Bloomberg News

Madoff Family May Keep $82 Million Under Mets Ruling Limitation

October 27, 2011

(Updates with excerpt from filing in third paragraph.)

Oct. 27 (Bloomberg) -- Bernard L. Madoff’s family would keep about $82 million of “other investors’ money” under a ruling that limited a bankruptcy trustee to claiming from the owners of the New York Mets only two years of withdrawals from the Ponzi scheme, according to a court filing.

The confidence man’s family took out $141 million in the six years before Madoff’s firm went bankrupt in 2008, of which less than $59 million was taken in the two years before the bankruptcy, trustee Irving Picard said in a filing. Many other investors are trying to hang onto “stolen” money that belongs to customers who took losses in the fraud, he said.

“But the trustee is a fiduciary of all customers and, as such, must make every effort to obtain redress for all the customers of BLMIS who fell victim to Madoff’s fraud,” he said in the filing in U.S. District Court in Manhattan yesterday, referring to the Madoff firm.

Picard wrote about the Madoff family in court papers filed after U.S. District Judge Jed Rakoff told him to explain why another investor, James Greiff, shouldn’t keep money he says he took “in good faith” from the Ponzi scheme. Rakoff’s Madoff caseload includes Picard’s suits against the Mets owners and Greiff.

Attempted Suicide

Ruth Madoff, the con man’s wife, told CBS News she and Bernard were so distraught by his crimes that they attempted suicide together, according to CBS. Their son Mark killed himself last year.

“These arguments implicate the questions about how to integrate the securities and bankruptcy laws,” Rakoff wrote in an order. Under securities law, some withdrawals from a brokerage firm may be protected from clawbacks, he has said.

Arguing that securities trades shouldn’t be protected from clawbacks, Picard cited his case against Peter Madoff, the con man’s brother. It exemplifies the “outrageous securities transactions” that feature in cases he has brought to reclaim fictitious profits, he said.

“Peter Madoff maintained at least two BLMIS accounts, for which he invested $32,146 -- including a grand total of only $14 after December 1995 -- yet he redeemed $16,252,004,” he said.

Charles Spada, a lawyer for Peter Madoff, didn’t immediately respond to an e-mail seeking comment on Picard’s remarks.

In one account, Peter Madoff generated a “purported gain” of almost $9 million based on a fictitious trade in Microsoft stock “despite having no money or securities invested,” Picard said.

Picard said Greiff had incorrectly accused him of being inequitable.

“Hiding behind the veil of ‘innocent investor,’ Greiff aims to keep money he now knows was stolen from other customers,” Picard told Rakoff.

Helen Chaitman, a lawyer for Greiff, didn’t immediately respond to an e-mail seeking comment on Picard’s remarks.

The case is Picard v. Greiff, 11-cv-03775, U.S. District Court, Southern District of New York (Manhattan).

--Editors: Fred Strasser, Charles Carter

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

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.


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