New York — Contributing editor Amy Wallace investigates how Hollywood moguls like Steven Spielberg, Jeffrey Katzenberg, and Arnon Milchan—the billionaire producer of Fight Club and Pretty Woman who lost at least $18 million—fell victim to Bernard Madoff’s Ponzi scheme (“Madoff’s Hollywood Connection,” p. 72). After discovering that Katzenberg, who lost millions of dollars, had never even heard of Madoff, Wallace concludes that business managers are partially at fault. “Madoff had apparently figured out what industry insiders have known for years: More than agents, more than lawyers, business managers are the financial gatekeepers to Hollywood’s elite,” Wallace writes. Business managers had directed large investments to Madoff without divulging details of the transactions to their wealthy clients. Two business managers have been linked with the scam: Gerald Breslauer—who has managed Spielberg and Katzenberg as well as Michael Jackson, Barbra Streisand, and Prince—and Stanley Chais, who was recently sued by one of his clients, screenwriter Eric Roth. Wallace explains, “Business managers buy the cars, the planes, and the boats; hire the gardener, file the nanny’s taxes, and take care of estate planning; put wills in order and make sure pensions are secure.” This hands-off approach to money management is common among Hollywood clients who seek help from a business-management firm. Howard Altman, a partner at Tani Barash & Altman, says that his clients hire him to “simplify the process” of investing. “Many of our clients do not have the time, the ability, or the interest to meet the actual person who’s going to execute the trade or structure the investment,” he said.

In this month’s Viewpoint (p. 14), Scott Turow maintains that while Madoff didn’t cause the financial meltdown, he makes a great poster boy for it. “Madoff’s name is liable to emerge as a symbol of the ridiculous excesses of 2008,” Turow writes. And in “Preventing the Next Madoff” (p. 78), contributing editor Gary Weiss discusses how financial crime is linked to stock market crashes and suggests a methodology for preventing future Wall Street scandals: “Instead of accepting the scandals with resignation, what’s needed is a radically new way of looking at the problem. No more endless cycle of scandals. As a start, Wall Street should no longer be viewed as a fundamentally sound institution that occasionally runs off the track,” he writes. Weiss finds the cycle of financial crime to be comparable to corruption in the New York City Police Department, which “suffered from a widely acknowledged 20-year cycle of scandal” that involved organized crime and drug deals. John Bogle, founder of the Vanguard Group of mutual funds, finds financial criminals and corrupt policeman to be similar because “they can make their own law.”

“The ‘I’m F*&#ed!’ Number” (p. 100) In 2006, Lee Eisenberg published The Number, a book addressing how much money Americans thought they needed to feel secure through retirement. Now, as millions of people nationwide are losing jobs and watching the market sink, that number has taken on a new identity. “It was clear right away that the Old Number had given way to a New Number. ‘Fuck you’ money? How quaint. ‘I’m fucked’ money? Now we’re talking,” writes Eisenberg. The Old Number has had to change for everyone—from Mr. Lucky, who left his job at a major financial-services firm for a partnership at a midsize hedge fund, to Mr. Jackass, the $1-million-a-year Wall Street man with two houses and expensive habits. “The change from the Old Number to the New Number is, in essence, all about lifestyle relapse,” Eisenberg writes.

Also in the March issue:

