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  It made a nice story. It had about the same elements and ring of truth as most of his other tales. And it would have amazed the manager of Bank Leumi Israel on Ben-Yehuda Street in Tel Aviv had he heard it, for two days after their arrival, Irwin and Madeleine Margolies appeared in his office. After long discussion and explanations, they opened a secret numbered account. It was in both their names, jointly. Only the bank manager had access to the records revealing their identities. No correspondence relating to the account was to be mailed to the United States. They opened the account with $200,000, in a three-month certificate of deposit earning 19% interest. (Margolies later would claim that the $200,000 had been withdrawn from Candor’s New York account and transferred to Israel in the first place to help cover his business debts and that it had been almost immediately withdrawn after the deposit for just that purpose. Abiding by the country’s banking regulations, Bank Leumi Israel kept its silence.)

  The couple stayed in Israel for two weeks, touring, seeing the sights, and doing a little business in that very important center of the world diamond industry. Then it was on to Munich, where they rented a car for a drive to Zurich. That city is, of course, home to most of Switzerland’s major banks and the center of the fabled secret numbered account. By the time the Margolieses departed Zurich, they had a few, and Madeleine had a new $1,100 mink jacket to console her for the supposed sale of her jewelry in Israel.

  Then it was back across the Atlantic, not home yet but to Canada. In Toronto, they rented a car to drive across the border to Detroit. In Detroit, they assumed false names and under them boarded a plane for Florida.

  While they were away, though, they were not cut off from events at home, not ignorant of what was going on, not out of touch at all. Margolies called Oestericher almost every day, at his office and at home, held lengthy conversations in which he was completely filled in and during which he gave explicit instructions to be carried out in his absence. And he and Madeleine spoke often with their sons, Steven and Douglas, though never over the phone to their home in Greenburgh. Oestericher made the arrangements. Steven and Douglas were to go to specified public phone booths at appointed hours and a call would come to that phone from their parents, wherever they happened to be.

  There was much that Oestericher and the Margolies sons had to report, and much that Margolies had to tell them, especially Oestericher. Candor might now be dead, or on its deathbed, bled of every ounce of vitality and viability, but in its place stood Madeleine Chain. In the absence of Margolies, it was being run by Madeleine’s brother, Scott Malen, as quondam president and owner, Madeleine later claiming that she had sold him all the stock for a few thousand dollars. Margolies hardly trusted Malen to run even the simplest errands let alone to guide the destiny of a company that he felt was crucial to his future plans. Through Oestericher Margolies gave the directives that guided Malen in his operations.

  As important as anything to Margolies was to keep track of Barbera, not to let her feel abandoned in this crisis. Though Madeleine Chain had no offices and no sales, it did maintain desk space at Oestericher’s office. And Malen was instructed to keep three of Candor’s employees and to pay them in cash every week. Those three included a diamond sorter, the Candor office manager, and Margaret Barbera.

  But Madeleine Chain served other purposes, too. It was a funnel through which laundered Candor-Maguire money could be channeled to the Margolieses for their own uses. For instance, Madeleine Chain, according to its books, was kept afloat for a time through an advance of $30,000 from a man named Boaz Sussman. Malen said the money had been received in cash in three separate parcels delivered by the postman. Sussman, however, had a different story when he was turned up. It seems that he was a distant relative of Oestericher and, at Oestericher’s urgent entreaties, he had loaned Madeleine Chain about $2,000. And that was the extent of his involvement.

  By mid-September, Irwin and Madeleine Margolies were home. The FBI, among others, very much wanted to talk to them, and especially Irwin. What had been a semi-official investigation had, with the uncovering of the fraud and the action to throw Candor into involuntary bankruptcy early in August, become official. The case was on the desk of Special Agent Robert Paquette, working out of the New Rochelle office. He meticulously went through all the records and files and books he could find of Candor and its customers, real and fictional, and of Maguire, and confirmed all that Maguire had feared. What he wanted then was very much to talk to Irwin Margolies. But Margolies was nowhere to be found.

