Recovery of funds from the Madoff investment scandal
Encyclopedia
There have been attempts for the recovery of funds from the Madoff investment scandal
.
Bernard L. "Bernie" Madoff's combined assets are about $826 million and have been frozen. Madoff provided a confidential list of his, and his firm's assets to the SEC on December 31, 2008, which was subsequently disclosed on March 13, 2009, in a court filing. Madoff had no Individual Retirement Account
s, no 401(k)
, no Keogh Plan, no other pension
plan and no annuities
. He owned less than a combined $200,000 in securities in Lehman Brothers
, Morgan Stanley
, Fidelity Investments
, Bear Stearns
, and M&T Bank
. No offshore or Swiss bank accounts were listed.
Professor John C. Coffee
of Columbia University Law School said that much of Madoff's money may be in offshore fund
s. The SEC believed keeping the assets secret would prevent them from being seized by foreign regulators and foreign creditors.
on Manhattan
's Upper East Side
; an $11 million mansion in Palm Beach, Florida; a three-bedroom apartment in Cap d'Antibes on the French Riviera
valued at $1.5 million; $45 million in municipal bond
s and $17 million in cash; $8.8 million worth of yachts; and $2.6 million worth of jewelry. The SEC is working with federal prosecutors, who have filed a notice with the Federal Court to seek forfeiture of all listed ill-gotten assets.
On March 17, 2009, prosecutors filed a document listing more assets including $2.6 million in jewelry and about 35 sets of watches and cufflinks, more than $30 million in loans owed to the couple by their sons, and Ruth Madoff's interest in real estate funds sponsored by Sterling Equities, whose partners include Fred Wilpon
. Ruth Madoff, and Peter Madoff, invested as “passive limited partners” in real estate funds sponsored by the company, as well as other venture investments. Assets also include the Madoffs’ interest in Hoboken Radiology LLC in Hoboken, New Jersey
; Delivery Concepts LLC, an online food ordering service in midtown Manhattan that operates as "delivery.com"; an interest in Madoff La Brea LLC; an interest in the restaurant, P.J. Clarke's on the Hudson LLC; and Boca Raton, Florida
-based Viager II LLC.
On March 2, 2009, Judge Louis Stanton modified an existing freeze order to surrender assets Madoff owns: his securities firm, real estate, artwork, and entertainment tickets, and granted a request by prosecutors that the existing freeze remain in place for the Manhattan apartment, and vacation homes in Montauk
, New York, and Palm Beach, Florida
. He has also agreed to surrender his interest in Primex Holdings LLC, a joint venture
between Madoff Securities and several large brokerages, designed to replicate the auction process on the New York Stock Exchange
.
Madoff's April 14, 2009, opening day New York Mets
tickets were sold for $7,500 on ebay
.
On March 31, 2009, the town of Fairfield
, Connecticut
, which lost $42 million, was granted a temporary restraining order
to freeze and secure all real estate property owned by the Madoffs and the homes of his inner circle in Greenwich
, including personal property and financial accounts of Madoff, his relatives and executives with Fairfield Greenwich Group
, Maxam Capital and other firms that allegedly fed Madoff's fund, which could allow Fairfield to recover up to $75 million.
On June 25, Madoff agreed to forfeit his share of $170 million of real estate, investments and other assets, with his wife forfeiting $80 million. Ruth Madoff retains $2.5 million as part of the agreement. The assets will be sold by federal marshals.
In Jan 2010, Madoff's Manhattan Penthouse at 133 East 64th Street was sold to the creator of the Cabbage Patch Kids dolls for approx. $8.9m, a million less than the original asking price.
for the Madoff Case, Irving Picard
, and lawyers from his firm, Baker Hostetler LLP
(a Cleveland-based firm which Picard joined the week before he was appointed), are locating assets for distribution to investors. U.S. District Judge Lawrence McKenna gave Picard power to seize assets and records, demand documents, summon witnesses, and enter Madoff’s residences around the world, including his Manhattan penthouse.
On February 20, 2009, Picard, at a meeting with Madoff creditors who include individual investors, banks, charities and others, indicated that his investigation has to date not found any evidence that any securities were purchased on behalf of customers in at least 13 years. It was “cash in and cash out.” He identified more than $830 million in liquid assets that may be subject to recovery. David Sheehan, a lawyer working for Picard, indicated: "We are looking at every member of the Madoff family."
