Picking up the pieces

While there was a lot of big-city moving and shaking going on to land the sale of the legitimate business arm of the fallen empire of Ponzi financier Bernie Madoff, it was the small-town t-crossing and i-dotting of a team of CPAs in Londonderry that got them there.

New York-based Surge Trading Inc., formerly Castor Pollux Securities Inc., recently closed the deal to purchase Bernard Madoff’s former securities trading unit for a reported $25.5 million.

The securities trading unit was one of the only legitimate branches of the Madoff empire, recently brought down by an investigation that led to Madoff’s arrest and subsequent confession that he bilked investors out of an estimated $65 billion in an elaborate Ponzi scheme.

Surge won the auction for the business, which was valued at $1 billion in April but only after it jumped through several months and hundreds of hours of regulatory scrutiny. And for that, they went to the Londonderry-based Regulatory Compliance LLC and Stephen Sussman, president.

Regulatory Compliance is a consulting firm for brokers and dealers to make sure their clients are compliant with Securities and Exchange Commission regulations. Getting a hold of one of Bernard Madoff’s former companies, even the legitimate one, was not going to be easy.

Earlier this year, Darin Oliver, who was at the time chief executive of Castor Pollux, approached Sussman with an idea to bid on Madoff’s securities-trading unit.

“There was some hesitation,” Sussman said. “We had extensive talks about this, many until 2 in the morning. I was playing devil’s advocate a lot, asking him if he really wanted to do this. But he showed me the documents, his own confidential documents as to why this part of it was legitimate. Bernie Madoff himself said this was the legitimate part of this business. And Darin did quite a bit of due diligence.”

Time pressure

At first, it was all up to Sussman to get the books, federal and state filings and projections in order. Since the bid was closed, for the first two months he had to work in secret.

“Only my wife and myself knew until the bid went public,” he said of Lisa Sussman, who also works at the firm. “So I would be getting slammed with other work, while secretly working on this. I would say I spent 75 percent of my time for the first few months working on this. I spent a lot of nights and weekends working on this — a lot.”

In March, Surge won the bid, only to inspire three more bidders to hop on board and make an offer.

“The price went up,” Sussman said. “It was half the cost before they up-bid it.”

Eventually, once it was OK to discuss what he was doing, he still could only enlist about four members of his 20-person staff to work alongside a handful of members of Surge and its legal team.

And then there was the time pressure. The deal received no special treatment from regulators. They had about 30 days to make sure the business was compliant – no more, no less.

“Everyone was full-time on this,” Sussman said. “My employees and myself missed out on a lot at home when we were working on this. None of us had a lot of hot meals for a few months.”

Sussman said the paperwork was daunting. “Every piece of paper, we’d have to hammer through and then re-hammer it and then go over it six times through,” Sussman said. “We basically inundated them with paper. It wouldn’t be an exaggeration to say that some of the filings stood a foot high.”

After 50 drafts, Surge was compliant and could seal the deal, almost.

“There was an item that was missed,” Sussman, a little weary, said. “So we had to file an amended projection. But that’s OK. The big part is over … (What’s submitted) is what allowed the transaction to close.”

The first thing he did to celebrate his victory? “I went to sleep,” he said. “I might have gone to Mohegan Sun too. We’re kind of still waiting to celebrate.”

He may still be waiting because his work is not quite finished. Sussman said he will continue working with Surge for the next six months to a year, at which point it’s up to Surge whether to give the work to someone in-house or continue to contract the work.

The project has also touched him on a personal level.

“What means something to me too is that $25 million gets back to the people who lost money,” he said. “All the proceeds from the sale goes to the trustee who gives it back to the victims in this. A lot of the victims, as you know, were Jewish, and I have a Jewish background. So it gave me a good feeling that I was able to help in some way.”

– MELANIE PLENDA

THE TELEGRAPH