Levy is ancillary to the matter at hand. By Monday, Mr. Guldi had taken to referring to the executive as "He Who Must Not Be Named."

Mr. Guldi's supporters, who gather on Ms. Scofield's blog--20,000 unique visitors in the past three weeks, she points out--interpret Judge Doyle's behavior as the most transparent sign of a conspiracy that stretches the length of Suffolk County. In particular, they believe that Mr. Guldi is being targeted for his bold legislative work in the '90s. Optimists all, they consider Ms. Stavrides to be on the run, and are convinced that an acquittal is imminent. To one degree or another, they have all been charmed by Mr. Guldi, who has an intellect that even his opponents admire.

"I thought George was a really bright guy," said Mr. Schneiderman. "In that sense, maybe I'm more surprised that he had gotten caught."

editorial@observer.com

Not so, the BBC reports:

"The possibility of involvement of the global CEO... looks remote," [Guragon police chief SS Deswal] said on Wednesday, according to Press Trust of India news agency.

The investigation was instead focusing on several of the bank's employees in India, he said.

Citigroup has also issued a statement saying that the charges are "completely without basis." Mr. Pandit, you're free to go.

mtaylor [at] observer.com | @mbrookstaylor

As this individual well knows, Citi identified the fraud and immediately reported the matter to the regulators and law enforcement agencies. His claims against senior executives are completely without basis and we intend to contest them vigorously. It was on Citi complaint that the Gurgaon police lodged an FIR and are currently investigating the matter. Citi will continue to work with the authorities on this investigation.

Running a global franchise sometimes means getting in international spats with the police. Just ask Citigroup boss Vikram Pandit, who is in some hot water back in his native India, where the authorities allege that Citibank's Guragon branch was siphoning off depositor money and using it to play the stock market. The Times of India reports that Citigroup's retired executive vice chairman, William Rhodes, and several high-level Citi employees are also being named in the complaint.

At stake are 300 crore, or 3 billion rupees, or $66 million U.S.

Sanjiv Agarwal, a rich investor from India, filed the complaint. According to India-news site NDTV, Shivraj Puri, branch manager in Guragon, was arrested last week and interrogated by police. Mr. Puri apparently ratted on Mr. Pandit and his other bosses:

Puri has allegedly told the police that the top rung of Citibank was aware of how his scam worked.

Puri reportedly promised corporate clients and High Net worth Individuals (HNIs) high-return schemes. He deposited their money in accounts in the names of his family and friends, and then diverted the money to the markets.

This considerable blow to Citigroup's customer service reputation follows recent efforts to refurbish the company's relationship with clients. Opening a brand-new space-age banking branch  on one side of the world doesn't exactly make up for defrauding customers on the other.

Clarification: William R. Rhodes retired from Citigroup last year. He was a senior vice chairman, not the chairman -- as the article previously stated. We regret the confusion.

(We came across this story via TheStreet.com and The Wall Street Journal.)

mtaylor [at] observer.com | @mbrookstaylor

Authorities accuse the 62-year-old ex-Madoff assistant of defrauding investors and helping keep Mr. Madoff's Ponzi scheme in motion. Says The Journal:

Of course, "Frank's Marriage Proposal In Central Park" turned out to be just another YouTube hoax, created to promote the work of Thinkmodo, a NY agency founded by Michael Krivicka and James Percelay, specializing in viral, it prefers the term social, videos and campaigns.

Percelay told Mashable, who were punked by the project, that a good hoax is hard, but a commercially viable fake is the real challenge.

"Since viral videos are both art and science, we wanted to merge both elements to introduce predictability to the videos' success," Percelay told Mashable. "As part of our 'study' we staged an elaborate marriage proposal in Central Park and fused tech and romance to see how well each would be received if merged."

Half a million views later, the answer seems to be pretty well received. A better question might be how users, and potential clients, will react  to the news that Thinkmodo played them for fools in order to perfect their viral technique.

bpopper [at] observer.com | @benpopper