On April 23, 2009, Picard said he wouldn't seek to recover funds from "net losers" in the fraud, referring to those who lost more than they withdrew over time, but those investors must prove it. 223 investors who have a direct personal relationship with the Madoff clan have received letters seeking the return of funds totaling $735 million they redeemed from the Madoff firm as many as six years before the firm collapsed—the time limit allowed under New York law. Known as the legal doctrine of fraudulent conveyance
in bankruptcy proceedings means that investors who withdrew their money before the fraud was revealed may be compelled to return their profits or even part of their initial investments. Many of these 223 investors - Madoff’s relatives, employees, and their relatives, and those managers who fed billions of dollars of investors’ money to him, withdrew funds within the previous 90 days of Madoff's December 10, 2008, arrest.
has found $75 million in Madoff assets.
On April 9, 2009, Irving Picard
sued Gibraltar-based Banque Jacob Safra
in Manhattan
Federal Bankruptcy Court seeking $150 million Madoff wired as a "preferential payment" to the bank, invested on behalf of Vizcaya Partners, a British Virgin Islands
company. Beginning in 2002, Vizcaya had wired a total of $327 million to Madoff's investment firm through 26 different wire transfers, by the end of October 2008. Coincidentally, Madoff's parents had an investment business called Gibraltar Securities, registered in his mother's name, using their home as the business address. In January 1964, the SEC dropped their investigation when Sylvia agreed to close "her" business.
On March 23, 2009, the bankruptcy trustee disclosed that French authorities are going to seize the French Riviera
apartment on behalf of customers allegedly swindled in France
. The property, listed in Ruth Madoff's name is located in Cap d'Antibes, is worth about $1 million, and contains approximately $900,000 in furnishings.
On April 17, 2009, Picard sued Kingate Management Ltd. for the return of $255 million transferred to it shortly before Madoff Investment’s collapse. Beginning in the mid-1990s, feeder funds Kingate Global and Kingate Euro, created by Carlo Grosso, channeled $1.7 billion of his client’s money to Madoff. The funds are registered in the British Virgin Islands
. The complaint also names Bank of Bermuda Ltd., a unit of HSBC Holdings Plc, as a defendant. The bank wired the money.
On May 1, 2009, Picard filed a lawsuit against Stanley Chais, 82. The complaint alleges he "knew or should have known" he was deep in a Ponzi scheme when his family investments with Madoff averaged 40% and sometimes soared as high as 300%. It also claims Chais was a primary beneficiary of the scheme for at least 30 years, allowing his family to withdraw more than $1 billion from their accounts since 1995 - money that belonged to Madoff victims. The case number is Picard v. Chais, 09-01172.
Stanley Chais is a wealthy investment advisor from Beverly Hills, California
, who is accused of steering money to private interests, including Madoff, through Chais's Brighton Co., a limited partnership
formed to manage money. He took about 3.8% of the profits as management fees. His Chais Family Foundation, which in 2007 reported assets of $178 million and charitable contributions of nearly $8.2 million, was wiped out and has shut down. He had a home in Beverly Hills, and an apartment in New York. (See Participants in the Madoff investment scandal
.)
On May 7, 2009, Madoff Bankruptcy Trustee, Irving Picard filed a lawsuit
against J. Ezra Merkin
, seeking to recover almost $500 million withdrawn from Madoff accounts in the last six years. The complaint alleges that since 1995, Merkin steered more than $1 billion to Madoff through three private hedge funds, Ascot Partners, Ariel Fund, and Gabriel Capital. Since 2002, the funds withdrew at least $494 million from Madoff — returns that Merkin “knew or should have known” were fraudulent. There were at least 500 instances in the last ten years when his Madoff account statements showed large blocks of stock bought or sold at prices that did not match the stock’s trading range for the day when the transactions supposedly occurred. The case number is 08-01789 (BRL): IRVING H. PICARD, Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC, v. J. EZRA MERKIN, GABRIEL CAPITAL, L.P., ARIEL FUND LTD., ASCOT PARTNERS, L.P., GABRIEL CAPITAL CORPORATION. On May 18, 2009, Merkin agreed to New York
Attorney General
Andrew Cuomo
's demands to step down as manager of his hedge funds and place them into receivership.
On May 12, 2009, Picard sued Harley International (Cayman
) Ltd., which invested more than $2 billion with Madoff, receiving an average annual return of 13.5%. The lawsuit alleges the Cayman Islands-based fund ignored warning signs that should have alerted it to the fraud. Harley withdrew more than $1 billion from the firm in the two years before its collapse on Dec. 11, 2008, including $425 million in those last three months.
