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Authors: Richard; Hammer

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Candor, of course, did more than merely redecorate and refurnish the Margolies home. It also paid about $48,000 on the mortgage and another $4,250 for a maid to keep the house clean.

Then there was a condominium in Fort Lauderdale, Fla. Irwin and Madeleine Margolies had gone to Florida in early February 1981 to visit Madeleine's parents, Herman and Molly Malen, and to take a little vacation from all the hard work and pressure of running their successful operation. They decided while there that maybe it would be a good idea if they made a little investment, bought a condominium. They looked around and soon found one they thought ideal. The price was $152,500, and they offered no arguments. Madeleine wrote a couple of checks, for the 10 percent down payment of $15,250, on her personal account at Scarsdale National Bank, and the couple agreed to come up with the balance of $137,250 at the closing on June 15. The only problem with the down payment was that Madeleine didn't happen to have enough in her personal account at that moment to cover the checks she had written. That, naturally, was no problem. Candor simply deposited $17,000 in her Scarsdale account to cover the checks.

The balance for the closing was something else, though. The Margolieses already were pulling so much out of the Candor account that to take another $137,250 out at one time might arouse somebody's suspicions—if, that is, somebody happened to look. Margolies found another way. On his return from Florida, a friend introduced him to an Israeli diamond merchant named Zvi Oxenberg. Oxenberg was in New York on behalf of Bitterman Diamond of Israel trying to make a distress sale of some very good diamonds. They were valued at $180,000 on the market, and he was willing to part with them for $122,000. When he learned that Margolies owned Candor Diamond and so was in the business, he offered him the gems. It was such a good deal that Margolies could not resist. But, he told Oxenberg, Candor really wasn't the right company to buy them, since its diamonds were not of such good quality. (Actually, there was another reason why Margolies decided not to buy through Candor. Had he done so, the diamonds would have become part of the Candor inventory, and Maguire had a security interest in that inventory.) Instead, he said, he would purchase them through M & M Merchandising. It was a company owned by his in-laws and he had an interest in it, he explained, and its credit was sterling. It would be the right vehicle to take on the stones. Then, using all his salesman's winning ways, Margolies managed to convince the Israeli not only to turn over the stones to him and M & M Merchandising, but also to wait until September 1, 1981, for payment and not to expect any interest.

The diamonds in his possession, Margolies moved to cash in on them. He hurried to his friend and independent auditor Harris Freedman and told Freedman he had just come into some precious gems. He offered to turn them over to Freedman at a distress price of $125,000 if Freedman would share the profits from their resale with him. Freedman agreed. To make the purchase from Margolies and then to handle the sale, which Margolies would assist with, Freedman set up a company called Gortz, Inc. And who was named president of Gortz? Madeleine Margolies. According to Freedman, she was given the post at the urging of Irwin Margolies. He said that if he was going to assist in selling the diamonds at their full value, or close to it, this would give him a certain credibility. He would be able to tell anyone who asked that the reason he was the one selling the diamonds for Gortz was because Gortz was his wife's company.

By early April, Gortz was in business. Freedman handed Margolies a check on the new company's account for $125,000, made out to the purported owner of the diamonds, M & M Merchandising. Margolies sent the check to his in-laws, the Malens. They deposited it in a sixty-day time account at a Florida bank. The maturity date on the account, as it happened, neatly coincided with the closing date on the Margolieses's Florida condominium. Indeed, as soon as the account matured, the bank issued a teller's check for the $125,000, payable to Madeleine Margolies. She endorsed it over to the seller of the condominium. But with that check and the 10 percent down payment, the Margolieses still were $12,250 short of the full purchase price. Again, no problem. On the day of the closing, Herman Malen visited three different Florida banks, his pockets stuffed with cash, and came away with bank checks for the necessary balance.

