Tomorrow’s edition of The Wall Street Journal reports that Hollywood financial adviser Jerry Breslauer steered his two top clients, Steven Spielberg and Jeffrey Katzenberg, into investments with New York money manager Bernard Madoff, and now the pair have been hurt in the widening $50B fraud scandal. The newspaper says Katzenberg has suffered millions in Madoff-connected losses, while one of Spielberg charities, the Wunderkinder Foundation, has sustained losses on investments with the Madoff firm. According to the WSJ, Breslauer was known to be a Madoff investor and has “likely sustained heavy losses” himself in the Madoff fraud.

Breslauer, now age 80, was for decades the financial adviser to many of Hollywood’s top stars and moguls. (I know it was seen as having “arrived” at the top rung of showbiz if the publicity shy Breslauer accepted you as a client.) But in recent years, Breslauer began to shed clients until he worked in semi-retirement handling only Spielberg’s and Katzenberg’s financial affairs. According to the newspaper, Breslauer’s financial relationship with Madoff (photo below)dates back to at least 2004, based on public tax records filed by the Mr. Spielberg’s Wunderkinder Foundation. “The foundation shows annual income from Madoff-related investments steadily increasing to the point that those investments accounted for at least 70% of the foundation’s reported earnings for 2006, the most recent year for which filings are available,” the WSJ reported.

Spielberg was one of Breslauer’s first Hollywood clients in the 1970s back when the director was still relatively unknown. “The relationship with Mr. Spielberg helped open other doors to the elite of Hollywood — including Mr. Katzenberg,” the paper said. Clearly, a lot of very savvy financial people were takenin my Madoff’s Ponzi scheme, and Breslauer is “routinely described as an honorable businessman and a relatively conservative investor by people who know him,” the WSJ noted. But “Breslauer is also someone who becomes deeply entwined in the lives of his clients,” the WSJ noted, reporting about several personal real estate holdings of Katzenberg’s and Spielberg’s on which Breslauer was listed as a trustee. Before this scandal, Katzenberg’s personal fortune had been estimated at around $860M and Spielberg’s at $2.7B.