On May 12, 2009, Picard filed a $5 billion lawsuit against Jeffry Picower
, his wife, Barbara, and the Picower Foundation. The complaint alleges the Picowers, friends of Madoff for decades, "knew or should have known they were benefiting from fraudulent activity or, at a minimum, failed to exercise reasonable due diligence." The Palm Beach, Florida, foundation had given millions to the Massachusetts Institute of Technology
, Human Rights First
, and the New York Public Library
. It also funded diabetes research at Harvard Medical School
and Parkinsons research at Columbia Medical School. On July 31, 2009, Picower filed a motion to dismiss the claim, that he "genuinely believed in the personal and professional integrity of Bernie Madoff." He urged the Court that the lawsuit was a "paradigm of excess" that reflected a "frenzied effort" to recover large sums from one of Madoff's wealthiest investors.
On October 25, 2009, Picower, 67 was found dead at the bottom of his Palm Beach, Florida
swimming pool.
As of May 14, 2009, lawsuits to recover $10.1 billion in fictitious profits have been filed.
On May 18, 2009, Picard sued Fairfield Greenwich Group
, seeking the return of $3.2 billion during the period from 2002 to Madoff's arrest in December 2008. $1.2 billion was withdrawn in the final three months of the fraud. Since 1995, the Fairfield funds invested about $4.5 billion with Bernard L. Madoff Investment Securities LLC, or BLMIS, through 242 wire transfers. The funds are Fairfield Sentry Ltd., Greenwich Sentry LP, and Greenwich Sentry Partners LP. However, the money may already be in the hands of Fairfield’s own clients, who are likely off-limits to Picard, since they were not direct investors with Madoff.
On June 22, 2009, Picard filed a claim against Cohmad Securities
founder Maurice “Sonny” Cohn, daughter Marcia Cohn, and Robert Jaffe
, among more than two dozen individuals and trusts in U.S. Bankruptcy Court in New York. The lawsuit claims that up to 90 percent of Cohmad’s income came from referring clients and that the firm had a “symbiotic” relationship with Madoff, having earned hundreds of millions of dollars from the fraud. The lawsuit seeks more than $100 million paid to Cohmad six years prior to Madoff’s firm declaring bankruptcy, and more than $105 million in profits Cohmad employees and their families withdrew from the investment accounts they held with Madoff. The case is Picard v. Cohmad Securities Corp., 09-AP-1305, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
On June 26, 2009, Judge Chin ordered Madoff to personally forfeit $170 billion in assets, and his wife, Ruth agreed to relinquish her claims of more than $80 million and to retain only $2.5 million. The order allowed the U.S. Securities and Exchange Commission (SEC) and Picard to continue to pursue Mrs. Madoff's funds, and on July 29, 2009, Irving Picard
sued her for $45 million.
Madoff-owned United States properties were auctioned unfurnished after Labor Day
2009; artwork and possessions, including boats, will be auctioned later.
Madoff's home at 216 Old Montauk Highway, Montauk, New York
, was sold through the Corcoran Group for $9.4 million to real estate investor Steven Roth of Vornado Realty Trust
. Madoff's mansion at 410 North Lake Way, Palm Beach
, is still on the market as of August 2010; in February 2010 the asking price for the property, also being offered by the Corcoran Group was lowered to $7.25 million, below the initial asking price of $8.49 million and the previous reduced asking price of $7.9 million. In May 2010, Madoff's penthouse at 133 East 64th Street in Manhattan
was sold to Al and Patsy Kahn for $8 million, a markdown from the original asking price of $9.9 million and the reduced listing price of $8.9 million.
On April 1, 2009, the United States Marshals Service
seized Madoff's several boats from marina
s on Florida's east coast; these included a restored, custom-made 1969 Rybovich wooden antique fishing yacht, Bull, valued at $2.2 million, featuring a hydraulic elevator
and teak
woodwork, as well as several other boats ' as well as personal property within the family home in Palm Beach, Florida
.
On November 19, 2009, many items formerly belonging to Madoff were auctioned off at a private auction conducted by the U.S. Marshals Service. Bull was sold at auction for $700,000 to an unknown buyer. At the same auction other items formerly belonging to Madoff were sold, including a 38-foot 2003 Shelter Island Runabout Sport, Sitting Bull, which sold for $320,000 and a 24-foot 2000 center console
from Maverick Boat Company, Little Bull, which sold for $21,000. A 1999 black Mercedes-Benz
convertible formerly owned by Ruth Madoff sold for $30,000. A 61-foot 2003 Viking sport-fishing yacht formerly owned by Frank DiPascali
sold for $950,000. A black 1999 Mercedes-Benz
CLK 320
convertible
with 12,827 miles on it, owned by Ruth Madoff, sold for $30,000.