  Then he surfaced and called the FBI and said, in all innocence, that he understood somebody wanted to talk to him. An appointment was made for him to appear at the U.S. attorney’s office on the morning of September 23. With him was his attorney, Henry Oestericher. Margolies was at his most winning and cooperative, and injured. He answered every question, had explanations for every seeming contradiction and problem. The trip to Israel and the transfer of the $200,000 from New York to Tel Aviv? Simple. The trip was a vacation; the transfer was money to pay business obligations; there had been no luxury journey, though; he and his wife were so broke on that trip that he had to pawn her jewels to raise the cash to finance it.

  The swindle of Maguire? He was completely unaware of that until it had all come down around his head. It was all the doing of his comptroller, Margaret Barbera. He had so trusted her that he had given her complete control over the company’s books and records, had permitted her to handle the assignments to the factor and all the rest. And now look how she had betrayed him. She had done it to enrich herself. She had destroyed him and his company in the process. She had put him in this kind of jeopardy. His trust had been misplaced. Obviously she was an evil, greedy person, and the law ought to come down on her.

  Did the authorities want to know what she had done? He would tell them, at least as much as he knew, and he was sure there was much more that he didn’t know. For one thing, she had used a lot of the money she had stolen from him, and Maguire, to make investments for her own personal aggrandizement. And here, he and Oestericher produced the Merrill Lynch order slip showing the purchase of about $795,000 worth of Superior Oil stock. Where had they found that slip? Why, just before Irwin and Madeleine left for Israel, they had searched Barbera’s desk and, lo and behold, there it was.

  And just why had they happened to have searched the desk of Barbera, until then the person they considered a loyal employee, until then the person they relied on so completely, until then considered their regent in their absence? Why, because on July 27, as they were getting ready to leave for Israel, she had called Irwin and told him that she had taken the entire inventory of diamonds and gold and hidden it and would not return it unless Margolies paid her $100,000, and she wanted it without delay, immediately, not after their return from their trip. And, Margolies said, Oestericher could confirm this. He had called Oestericher as soon as he got that message from Barbera and told him about it. Oestericher confirmed it.

  So the FBI talked to Barbera. She didn’t know what they were talking about. All she was was a bookkeeper, with the glorified title of comptroller. All she did was keep the books. All she did was write down what Irwin and Madeleine Margolies told her to write down. She wasn’t supposed to ask any questions, and she didn’t. She had never bought $800,000 worth of stocks in her life. She had never stolen any jewelry from Candor and held it for ransom. Obviously Margolies was lying about her to cover up for what he had done. She was not a thief and had never been one. She’d had nothing to do with the fraud that had taken place. That was all the doing of Irwin and Madeleine Margolies and she wasn’t even aware of it; she had never questioned the figures they had given her, had always thought they must be correct. It was a terrible thing to have loyalty, and she had given them her complete loyalty, rewarded this way.

  It was, for the moment, a standoff. Margolies was claiming loudly that he was innocent, he was wronged, it was all Barbera’s doing, and Barbera was saying that she was innocent, she had done nothing,
she was the wronged party, and she was pointing her finger at Margolies. Paquette and the other FBI agents now on the case, and the lawyers in the U.S. attorney’s office, might be fairly certain that Margolies was the guilty party, but belief is one thing and proof is another, and they didn’t have the proof. It was Margolies’s word against Barbera’s. The authorities were sure, too, that Barbera knew a lot more than she was telling. If they could turn her, she might lead them to the convincing and convicting evidence that would wrap the net tightly around Margolies and, perhaps, get Maguire some if not all of its money back, which was, of course, what everyone wanted.

