The mini-Madoff of Brooklyn, and the customers who can't stop trusting him

In the course of the Bernie Madoff scandal, one of Warren Buffett's catchier quotes clamored endlessly through the echo chamber of money media: "When the tide goes out, you learn who's been swimming naked."

Now, with Madoff sitting in prison and the furor around his stolen billions starting to subside, a few lower-level scammers are jockeying to replace him as the new investor with no clothes. The Madoff of the moment is Philip Barry, a Brooklyn-based investment advisor who faces a host of charges for what's looking like a $40 million Ponzi scheme. But even as government investigators pore over his records, many of Barry's customers clearly aren't ready to give up on him.
Since last December, when Madoff's sons turned him in, Buffett's metaphoric tide has continued to retreat. Perhaps it was only the size and scope of Madoff's scheme that did him in -- the high-profile, high rise house of cards that couldn't stand forever. Philip Barry seems like the furthest thing from that: a low-rent crook operating out of a storefront in Brooklyn's blue-collar Bay Ridge neighborhood, his office decorated with shag carpeting, utilitarian furniture, and a black-and-white TV. Barry went for a slightly scruffy look, too: brown-bagging his lunches, heating up TV dinners at the office, and avoiding flashy clothes.

His style was perfect for a certain type of customer: cheap clothing and high returns meant a man who was serious about saving money, not spending it. And just as an account with Madoff signaled a financial coming-of-age for many of his clients, an account with Barry suggested a customer who knew something special -- who had a friend-of-a-friend who could give great investment advice. For their respective customers, Madoff was "the money guy," while Barry was "my money guy."

Perhaps that's why so many of Barry's customers have decided -- so far -- to stand by their man. Unlike Madoff's investors, who were quick to clamor for their money, Barry's customers seem more circumspect. Some, including New York State Conservative Party chairman Michael Long -- who lost $15,000 with Barry -- are convinced that Barry invested in good faith but was done in by the shaky financial and real-estate markets.

Of course, others haven't been quite so forgiving. Barry's various companies, including Philip Barry LLC, the Leverage Group, North American Financial, and Saint Joseph Development Corp., face a host of lawsuits. Apparently, Barry promised a minimum return of 12.55 percent to most of his customers but wouldn't allow them to withdraw their funds. However, the biggest claim is that Barry, like Madoff, used money from new investors to pay off old ones. If that proves true, this classic "Ponzi" scheme will be the end of Barry.

Right now, it is unclear if Barry is a scammer or a sincere investor who has simply been flooded by bad luck. But as this case works its way through the courts, it's worth noting that nobody -- not your guy, not my guy -- is completely beyond reproach. Anyone could be swimming naked.,feedConfig,localizationConfig,entry&id=694307&pid=694306&uts=1250541635
Famous White-Collar Crimes
Click through the gallery for a look at some of the most high-profile white-collar crimes in recent history.
Stephen Chernin, Getty Images
Stephen Chernin, Getty Images
Read Full Story