The Manhattan penthouse and Montauk Long Island summer home were seized in July 2009.
Picard plans to sell Madoff's plane and his interest in NetJets.
In an interview in July 2010, Picard said that he could potentially end up suing about half of the estimated 2,000 individual investors who withdrew more from Madoff's funds than they had invested. These investors claim such recovery would cause personal hardships. For example, one 87-year-old former school secretary had made mandatory withdrawals from her retirement account and had paid taxes on the withdrawals, but Picard had sent her two letters seeking repayment of $691,372. On November 12, 2010, Picard sued five former Madoff employees: Enrica Cotellessa-Pitz, Madoff’s former controller; Daniel Bonventre
, former head of operations; David Kugel, a trader; and employees Annette Bongiorno and Jo Ann Crupi. The suit seeks recovery of $70 million in allegedly fraudulent transfers. On November 17, 2010, Picard filed a clawback lawsuit seeking recover of $20.4 million in false profits from Melvyn I. Weiss and David J. Bershad, who both previously plead guilty to racketeering charges over a client-kickback scheme in an earlier securities fraud case.
On June 16, 2009, Judge Burton Lifland approved the settlement between Picard and Banco Santander SA's Optimal Investment Services. The Optimal SUS fund, one of Madoff's largest feeder funds, agreed to pay $235 million, about 85% of the $285 million that the Geneva-based hedge fund group redeemed in the 90 days before Madoff was arrested. As of December 2008, Santander had $3.2 billion of clients' money invested with Madoff, a relationship that started in 1996. The fund continues to have claims against Madoff's estate. The largest Spanish bank earned nearly $100 million in management fees in 2006 and 2007 combined selling the feeder fund. Santander lost €17 million ($23.8 million) of its own money. 70% of its affected clients are in Latin America
. In April, Santander offered its clients compensation for losses from the fraud, and 93% of clients affected by the Madoff fraud had accepted, which it originally valued at €1.38 billion. The offer has been widely criticized.
On October 31, 2008, Craig Kugel, human resource employee, was "designated" a trustee by Peter Madoff, who told him to sign a lease for his brother, as guarantor for a Mercedes S-550, because Madoff refused to provide the requisite company credit information. A Bankruptcy Court Judge Burton Lifland denied Kugel’s estimated remaining $58,212 lease liability.
Picard terminated Madoff's leases totaling $117,359 of a 2007 Land Rover
, 2008 Cadillac
, 2007, 2008, and 2009 Mercedes-Benzes, and a 2006 Lexus
.
On April 28, 2009, it was disclosed that the Bank of New York
held $7 million in six Madoff accounts.
A May 5, 2009, court motion to consolidate business and personal assets, discloses that Madoff used $2.7 million of his firm’s cash to pay for a home in New Jersey for a longtime employee, JoAnn Crupi. The firm lent nearly $11 million to Madoff’s sons Andrew and Mark for real estate purchases. He also gave a $9 million loan to his brother Peter in 2007, none of which were ever repaid. The firm also gave money to two entities owned by Madoff family members, including $1.7 million in capital contributions to Madoff Energy Holdings LLC, owned by Andrew, Mark and Shana Madoff, who also worked at the firm. The Madoff firm also paid out $4.5 million to support Ruth Madoff's real-estate-related investments. More than $11.5 million was used to buy two yachts for the Madoff family. The firm provided corporate cards to his wife, Ruth, his son's wife and brother's wife, even though they didn't work at the firm. In January 2009, Madoff and his wife, Ruth, spent more than $100,000 on the firm’s American Express Corporate Card: $1,564 at Bistro Chez Jean-Pierre in Palm Beach, Fla.; $2,000 at Georgio Armani in Paris; and $2,813 at the Apple computer store in New York. Peter Madoff’s wife, Marion, was not employed, but was paid a salary of $163,500 by the Madoff firm last year. Madoff also paid out $471,000 to a marina in Long Island and nearly $1 million to exclusive country clubs including the Breakers, the Atlantic Country Club on Long Island, the Palm Beach Country Club and the Trump International Golf Club. Madoff paid the salary of the captain of a boat owned by Frank DiPascali. as well as his personal boat captain, his maid and his house-sitter in Florida.
