LONDONDERRY — For most people, the Bernard Madoff Ponzi scheme is nothing short of a disaster.
The New York City-based financier bilked his clients — many of them celebrities like Steven Spielberg and Tom Hanks — out of billions of dollars as federal regulators watched from the sidelines. Now he sits in jail, awaiting final word from a judge on what is likely to be a lengthy prison sentence.
But others see the Madoff scandal as an opportunity — to help others.
For the past 20 years, Stephen Sussman has run a company in Londonderry that specializes in navigating the complicated world of federal compliance rules and regulations for the trading of stocks and bonds and other financial instruments.
When he got a call last year to join a former colleague who was starting a company to buy the only legitimate remains of the Madoff empire, he jumped at the opportunity, even though much of the up front work was done without pay.
"I don't mind doing this pro bono," he said, "because I'm giving money back to the victims. I couldn't get all the money back that the victims lost ... But I'm Jewish, most of the victims were Jewish — at least I'm doing something."
While Sussman, 52, runs a 20-person compliance company (soon to grow to 50 people) with hundreds of clients, his latest client is clearly his biggest.
Surge Trading Inc. purchased the Bernard L. Madoff Investment Securities LLC in a deal that was finalized Thursday for $25.5 million.
Sussman became involved because he is the former financial officer of Castor Pollux, now known as Surge Trading. Darin Oliver, former CEO of Castor Pollux, is now the president of Surge.
Sussman joins not only his former colleague Oliver, but a list of financial services heavy-hitters who bring savvy and expertise to what they hope will be a successful company.
Surge Trading's CEO is Frank Petrilli, former CEO of TD Waterhouse. Former Fidelity Brokerage Services LLC President Robert Mazzarella will serve as the nonexecutive chairman, Oliver its president and Sussman in charge of compliance.
"To be among those guys is pretty exciting for a guy in the middle of Londonderry, New Hampshire," Sussman said.
The way the deal is structured, $1 million of the sale price has already been paid back to the victims, with the remainder — $24.5 million — to be paid as the company makes a profit through 2013.
Sussman views himself as a modern-day Mighty Mouse, whose operatic theme song — "Here I come to save the day" — was well-known to children from the 1950s through the 1980s.
"We are looking to get money back to the victims," he said, "not take it away from them, like Madoff did."
Surge won the auction in April for the Madoff unit, which sold for a fraction of its former worth of about $1 billion. Officials said the unit was legitimate, unlike the investment arm at the center of the $65 billion fraud.
Madoff, 71, pleaded guilty in March to orchestrating the fraudulent scheme over 20 years through the investment unit of the firm. He was immediately jailed and is expected to spend the rest of his life in prison after sentencing on June 29.
Executives of the former Madoff trading unit, which matched buyers and sellers of stocks, included Madoff's brother Peter and two of his sons, Mark and Andrew. They have denied knowledge of the fraud and have not been charged with any crime, although their assets have been frozen.
Sussman said he hasn't met any of the Madoff family members, and he thinks they are no longer with the company.
But Bernie Madoff's scheme has left a huge shadow on the compliance industry. Sussman said new regulations are coming out almost daily that have been created because of the Madoff scandal.
"I went to a seminar recently on how to set up a hedge fund, and Madoff must have been mentioned 100 times," he said. "The entire regulatory environment has changed because of Madoff.
"This is good for us, because it's our business."
But this particular deal was tough because it is under such scrutiny by state and federal regulators.
"Everything is under a microscope," he said. "Every time we make a move, it gets leaked out to the media — we have to worry that nothing is done wrong. All the Is have to be dotted and all the Ts have to be crossed."
As such, his office on Parmenter Road is filled with stacks of documents devoted to the Madoff scandal.
Sussman said the reaction of government regulators to the Madoff scandal is understandable, but the real problem isn't with lack of regulations, it's with the lack of regulators and the lack of coordination among agencies responsible for overseeing the complex web of regulations.
"Looking into it, I can understand how it was overlooked," he said. "He's a lot smarter than people think. He's a genius to have figured this out, and he knew how to push everyone's buttons."
Material from Reuters was used in this report.
