Even after Madoff’s loss of life, work to unwind epic fraud goes on

NEW YORK — Epic Ponzi scheme mastermind Bernard Madoff is useless. However the effort to untangle his internet of deceit lives on.

Greater than 12 years after Madoff confessed to working one of many greatest monetary fraud in Wall Road historical past, a staff of legal professionals continues to be at work on a sprawling effort to get well cash for the hundreds of victims of his rip-off.

Their labors, which have already secured $14.5 billion of the estimated $17.5 billion traders put into Madoff’s sham funding enterprise, did not stop with the financier’s loss of life in jail in April.

Ongoing litigation by Irving Picard, a court-appointed trustee for the liquidation of Bernard L. Madoff Funding Securities, and his chief counsel, David Sheehan, may doubtlessly pull in billions of {dollars} extra.

“You don’t prefer to see anybody die. However on this case, it wasn’t going to have any affect on what we’re doing,” Picard informed The Related Press. “Our work goes on.”



The painstaking technique of making an attempt to unwind Madoff’s fraud started not lengthy after the cash supervisor’s arrest in December 2008.

Spooked traders began making withdrawals from Madoff’s funding fund, too, however he ran out of cash to provide them. Whereas his books stated his fund was value $60 billion, most of that cash did not exist. He’d by no means truly invested the money purchasers gave him.

When purchasers cashed out fictitious earnings, Madoff merely stole from different purchasers to cowl withdrawals.

Picard was given the duty of separating the “internet losers” — Madoff purchasers who didn’t money out of their accounts — from those that did.

Over time, internet losers with accredited claims have quietly seen a median of 70% of their investments returned. Internet winners had been subjected to so-called “clawbacks.” Not solely did they lose cash they thought that they had of their accounts, they needed to pay again earnings that they had withdrawn over time.

“These folks felt as if, and rightfully so, that that they had been broken twice — first by Madoff after which by this trustee saying ‘give me your revenue,’” Sheehan stated.

The method was troublesome for everybody. Some Madoff traders had retired early. Some had purchased good houses in costly locales. Some had made massive charitable donations, assured their nest egg was safe.



Gordon Bennett, pondering his account with Madoff was value $3 million, did heavy renovations on a house in Marin County north of San Francisco.

When he realized Madoff was arrested, he informed his spouse, “Kate, we simply misplaced the home.”

The monetary shock worsened months later when he realized that 25 years of annual withdrawals of as much as 10% meant he’d taken out greater than he’d put in.

Picard’s collectors needed his earnings. All of the sudden, Bennett was at risk of being added to the bucket of rich people and establishments the trustee was suing, claiming they knew or ought to have identified their returns had been fraudulent.

“That was fairly scary,” he stated. “We ultimately labored out an association with the trustee and we despatched him all our paperwork and stated: ‘Look, you understand, we don’t have any cash.’ So he ultimately stated: ‘OK, I’ll go after larger fish.’”

And Picard did, with some assist from federal prosecutors. The most important single chunk got here in late 2010 when the widow of a Florida philanthropist agreed to return a staggering $7.2 billion that her husband, businessman Jeffry Picower, had pocketed. Months later, one other $1 billion was secured from one of many many feeder funds that the trustee accused of ignoring pink flags about Madoff.

Lately, Bennett, 74, finds solace in the identical residence after a good friend purchased it and rented it again to him.

“So we don’t have $3 million {dollars} now, however you understand what, we don’t want $3 million {dollars},” he stated.

Some victims contacted by The AP stated that the information that Madoff had died at age 83 whereas serving a 150-year jail time period served solely as a tragic reminder of crimes that altered their lives.

Richard Shapiro, 68, of Hidden Hills, California, stated he misplaced a “very vital” quantity of his internet value. In a panic, he briefly put his home up on the market and un-retired to earn cash once more as a industrial actual property growth supervisor.

Picard’s fast success at recovering some cash spawned a mini-industry of corporations providing Madoff victims rapid money in return for his or her rights to regardless of the trustee recovered.

Shapiro pounced on that chance, promoting one in every of his Madoff funds for a lot lower than it was value, and one other for nearer to what Picard would possibly ultimately fetch, enabling him to save lots of his residence and begin rebuilding his life.

“I do have my life again collectively now,” he stated. “And I’m certain that’s the case with each Madoff sufferer. I don’t assume anyone walked away from it unscathed.”

One other sufferer who misplaced cash, 59-year-old Charles Gevirtz, recalled feeling the payout components was a uncooked deal.

“I used to be sort of offended on the trustee,” stated Gervitz, an engineer from Detroit. “He didn’t even attempt to provide you with a extra affordable settlement.”

Nonetheless, Gervitz discovered a bigger lesson to the ache: “You don’t get one thing for no nothing. Mainly, if it’s too good to be true, it’s.”



Picard and Sheehan carry their very own reminiscences of the Madoff saga. Sheehan recalled how there was one one that didn’t provide any assist over time: a delusional Madoff.

“He truly would complain to me that the individuals who received the false earnings had been getting cash, so why had been they complaining? He was doing them a favor,” Sheehan stated in describing his interactions with the disgraced financier, together with jail visits. “It was stolen cash. It wasn’t a lot of a favor.”

Then there was the art work recovered from Madoff’s workplace and bought at public sale, together with an notorious 4-foot sculpture depicting a screw — titled “The Tender Screw” — and bull lithographs by Roy Lichtenstein. All introduced in more money by means of auctions.

“There have been plenty of belongings we may promote that you just wouldn’t discover within the typical case,” Picard stated. “Right here that they had different folks’s cash to spend, and so they did.”

Requested whether or not the restoration effort was winding down, the legal professionals predicted it should go on at the very least one other two to a few years — one thing they’ve been saying for a decade.

The trustee nonetheless has the monetary backing of the non-profit Securities Investor Safety Company (SIPC) to maintain international litigation going in opposition to the remaining clawback holdouts – together with feeder funds and different subtle cash managers who did not detect the fraud.

However Picard assured, “Sometime it should come to an finish.”

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