Madoff had estimated the value of his Manhattan business as $700 million which included both the investment management unit and the market-making operation. At an April 27, 2009, Castor Pollux Securities LLC ("Castor Pollux") won the bidding for the acquisition of the assets related to the market making business of BLMIS. Castor Pollux will pay $1,000,000 at closing and up to $24.5 million in deferred compensation through December 2013. Three bidders competed in the auction. One entity that had submitted a bid on April 22, 2009, withdrew its bid prior to the auction. On April 30, 2009, the sale was approved by the Bankruptcy Court.
On July 1, 2009, Trustee Picard agreed to takeover the 1986 lease on behalf of the FBI for at least another year of the investigation.
On April 13, 2009, a petition by creditors Blumenthal & Associates Florida General Partnership, Martin Rappaport Charitable Remainder Unitrust, Martin Rappaport, Marc Cherno and Steven Morganstern was filed. The filing said their $64 million in claims against Mr. Madoff are based on the balances contained in the last statements they received from his firm. Claims are based on breach of contract
, conversion
, and fraud
.
On April 17, 2009, Denny Chin
, the U.S. District Judge presiding in Madoff's criminal case, separately granted a motion by prosecutors to restrain the transfer of assets held by Madoff or his wife, Ruth, and be subject to criminal forfeiture proceedings, rather than the bankruptcy proceedings.
(SIPC) and Madoff's involuntary personal-bankruptcy case, claiming "it was virtually impossible to separate Madoff's affairs from those of his company. The SIPC case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, 08-01789, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
On January 6, 2009, Picard and lawyers from his firm said some investors may get cash advances from SIPC well before March 4, 2009.
SIPC is a securities-industry fund formed by the United States Congress
to help customers of failed brokerage firms. SIPC has $1.7 billion in assets, $1 billion in credit available from the U.S. Treasury, and another credit line
from several international banks. Investors may each receive a maximum of $500,000 from SIPC, but only for cash or securities that are missing from their accounts. It could take several years before all investigations into the scandal are concluded and some investors are able to file claims.
On February 20, 2009, Picard, at a meeting with Madoff creditors who include individual investors, banks, charities. and others, confirmed that customers can each recover up to the $500,000 under the Securities Investor Protection Act
. David Sheehan, a lawyer working for Picard, indicated that the SIPC will be trying to recover “false profits” earned by some investors. “It was all just made up. ... You got somebody else’s money.”
As of September 3, 2010, a total of $722,970,275.94 of Securities Investor Protection Corporation (SIPC) funds have been committed in determination letters sent to 2212 claimants in the Securities Investor Protection Act (SIPA) liquidation proceeding. As of September 3, 2010, a total of 13,331 customer claims have been filed in connection with 3,565 customer accounts at BLMIS. Many of the rejected claims were due to the fact that they were from customers of feeder funds and not direct BLMIS customers , also numerous duplicate claims were rejected.
On June 12, 2009, a lawsuit was filed against SIPC's Bankruptcy Trustee, Irving Picard by Maureen Ebel, Roger and Diane Peskin claiming his breach of fiduciary duty for failing to follow rules to make payments to Madoff victims. Picard demanded the Peskins pay back $113,000 they withdrew from Madoff in the 90 days before the firm closed. They also invested more than $470,000 in the same period, a net loss of $357,000. Ebel claims she is owed for two accounts that held her life savings.
Under the rules, investors who do not sue Madoff or other parties will be allowed a theft-loss deduction for the 2008 tax year, equal to 95 percent of their total investment, including all fictitious earnings credited to their accounts on which they were taxed, but less any withdrawals, or actual or potential recoveries from SIPC or their own insurance. Victims who decide to sue Madoff or third parties, believing they might have the possibility of some recovery, may still deduct 75 percent of their investment. The deduction will not be subject to the limitations on deduction of itemized deduction
s. Any loss exceeding current income may result in a net operating loss
, which can be carried back, at the taxpayer's election, 3, 4, or 5 years, with any loss still remaining carrying forward 20 years. These rules apply to all Ponzi schemes where there has been a federal or state indictment of the lead promoter.
Alternatively, victims may chose to file a refund claim for the full amount of their investment, including fictitious earnings on which they previously were taxed, but such claims will be subject to the standard rules for theft losses. Victims can also file refund claims based on excluding from income fictitious earnings which they previously reported, but such claims must be filed when the prior returns are still open for refund, generally three years from filing.