The closing was held, the money changed hands, and the condominium belonged to the Margolieses. They took steps to make sure that it continued to belong to them no matter what later ensued. They told the seller to hold on to the title for the next several months before filing it. And when it finally was filed, showing that the condominium belonged to Madeleine Margolies, another document also was recorded showing that the property was mortgaged for $125,000 and that the holder of the mortgage was M & M Merchandising. It was a very unusual mortgage. First of all, no interest was payable on it. And even more unusual, the mortgage matured and became payable only when and if the condominium ever was sold. If, however, Madeleine Margolies decided that she wanted to transfer the ownership as, say, a gift to her husband, Irwin, or to her sons, Stephen and Douglas, or to her brother, Scott Malen, or to her parents, Herman and Molly Malen, or to anyone else, the mortgage would remain intact and not have to be paid off.

Meanwhile, there were the Oxenberg diamonds, now owned by Gortz. At about the time of the closing on the condominium in Florida, Irwin Margolies sent his brother-in-law, Scott Malen, around to see Harris Freedman. Margolies had little use for Malen other than as a messenger boy, though he employed him as a salesman for Candor. “He's a schmuck,” Margolies complained to his lawyer, Oestericher, and to others, “but what can I do? He's my brother-in-law.” Malen arrived at Freedman's office bearing a note from Margolies. The note asked Freedman to turn over the Oxenberg diamonds to Malen, who would, in turn, deliver them to Margolies. The jeweler explained that he needed physical possession of them because he was about to make a selling trip to show them to prospective buyers. Freedman complied. Malen took the diamonds and handed them to Margolies. Freedman never saw them again, and he never saw any money, and he was out the $125,000 that he, and Gortz, had paid for them. September 1 came and went and no money was paid by M & M Merchandising or anyone else to Zvi Oxenberg for the diamonds. His distress sale had, indeed, been a distress, for him and his principal in Israel, Bitterman Diamond.

Diamonds, of course, were an obsession with Margolies. They were his hedge against the future, whatever it might bring, they would see him through anything. Accumulating diamonds, then, was his passion. By early summer of 1981, he had the Oxenberg diamonds and he had the diamonds he had swindled from Van Mopes. And he had a lot more. He was pouring Maguire money into the purchase of diamonds, and not the low-quality stones that Candor used to make its merchandise, but very high-quality gems. The money to buy those diamonds—and here he was buying and not attempting to swindle anyone but Maguire—from the best suppliers was channeled through Candor, which had no use for them, and through a new company, Madeleine Chain Corporation, set up in April 1981 with Madeleine Margolies as president and her brother, Scott Malen, as vice-president, theoretically to make and sell low-quality, low-cost trinkets. Between them, Candor and Madeleine Chain bought $2,250,000 worth of the best diamonds by the summer of 1981.

And what happened to those diamonds? In the spring of 1981, one day Scott Malen was hanging around the Candor-Madeleine Chain offices on West Forty-seventh Street when his sister summoned him. She had a bag on her desk that she could hardly lift. She asked Malen to carry it for her. Together they made their way down the street to a nearby branch of Manufacturers Hanover Trust Company and down to the safe-deposit area. Madeleine Margolies signed the register for a safe-deposit box rented by a company called A & B Amusement Corp. It was a dummy, of course. It had just been formed. Its officers on the corporate register were listed as Samuel, Molly, and Ann Tuttleman. Molly Malen's maiden name was Molly Tuttleman. And the offices of A & B Amusement were the same as those occupied by the Margolieses's friend and attorney Henry Oestericher. At the bank's vault, Madeleine Margolies took the heavy, bulging bag from her brother and disappeared into the safe-deposit area, along with a safety-deposit box measuring nearly two feet by two feet by two feet. A little later, she reappeared with the bag and handed it back to Malen. It was now empty. (Two years later, the FBI obtained a search warrant and went into that box. It recovered four hundred diamonds worth about $600,000. That is about all that has ever been recovered of the $2,250,000 in diamonds purchased by Margolies and the other $3 million swindled from Maguire.)

But the diamonds in the safety-deposit box at Manufacturers Hanover and in other safety-deposit boxes in other banks, in the United States and abroad, were only part of the horde. Another part was put into the hands of a jeweler friend on Forty-seventh Street, Josef Gubits, to hold for safekeeping and, if necessity dictated, to turn quickly into cash.

