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Madoff's Hollywood Connection

The roster of victims goes way beyond Spielberg and Katzenberg. How did the scam of the century reach all the way across the country and into the pockets of the showbiz elite? It wasn't hard at all.

To hear him talk about the economic challenges facing the entertainment industry, you'd think that Jeffrey Katzenberg, CEO of DreamWorks Animation SKG, would be worried. Still, sitting in a meeting room on the DreamWorks campus, surrounded by plush toys commemorating his company's biggest hits, Katzenberg speaks in a tone that borders on serenity.

"I tell people, 'Wherever you are today, this is the new great,'?" he says, a Kung Fu Panda doll looming over his shoulder. "The sooner you forget what you had, the better off you'll be."

Katzenberg's Zen-like calm is especially surprising, given that just weeks before, he'd learned that he was among the Hollywood victims of Bernard Madoff's Ponzi scheme. Both Katzenberg and his DreamWorks co-founder, Steven Spielberg, had millions tied up with Madoff, most of it money they'd set aside for charity and all of it probably gone. As Katzenberg speaks of the belt-tightening that is happening in Hollywood, it's hard not to wonder about his own belt.

"If you look at where you were last summer, and that's your measure of how you're doing, it's hopeless," he says. His words could also apply to life after Madoff, I suggest. Katzenberg nods. His loss was humiliating, he admits. "It's gone. It's finished," he says. He refuses to reveal how much "it" is, though public tax filings show his and his wife's foundation had assets of more than $22 million in 2007. "I'm as lucky and as blessed as I can be," he says. "Let's move on."

If only it were so easy. The names of Madoff's other Hollywood victims are still gradually and grudgingly coming to light. Cond� Nast Portfolio has learned that Arnon Milchan, the billionaire producer of such films as Fight Club and Pretty Woman, lost at least $18 million in the scam. (Milchan declined to comment.) Actors Kevin Bacon and Kyra Sedgwick, who are married, have acknowledged that they too were taken.

How did so many smart people get so suckered? By Katzenberg's own account, he had never met Madoff, never even heard his name. Katzenberg is not a member of the Jewish country clubs in Palm Beach and Minneapolis where Madoff and his agents trolled for investors. He doesn't move in the social circles of New York's Upper East Side to which many of the scheme's patsies belong.

The answer, it turns out, lies closer to home. Katzenberg and Spielberg, like many people on the top rungs of the entertainment business, relied on the services of a personal business manager. Madoff had apparently figured out what industry insiders have known for years: More than agents, more than lawyers, business managers are the financial gatekeepers to Hollywood's elite.

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