About 120 Madoff-related class action
s have been filed – mainly suits on behalf of investors who indirectly invested when they entrusted their money to funds-of-funds like Fairfield Greenwich Group
, (Case No: 09-118) in U.S. District Court for the Southern District of New York (Manhattan) Kingate Management, Tremont Group, and J. Ezra Merkin
's Ascot, Gabriel and Ariel Partners. The contingency fee to the attorney is usually 25% or more of the recovery.
in 1996, and the merged bank took the better-known Chase name. Chase merged with JPMorgan to form JPMorgan Chase in 2000, and Madoff retained his account there until his 2008 arrest.
On April 23, 2009, JP Morgan Chase and Company was served with a complaint from MLSMK
Investment Company, a Palm Beach, Florida
partnership that directly deposited $12.8 million into Madoff's account between October and early December 2008. The lawsuit alleges the bank of aiding Madoff's crime by maintaining his checking accounts and trading with his brokerage firm long after the bank realized that he was running a vast fraud. In September 2008, Morgan Chase began withdrawing $250 million of its own money from the Sentry funds operated by the Fairfield Greenwich Group
, a Madoff feeder fund. If the bank had terminated Madoff's accounts then, the plaintiffs would not have lost their money.
On October 20, 2009, an amended complaint to an investor lawsuit in New York State Supreme Court added accounting firm KPMG
, JPMorgan Chase and Bank of New York Mellon
Also named was Oppenheimer
Acquisition Corp, Massachusetts Mutual Life Insurance (MMLIC.UL), Tremont
funds founder Sandra Manzke and former Tremont Chief Executive, Robert Schulman
. The amendments were based on the Plaintiffs' attorneys' prison interview with Madoff in July 2009 and an investigation. "The complaint alleges Bernard Madoff's fraud was not accomplished in isolation," the law firm's statement said. "The sheer size and scope of the fraud make it impossible for Madoff to have acted alone. The complaint alleges JP Morgan and the Bank of New York as well as powerhouse accounting firm KPMG LLP and their international counterparts, KPMG UK and KPMG International were primary players necessary to accomplish the fraud."
On December 2, 2010, Picard sued JPMorgan Chase, seeking damages and restitution of at least $6.4 billion. The suit was initially sealed due to confidentiality concerns on Chase's part, but both parties agreed to unseal it on February 3, 2011. The suit alleges that Chase knew or should have known that Madoff's wealth management business was a fraud. However, Chase didn't report its concerns to regulators or law enforcement until October 2008, when it told the UK Serious Organised Crime Agency
that the performance of Madoff's investments was "too good to be true." The suit also claimed that Chase bankers were making profitable deals with Madoff even as risk management executives expressed concern about the nature of Madoff's business. It also claimed that Chase officials knew that Friehling & Horowitz wasn't peer review
ed or registered with the Public Company Accounting Oversight Board
(it subsequently emerged that the Friehling firm had stated in writing for more than a decade that it didn't conduct audits). Almost as seriously, Picard charged that Chemical/Chase's retail bankers failed to perform even basic oversight of Madoff's banking activities, despite several transactions dating as far back as the 1990s that raised the appearance of money laundering
or check kiting
. Picard argued that even a cursory glance at Madoff's account activity at Chase would have revealed his business could not possibly have been legitimate. He also argued that even after Chase reported its concerns about Madoff's performance to UK officials, it didn't put any restrictions on Madoff's banking activities until his arrest two months later.
Treasury Minister Luc Frieden
is negotiating a settlement with custodial Swiss Bank, UBS. Luxalpha, a Luxembourg-based fund created at their request by the bank was holding about $1.4 billion of assets. UBS has denied recommending to clients any Madoff products, stating that clients knew what they were investing in. Financial regulator CSSF has given the bank three months to reform its practices.
About 70 investors whose money was put into Access International Advisors LLC’s LuxAlpha Sicav-American Selection are suing UBS, the fund’s custodian bank, Ernst & Young
, its auditor, and directors of the fund. René-Thierry Magon de la Villehuchet
, chief executive officer of Access International, which managed LuxAlpha, was found dead in his New York office after losing all of the money he had invested with Madoff. (See:Madoff Investment Scandal#Impact and aftermath)
Madoff investment scandal
The Madoff investment scandal broke in December 2008 when former NASDAQ chairman Bernard Madoff admitted that the wealth management arm of his business was an elaborate Ponzi scheme....
.
