Madoff Victims Will Get At Least $534 Million
Since last December, Irving H. Picard, a New York-based partner of Baker & Hostetler and the court-appointed trustee in the liquidation of Madoff's investment firm, has been working with the Securities Investor Protection Corporation, or SIPC, which acts as a sort of insurance fund for victims of failed brokerage firms. The SIPC insures accounts for up to $500,000. At Picard's discretion, investors owed more money than that can benefit from a prorated amount of whatever is recovered in the liquidation process. So far, $1.4 billion has been recovered, Picard said, but he expects to revise that number as the proceedings continue. The $534 million potential payouts are greater than the sum of all payments made by the SIPC since it was founded in 1970.
That repayment figure is almost certain to climb. In a telephone press conference on Oct. 28, Picard and SIPC President and CEO Stephen Harbeck explained that they have received 15,974 claims against Madoff's firm, Bernard L. Madoff Investments Securities. Picard has determined so far that 2,335 accounts were held by investors who deposited more money over the years than they withdrew, thereby qualifying as "net losers." Roughly 2,660 accounts had more money withdrawn over the years than was deposited. Picard is going through those accounts to determine whether he will try to get some of the gains back. He said he won't pursue investors who are destitute or undergoing significant hardship, such as those suffering from medical problems or losing their homes. Picard has identified 1,558 victims who will receive a portion of the $534 million and has denied 1,303 claims.
Lawsuits against Madoff relativesMadoff is currently serving a 150-year prison sentence ordered by a U.S. District Court in Manhattan on June 29, after he pleaded guilty in March to 11 counts of fraud, money laundering, theft, and perjury. Madoff's decades-long Ponzi scheme was uncovered on Dec. 11, 2008.
Picard is attempting to claw back profits made by Madoff investors and those who may have been complicit in the scheme. Toward that end, he has filed numerous lawsuits in recent months, covering some $15 billion in what he says are fake profits. Picard has sued four Madoff family members who held senior positions at Bernard L. Madoff Investments Securities for some $200 million. Those family members are: Peter Madoff, Madoff's brother and the firm's chief compliance officer; Andrew and Mark Madoff, Madoff's sons and co-directors of trading; and Shana Madoff, Madoff's niece and compliance director.
Picard also filed a $7.2 billion lawsuit against the estate of investor and philanthropist Jeffry M. Picower, who was thought to be one of the largest beneficiaries of Madoff's scheme. On Oct. 25, Picower was found drowned in his Palm Beach, Fla., pool after suffering a heart attack. Picard called Picower's death a "tragic event," but said it would not derail his pursuit of the case.
Picard said he and the SIPC have made "significant headway" in processing claims "under what have been very challenging circumstances."
"The Trustee's office is working tirelessly to ensure that every [Madoff] customer with a valid claim is given full consideration and handled as expeditiously as possible," he says. "That will continue to be our focus in the coming weeks and months."
An exhaustive search of old accountsStill, some Madoff investors are furious at how Picard is calculating their payouts—some to the point of suing him. Ronnie Sue Ambrosino, coordinator of the Madoff Coalition for Investor Protection, says she and her husband Dominic lost $1.66 million in retirement savings. She is awaiting a response to a complaint she filed after her original claim was denied.
"I believe that Picard is illegally defining how much money people are owed," Ambrosino says. She argues that the trustee is wasting time combing through decades of records to determine how much money investors put in and took out instead of using the figure that appears on their most recent statements. The latter definition is what was used to determine that Madoff had engaged in a $65 billion Ponzi scheme, the number that appeared in headlines. Ambrosino has not yet received any money, she says, and is living in a mobile home in Arizona while her husband looks for work.
Larry Leif, 59, a retired manufacturer of toys and sporting goods living in San Antonio, said he lost $8 million from two separate accounts he held with Madoff. Leif says the SIPC has committed $91,000 to him but he hasn't "yet received a dime."
"Picard says we should have known better. Shouldn't the SEC have known better?" Leif says. He adds that the legal fees Picard's firm is receiving gives Picard motivation to draw out the proceedings for as long as possible. According to Bloomberg, Picard's fees are capped at 3% of what he recovers for the estate, beyond $1 million.