Claws are out for Ruth Madoff

For once, there is no one camped on the corner of Lexington Ave and 64th St. No television camera crew. No breathless newspaper reporters. Not even a lone paparazzo. For more than three months, 64th and Lex were the co-ordinates for an extraordinary media scrum, and even for some public protests, while a certain Bernard and Ruth Madoff looked down from their penthouse above.

But Bernard Madoff is in jail now, guilty pleas entered to all 11 of the fraud and perjury charges laid on him. His wife and companion of 50 years still has the US$7 million ($12 million) apartment - for now - and the services of the security guards she hired to protect it after she and her husband shot to infamy.

Her world, though, once so privileged and glamorous, is closing in. Homes in two countries are under threat of seizure; boats, jets and bank accounts have been confiscated or frozen; the government is even coming after her jewels.

Ruth Madoff was at the side of history's biggest swindler for the duration of his extraordinary fraud and - from talk show hosts to tabloid readers, from Madoff's victims to FBI officers - it seems the whole of the US is speculating about how much she knew, how much responsibility might be hers, and how much she should pay.

The place you are most likely to catch a glimpse of Mrs Madoff now is further downtown, outside the Metropolitan Correctional Centre, in the financial district of Manhattan where Madoff used to be one of the most powerful men on Wall St before his business was revealed to be a US$65 billion Ponzi scheme.

Mrs Madoff made her first visit to see him last week, igniting another storm of flashbulbs but staying silent under a barrage of questions. Photographers thought they caught her in a fleeting smile. When she had previously emerged from the apartment, a week after her husband was jailed, her trip to the supermarket ended in chaos as paparazzi descended.

"Oh, this is crazy, forget this," she had exclaimed, shoving her trolley into the shelves and storming out. "Oh, very exciting, I went to the grocery store." The tabloids did indeed find it exciting. The New York Post screamed: "She was shopping for detergent - but will she come clean?"

The people now on the trail of Mrs Madoff are the FBI, the state prosecutors and the Serious Fraud Office in the UK, who are painstakingly piecing together her involvement in her husband's business and her own personal finances. They are testing Madoff's claim, repeated from the day of his confession in December to his appearance in court last month, that he acted alone. Mrs Madoff has not been charged with any wrongdoing, and her lawyers deny any.

The 67-year-old lives in a kind of limbo, flitting unhappily between New York and Palm Beach, where she and her husband had the mansion and the boat and the club memberships required of that rarified place and where Madoff's friends solicited for him some of his wealthiest victims.

If in New York Mrs Madoff is hounded, in Palm Beach she is largely ostracised. In a community where it is vital to be seen in the right company, and in the right outfits, she is decidedly out of fashion, and there has been an explosion of sniping about her. Journalist Lucinda Franks, brunching at the Palm Beach Country Club, reported back that members and other locals are damning Mrs Madoff as "a mousy little woman" or "antisocial" and "everyone down here thinks she was involved in the Ponzi scheme".

According to Franks, when Mrs Madoff turned up in Palm Beach just before her husband was jailed, news of her shopping trip swept the area, with gossips commenting on the US$7500 ($12,913) Birkin bag she carried with her and even wondering where exactly she found her four female companions, since she had rarely previously been seen out of the company of her husband.

The cattiness is the least of it. In the weeks since that visit, the Palm Beach mansion has been seized by the US Government, the first round in its attempts to confiscate as much of the Madoffs' wealth as possible before parcelling out what they can to the Ponzi scheme's thousands of victims. They have identified US$100 million in personal assets they claim can be confiscated as the proceeds of fraud.

That list of the couple's assets was made public by Madoff's defence team last month. Their four homes are worth about US$22 million, all but one of them in Mrs Madoff's name alone. Their four boats add up to US$9.3 million. The penthouse apartment in Manhattan contains US$104,000 of silverware and other items, including a US$39,000 Steinway piano. Mrs Madoff's jewellery is worth US$2.6 million.

But having lost the Palm Beach home she is not going to give up the penthouse without a ferocious fight. Her lawyers say the apartment, plus about US$62 million in cash and bonds, are hers alone and unrelated to her husband's finances. She says these sums come from investing a multimillion-dollar inheritance from her father, Sol Alpern. He had been one of Madoff's earliest cheerleaders, recommending to friends that they invest with his new son-in-law as he began building his business on Wall St in the 60s.

Madoff gave his wife a helping hand in her legal fight when he claimed in court that "to the best of my recollection" he began his scam in the early 90s. That could mean that the apartment, purchased in her name in the 80s, may be saved for her - but prosecutors say his scheme began much earlier than he is letting on.

"It's an absolutely crucial point," says Daniel Ruzumna, a New York attorney who has defended the spouses of other alleged fraudsters against similar forfeiture actions.

"If the fraud does go back to the 80s, from that point on, anything she purchased with any of his money will be traceable to the proceeds of fraud."

He thinks her bid to hold on to the apartment will ultimately fail and Mrs Madoff, like so many of her husband's victims, faces a future of homelessness and penury.

"Most people in relationships tend to commingle their assets, at least to some extent. I think Ruth Madoff is going to struggle to hold on to her assets, now that the government is taking affirmative action. This fraud is so much greater in scale, has gone on so long without being detected and caused losses that are so staggeringly high, I think the government can go after almost any assets at all as they try to pay back victims."

The victims of Madoff's fraud who showed up in court to see him plead guilty last month certainly don't believe his wife should be shielded. There were hoots of derision from their benches when a defence lawyer talked about Mrs Madoff paying for the penthouse security guards "out of her own pocket". They believe her money is his money, and therefore theirs. More to the point, many victims simply don't believe that Mrs Madoff is an innocent dupe, but rather that she too knew that Madoff Investment Securities was a giant pyramid scheme.

It has been revealed she made large withdrawals from brokerage accounts in the UK and US in the weeks before her husband's scheme collapsed, including a US$10 million withdrawal on the day he confessed to their sons.

- INDEPENDENT