Bernard L. "Bernie" Madoff's combined assets are about $826 million and have been frozen. Madoff provided a confidential list of his, and his firm's assets to the SEC on December 31, 2008, which was subsequently disclosed on March 13, 2009, in a court filing. Madoff had no Individual Retirement Account
Individual Retirement Account
An individual retirement arrangement is the blanket term for a form of retirement plan that provides tax advantages for retirement savings in the United States...
s, no 401(k)
401(k)
A 401 is a type of retirement savings account in the United States, which takes its name from subsection of the Internal Revenue Code . A contributor can begin to withdraw funds after reaching the age of 59 1/2 years...
, no Keogh Plan, no other pension
Pension
In general, a pension is an arrangement to provide people with an income when they are no longer earning a regular income from employment. Pensions should not be confused with severance pay; the former is paid in regular installments, while the latter is paid in one lump sum.The terms retirement...
plan and no annuities
Annuity (US financial products)
In the United States an annuity contract is created when an insured party, usually an individual, pays a life insurance company a single premium that will later be distributed back to the insured party over time...
. He owned less than a combined $200,000 in securities in Lehman Brothers
Lehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
, Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
, Fidelity Investments
Fidelity Investments
FMR LLC or Fidelity Investments is an American multinational financial services corporation one of the largest mutual fund and financial services groups in the world. It was founded in 1946 and serves North American investors. Fidelity Ventures is its venture capital arm...
, Bear Stearns
Bear Stearns
The Bear Stearns Companies, Inc. based in New York City, was a global investment bank and securities trading and brokerage, until its sale to JPMorgan Chase in 2008 during the global financial crisis and recession...
, and M&T Bank
M&T Bank
M&T Bank is an American commercial bank that was founded in 1856 in western New York, and today remains headquartered in Buffalo at One M & T Plaza...
. No offshore or Swiss bank accounts were listed.
Professor John C. Coffee
John C. Coffee
John C. "Jack" Coffee, Jr. is the Adolf A. Berle Professor of Law at Columbia Law School and director of the Center on Corporate Governance at Columbia University Law School.-Education:...
of Columbia University Law School said that much of Madoff's money may be in offshore fund
Offshore fund
An offshore fund is a collective investment scheme domiciled in an Offshore Financial Centre such as the British Virgin Islands, Luxembourg, or the Cayman Islands; it is typically sold exclusively to 'foreign' investors...
s. The SEC believed keeping the assets secret would prevent them from being seized by foreign regulators and foreign creditors.
Combined assets
Ruth Madoff's combined assets with her husband have a net worth of between $823 million and $826 million. She has $92.6 million in assets listed in her own name: the $7 million penthousePenthouse apartment
A penthouse apartment or penthouse is an apartment that is on one of the highest floors of an apartment building. Penthouses are typically differentiated from other apartments by luxury features.-History:...
on Manhattan
Manhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...
's Upper East Side
Upper East Side
The Upper East Side is a neighborhood in the borough of Manhattan in New York City, between Central Park and the East River. The Upper East Side lies within an area bounded by 59th Street to 96th Street, and the East River to Fifth Avenue-Central Park...
; an $11 million mansion in Palm Beach, Florida; a three-bedroom apartment in Cap d'Antibes on the French Riviera
French Riviera
The Côte d'Azur, pronounced , often known in English as the French Riviera , is the Mediterranean coastline of the southeast corner of France, also including the sovereign state of Monaco...
valued at $1.5 million; $45 million in municipal bond
Municipal bond
A municipal bond is a bond issued by a city or other local government, or their agencies. Potential issuers of municipal bonds includes cities, counties, redevelopment agencies, special-purpose districts, school districts, public utility districts, publicly owned airports and seaports, and any...
s and $17 million in cash; $8.8 million worth of yachts; and $2.6 million worth of jewelry. The SEC is working with federal prosecutors, who have filed a notice with the Federal Court to seek forfeiture of all listed ill-gotten assets.
On March 17, 2009, prosecutors filed a document listing more assets including $2.6 million in jewelry and about 35 sets of watches and cufflinks, more than $30 million in loans owed to the couple by their sons, and Ruth Madoff's interest in real estate funds sponsored by Sterling Equities, whose partners include Fred Wilpon
Fred Wilpon
Fred Wilpon is a real estate developer, baseball executive and the majority owner of the New York Mets.-Biography:...
