Bloomberg News

Madoff Trustee’s First Payments to Customers Approved by Judge

July 13, 2011

July 13 (Bloomberg) -- The first payments to customers of con man Bernard Madoff out of funds collected by a trustee for his firm won approval from a bankruptcy judge, more than 2 1/2 years after the Ponzi scheme collapsed.

Trustee Irving Picard said in May he would initially pay $272 million to customers with approved claims, out of a $2.6 billion fund set up for Madoff investors. Yesterday’s order approving the payouts was issued by U.S. Bankruptcy Judge Burton Lifland in Manhattan.

Picard, who has filed more than 1,000 suits seeking money for Madoff investors, said May 4 that he had recovered $7.6 billion. In June, he estimated the principal lost by all Madoff investors was $19 billion. He and his law firm, Baker & Hostetler LLP, have collected about $179 million in fees for their efforts.

Because of court challenges, most of the money recovered isn’t available to put in the customer fund or distribute, Picard said in May. Investors are challenging his share of a $5 billion settlement with the estate of Jeffry Picower.

Picard’s lawsuits have targeted banks as well as individuals who invested large sums with Madoff. JPMorgan Chase & Co., sued for $19 billion for allegedly assisting the fraud, and HSBC Holdings Plc, sued together with so-called feeder funds for $9 billion, have challenged the trustee’s right to make such fraud claims, or sue on behalf of customers.

Two U.S. District Court judges in Manhattan are reviewing Picard’s right to sue banks and investors for damages.

The main case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, 08-ap-1789, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

--Editors: Peter Blumberg, Michael Hytha

To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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