  Barbera could have given them exactly what they wanted and needed. She had Candor’s books, the ones that would reveal just what had been done to Maguire and how. And Margolies knew she had those books, knew that his future depended on what she did with them. In the fall of 1981, it was Barbera’s intention to do precisely nothing with those books except sit on them. For one thing, they were, she thought, her protection against any retribution from her one-time employer and now her enemy, and having worked for and with him for so long, she knew that he was capable of many things. There were phone calls now, as the year was dying, threatening phone calls from Margolies. He ordered her to keep her mouth sealed. He ordered her to return the books. He threatened dire consequences if she should talk or if she didn’t return those records, or if she should show them to anyone, especially those who were investigating the case.

  She had no intention of doing any of those things. Her own safety, and not just from Margolies’s wrath, depended on her silence and her resistance to any pressure, from any source. If she talked and turned those books over to Paquette or the federal lawyers, she was in very great danger from them. Those books would reveal just how deeply she was involved in the swindle, how great a role she had played in it, that she was not the innocent she claimed but a willing participant, if not as guilty as Margolies, nevertheless very guilty herself. So she kept her silence and she kept her distance and she held to her story. The authorities pressed. She held fast.

  In those months, Margolies was putting several faces to the world. There was the sad, defeated face. He filed for personal bankruptcy. He was, he declared, without assets and a ruined man, all because he had trusted a woman not deserving of his trust.

  There was the devious face, scheming to save what he had taken and ensure his future. With Maguire and all those other creditors closing in, the first thing was to save the Greenburgh house from their grasp. There was that $180,000 mortgage still outstanding with Scarsdale National Bank, and he was very worried about that. Scarsdale was a wholly owned subsidiary of Irving Trust Company. So was John P. Maguire. Margolies thought that because of the relationship, the bank might foreclose and sell the house to begin to repay the debt to Maguire. It was vital to prevent that.

  Margolies called in Oestericher, and with him hatched a way out. Oestericher knew a New Jersey real-estate broker named Harry W. Fry. They were, if not friends, at least close acquaintances who had done business together in the past. Now Oestericher called Fry and asked if he happened to know anyone who might have some free money around to take over a large mortgage on a Westchester home. Fry made a few inquiries, and then, before he had time to follow up, Oestericher called again. Forget it, he said. We’ve found a foreign investor by the name of S. Nussbaum, who’s willing to take the mortgage as an investment, since it will be for just a year and pay sixteen percent interest. What we’d like you to do is represent Nussbaum at the closing and then act as his collection agent. For that we’ll pay you a seven-thousand-dollar fee.

  The closing took place in Oestericher’s office on October 24. Madeleine Margolies was there, and so was Fry, and so were Oestericher and his sometime partner, Norman Schwartz. Nussbaum was absent, but Oestericher had a letter from Nussbaum that he showed to Fry giving his consent to the proceedings. Madeleine Margolies handed Oestericher a check for $180,000 drawn on a Zurich bank and made out to her, supposedly from Nussbaum. The mortgage papers were signed and executed. Madeleine handed Fry a check on her personal account for $1,800 as partial payment for his fee, with the balance to be paid later. It was, by Oestericher, in cash. Schwartz assured Fry he would take care of recording the mortgage.

  That out of the way, Madeleine Margolies moved quickly to protect her home. Oestericher handed the check back to her. She endorsed it over to the Scarsdale National Bank as payment in full for the $180,000 outstanding on the mortgage. It was dispatched to the bank.

  If the Margolieses thought they were now fully protected, that they had saved their home, they were wrong. The relationship between the Scarsdale bank, Irving Trust, and Maguire being what it was, Irving Trust was not long in learning about the payment through the endorsed Zurich check, and, naturally, Maguire heard the news, too. Maguire’s attorney, David Blejwas, hurried to court. He demanded that the check not be honored until there was a hearing to decide whether the money actually belonged to this Mr. S. Nussbaum, whom apparently nobody had ever seen and whose existence was attested to only by the letter Oestericher had shown Fry, or if it was actually laundered Candor money that, thus, rightfully belonged to Maguire.