But in his own amassing of great wealth and turning it to his own purposes, Irwin Margolies did not forget Margaret Barbera, who kept his books and who advised him and showed him ways to work his scheme so it would not be detected. She had been hired in June as a part-time bookkeeper. By September 1980, she was the full-time comptroller of Candor, keeper of the several sets of books and accounts and of its secrets. And her salary was $32,000 a year. But that wasn't enough, not with all the Margolieses were getting away with. She thought she deserved more. Margolies complied. He doubled her salary.

The Margolieses were buying cars every time she turned around. Barbera thought she ought to have a car, too, and she told Irwin Margolies so. He bought her a BMW.

She had a very close friend, Jenny Soo Chin, who was getting bored with life as a housewife. Besides, they were such close friends that they wanted to spend as much time together as they could. Barbera told Margolies she needed an assistant, and she wanted him to hire Jenny Soo Chin as that assistant. Margolies offered no argument. He hired Chin.

After a few months, Barbera told Margolies that she was working so hard, she needed a vacation. She and Chin would just love to go to Europe for a few weeks. Margolies agreed that she deserved that vacation and, what's more, he would foot the tab for that European vacation for her and Chin. And he did it not once but twice. (There is some speculation, but no hard evidence, that on those European trips, Barbera and Chin did more than play. The theory goes that she carried with her cash and diamonds, that she deposited them in safe-deposit boxes and secret numbered accounts, and that if some of those boxes and accounts belonged to Margolies, others belonged to her, and that what she put there will now remain unclaimed.)

One thing she hated, she told Margolies, was regular office hours, a nine-to-five job. Besides, the kind of work she was doing for him was not something she, or he, wanted done when there were other people around with prying eyes. He complied. She could set her own hours. She did, often arriving for work just as everyone was leaving, and working long into the night, often arriving for work on Saturday and Sunday when the office was otherwise empty, unless, of course, there was special work to do. Margolies never complained. But, then, there was little for him to complain about. Barbera was everything he had hoped for when he hired her, and more.

And so anything Barbera wanted, Margolies granted, within reason. But, with it all, with all of Margolies's compliance with her every wish, she never completely trusted him, no more than he completely trusted her. She took steps to protect herself should she need protection. She took sets of the Candor books and ledgers home and secreted them in her cluttered closet, and she let Margolies know that she had them.

Margolies always had intended that when and if his scheme collapsed, it would be Barbera, not he and Madeleine, who would take the fall. Barbera would be his patsy. Perhaps it was her revelation that she had in her possession the records that would clearly show just what had been done and how, that would shift at least part, and the major part, of the responsibility back to Margolies, that told him it was time to set his plan in motion.

12

One day in early May 1981, Margolies summoned Oestericher. According to Oestericher, if he can be believed, while he was always aware of the general outlines of the Margolies swindle at that moment he was not cognizant of the details or the scope. But he knew enough to realize how successful Margolies's plan had become. It was his hope and dream that soon, very soon, Margolies would offer him that implied partnership in a jewelry business, one that would make him rich and independent. And so anything that his friend wanted him to do, he was willing to do.

On that May day, Margolies wanted to talk about Barbera. She was doing a good job, he admitted. But she was untrustworthy. She had made off with copies of the books and records. It was essential to get them back and, at the same time, cast a cloud of suspicion over her, that she was not the loyal employee she seemed but a devious and possibly dishonest person who was stealing from Candor and trying to cover her tracks.

What Margolies wanted was Oestericher's help in manufacturing some sort of evidence to show that Barbera must be stealing from Candor, and then he wanted to hire a private detective who would be given the evidence and who would then, among other things, shadow her for a time, thereby implying that Margolies was very concerned that his comptroller was not all she seemed.

He and Oestericher discussed the first phase and came up with what they were sure was an ideal solution. They got a copy, easily obtained, of a Merrill Lynch transaction slip and filled it in. It revealed that on November 13, 1980, Margaret Barbera had purchased 4,325 shares of Superior Oil Company of Nevada for $795,800. Copies of the document were made, ready for whatever use Margolies wanted to make of them. (As it happened, Barbera did maintain an account with Merrill Lynch and, indeed, had used it at one time to purchase on margin shares in Superior Oil, but her holdings had never exceeded $21,000.)

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