“Slimed Online” (p. 80) Contributing editor David Margolick reports on how “cyber-bullying” has reached a new low—and at the highest levels of the professional world. He investigates the case of the website AutoAdmit, an online forum for law-school students to post comments and communicate with one another. The site quickly drew attention when anonymous attackers went after two Yale Law School students, Brittan Heller and Heide Iravani. The posters made negative comments about the two women, saying that Heller had bribed her way into Yale—helped by a secret lesbian affair with the dean of admissions—and that Iravani had gonorrhea and was addicted to heroin. The comments on AutoAdmit came up in a Google search of the women, allowing anyone, including potential employers, to read them. The case represents emerging issues and questions of legality in the internet era, such as how freely people should be allowed to express themselves online. If the falsehoods had been published in a newspaper or aired on television, the women could have easily sued, but the internet has its own set of rules. AutoAdmit refused to remove the negative comments, so Heller and Iravani decided to file suit, taking their case to court and fighting to have their online reputations restored. “Though they do not raise the issue explicitly in their suit, Heller and Iravani may even end up helping prompt a change in the law: forcing internet intermediaries to bear greater responsibility for what they carry,” Margolick writes. In the sidebar “Who You Gonna Call?” Megan Angelo lists the organizations that can help you if you’ve been smeared online; in “Cyber Law 101,” David Lat offers advice both for those who’ve been slimed and those who did the sliming.

“Ice Storm” (p. 88) Joshua Hammer travels to Iceland to interview the globetrotting first couple who epitomized the country’s meteoric rise from fishing backwater to global powerhouse. The tiny country’s mid-decade heyday quickly turned it into Western Europe’s newest economic tiger, but with the October ’08 global credit crunch leaving Iceland’s economy in shambles, the party might be over for president Ólafur Grímsson and first lady Dorrit Moussaieff. The unlikely pair—he a widower whose idea of a good time is discussing thermal energy with Al Gore, she a divorced socialite and jewelry designer with a byline in Tatler—wed six years ago. “We have nothing in common,” the first lady says of her husband, “except that we both speak English and we both love skiing. Politics bore me.” For the past several years, Grímsson had been happily promoting Iceland’s banks, while Moussaieff booked rock musicians for state dinners and parties in London. But with Iceland’s economic collapse, they face a personal and political reckoning, and they’re bickering over who’s to blame. “Just as Grímsson and Moussaieff epitomized Iceland’s euphoria in good times, the first couple now seems to personify the country’s consternation,” Hammer writes.

“Google’s Power Play” (p. 108) Contributing editor Peter Waldman reports that Google Inc. and General Electric Co. are pairing up to work on an energy-saving strategy to aid environmental sustainability. At the 2008 Zeitgeist conference in Mountain View, California, Google’s chairman and CEO, Eric Schmidt, and his counterpart at General Electric, Jeff Immelt, discussed how this would be possible. “Energy actually isn’t hard,” Immelt said. “The technology exists; it doesn’t have to be invented. It needs to be applied.…We make the gadgets—smart electric meters, things like that. People like Google can make the software, which makes the system. That’s the key to renewable energy.” The two companies predict that green energy will be “the driver of a new industrial revolution” that will spark job creation and economic growth while combating the global climate crisis. “Just as it imposed order on an unruly Web, Google is hoping to make sense of an always-on electricity grid and help consumers decide when to power up appliances and plug-in cars and when to turn them off,” writes Waldman.

“Condé Nast Portfolio 25” (p. 46) The editors of Portfolio present the “Tech Influentials,” a list of 25 individuals who are influencing business and society through technology developments. In addition to media moguls and political advisers, the list includes entrepreneurs from various professions who are using technology to make changes in their various fields. Included are Arianna Huffington, Steve Jobs, and Jeff Bezos, as well as Evan Williams, CEO of Twitter; David Bohrman, Washington bureau chief of CNN; and Marissa Mayer, vice president of search products and user experience at Google.

“The Private Equity Meltdown Myth” (p. 28) Wall Street editor Jesse Eisinger writes about why buyout kings like Leon Black aren’t going out of business. “The private-equity industry should be in peril. The fact that it’s not is a testament to some savvy dealmaking and a lot of less-than-savvy investors,” Eisinger writes.

“How to Value It: Fare Value” (p. 44) Contributing editor Duff McDonald arrives at a back-of-the-napkin estimate of just how much New York City could get if it ever decided to put its transit system on the block. Based on variables such as ridership levels, fares, and revenue from the ads inside subway cars and on buses, McDonald puts the total estimated value at $7.5 billion to $8 billion.

 
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