  This was very bad news for Margolies, and the list of enemies accumulating within his mind now expanded to include Blejwas. Margolies was determined to forestall that court action, to overturn it. He and Oestericher rushed out to New Jersey, arriving late in the evening just as Fry was closing his office. They had an affidavit with them for him to sign. It asserted that Fry had, indeed, found a foreign investor and placed the mortgage with him, and so the $180,000 check did not represent funds put up by Irwin or Madeleine Margolies or Candor but was money put up by this Mr. Nussbaum. Somehow or other, Margolies and Oestericher persuaded Fry to sign the affidavit, and Oestericher’s partner, Schwartz, notarized it.

  Then came the court hearing on Blejwas’s motion. It was a staggering blow to Margolies. Fry renounced the affidavit. He told the court that he had never found a foreign investor for the mortgage and so had no basis on which to say whether or not the $180,000 check came from the Margolieses or Candor or anyone else. In fact, he said, he had even tried to find this S. Nussbaum, but all his efforts had been fruitless. After hearing Fry’s story, the court declared that the $180,000 did not belong to Nussbaum, whoever he might be, but rather to Candor and thus was part of Candor’s assets that belonged to Maguire and so could not be used to pay off the Margolieses’ mortgage.

  Margolies was not one to surrender easily. He searched for ways to overturn that judgment and thought he had found one. He came up with Joseph Gubits, a jeweler friend of his on Forty-seventh Street. He got Gubits to swear to an affidavit that he was actually the unnamed foreign investor in the mortgage and that somehow he had been persuaded to make a loan of $180,000 to a business acquaintance, S. Nussbaum, to fund that mortgage. But when the court summoned Gubits to testify to this, he failed to appear. And so the court’s judgment that Maguire had a legal right to the $180,000 Zurich check stood.

  Later, appearing before a grand jury, Gubits would be asked about the whole affair. “Mr. Gubits,” the question was posed, “in the affidavit there is a reference to a hundred eighty thousand dollars, and the statement that you signed that the check represents ‘my personal funds, none of the funds of this mortgage loan came from Madeleine Margolies, Irwin Margolies, Candor Diamond Corp., or any member of the Margolies family or Candor Diamond Corp.’ Is that statement true?”

  “I signed it,” Gubits said.

  “Is the statement true?”

  “Yes, sure.”

  “Is the last half of the statement true?”

  “I didn’t pay any attention to the names, here, but …”

  “The one hundred eighty thousand dollars represented your personal funds?”

  “Yes, sure.”

  “Where did the money come from, the one hundred eighty thousand dollars? Barclays Bank?”

  “No.”

  “Mizrachi Ba
nk?”

  “No.”

  “Where?”

  “From sales, what I sold in Switzerland,” Gubits said.

  “When?”

  “Over the eighties. 1980.”

  “You left Israel with eight thousand dollars, nine thousand dollars. Aside from the eight thousand dollars, nine thousand dollars in cash and your investment in Gem Electronics … it is your testimony that you lent that one hundred eighty thousand dollars to Madeleine and Irwin Margolies for a year?”

  “Yes.”

  The grand jury indicted Gubits, charging that he “unlawfully, willfully, knowingly, and corruptly impeded and endeavored to influence, obstruct, and impede the due administration of justice.”

  All that took years, of course. And the delays served the Margolieses’ purpose. They retained their home. They even, while in danger of losing it, continued to spend money, despite their supposed bankruptcy and poverty, in the grand manner to refurnish and redecorate it regularly.

  15

  It had been a very bad autumn for Irwin Margolies, perhaps the worst in his life. He had all those millions in diamonds squirreled away in safety-deposit boxes, with his friend Joseph Gubits, and elsewhere, and he had all those other millions hidden in secret numbered bank accounts and other safe places, but he had to be very careful how he used that money. People were watching, calculating, trying to trap him, the FBI agents, the government attorneys, the people from Maguire. Caution was the word; there would be time in the future. But Madeleine still was spending in the grand style; still redecorating and refurnishing the house, still buying cars, and even though she was paying cash for everything, it still worried him. He told his friend Oestericher that he wished she’d slow down, but who can make a woman listen?