. Ruth Madoff, and Peter Madoff, invested as “passive limited partners” in real estate funds sponsored by the company, as well as other venture investments. Assets also include the Madoffs’ interest in Hoboken Radiology LLC in Hoboken, New Jersey
Hoboken, New Jersey
Hoboken is a city in Hudson County, New Jersey, United States. As of the 2010 United States Census, the city's population was 50,005. The city is part of the New York metropolitan area and contains Hoboken Terminal, a major transportation hub for the region...
; Delivery Concepts LLC, an online food ordering service in midtown Manhattan that operates as "delivery.com"; an interest in Madoff La Brea LLC; an interest in the restaurant, P.J. Clarke's on the Hudson LLC; and Boca Raton, Florida
Boca Raton, Florida
Boca Raton is a city in Palm Beach County, Florida, USA, incorporated in May 1925. In the 2000 census, the city had a total population of 74,764; the 2006 population recorded by the U.S. Census Bureau was 86,396. However, the majority of the people under the postal address of Boca Raton, about...
-based Viager II LLC.
On March 2, 2009, Judge Louis Stanton modified an existing freeze order to surrender assets Madoff owns: his securities firm, real estate, artwork, and entertainment tickets, and granted a request by prosecutors that the existing freeze remain in place for the Manhattan apartment, and vacation homes in Montauk
Montauk, New York
Montauk [ˈmɒntɒk] is a census-designated place that roughly corresponds to the hamlet with the same name located in the town of East Hampton in Suffolk County, New York, United States on the South Shore of Long Island. As of the United States 2000 Census, the CDP population was 3,851 as of 2000...
, New York, and Palm Beach, Florida
Palm Beach, Florida
The Town of Palm Beach is an incorporated town in Palm Beach County, Florida, United States. The Intracoastal Waterway separates it from the neighboring cities of West Palm Beach and Lake Worth...
. He has also agreed to surrender his interest in Primex Holdings LLC, a joint venture
Joint venture
A joint venture is a business agreement in which parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets...
between Madoff Securities and several large brokerages, designed to replicate the auction process on the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
.
Madoff's April 14, 2009, opening day New York Mets
New York Mets
The New York Mets are a professional baseball team based in the borough of Queens in New York City, New York. They belong to Major League Baseball's National League East Division. One of baseball's first expansion teams, the Mets were founded in 1962 to replace New York's departed National League...
tickets were sold for $7,500 on ebay
EBay
eBay Inc. is an American internet consumer-to-consumer corporation that manages eBay.com, an online auction and shopping website in which people and businesses buy and sell a broad variety of goods and services worldwide...
.
On March 31, 2009, the town of Fairfield
Fairfield, Connecticut
Fairfield is a town located in Fairfield County, Connecticut, United States. It is bordered by the towns of Bridgeport, Trumbull, Easton, Redding and Westport along the Gold Coast of Connecticut. As of the 2010 census, the town had a population of 59,404...
, Connecticut
Connecticut
Connecticut is a state in the New England region of the northeastern United States. It is bordered by Rhode Island to the east, Massachusetts to the north, and the state of New York to the west and the south .Connecticut is named for the Connecticut River, the major U.S. river that approximately...
, which lost $42 million, was granted a temporary restraining order
Restraining order
A restraining order or order of protection is a form of legal injunction that requires a party to do, or to refrain from doing, certain acts. A party that refuses to comply with an order faces criminal or civil penalties and may have to pay damages or accept sanctions...
to freeze and secure all real estate property owned by the Madoffs and the homes of his inner circle in Greenwich
Greenwich, Connecticut
Greenwich is a town in Fairfield County, Connecticut, United States. As of the 2010 census, the town had a total population of 61,171. It is home to many hedge funds and other financial service companies. Greenwich is the southernmost and westernmost municipality in Connecticut and is 38+ minutes ...
, including personal property and financial accounts of Madoff, his relatives and executives with Fairfield Greenwich Group
Fairfield Greenwich Group
Fairfield Greenwich Group is an investment firm founded in 1983 in New York City. The firm had among the largest exposures to the Bernard Madoff fraud.-History of the Firm:...
, Maxam Capital and other firms that allegedly fed Madoff's fund, which could allow Fairfield to recover up to $75 million.
On June 25, Madoff agreed to forfeit his share of $170 million of real estate, investments and other assets, with his wife forfeiting $80 million. Ruth Madoff retains $2.5 million as part of the agreement. The assets will be sold by federal marshals.
In Jan 2010, Madoff's Manhattan Penthouse at 133 East 64th Street was sold to the creator of the Cabbage Patch Kids dolls for approx. $8.9m, a million less than the original asking price.
Irving Picard, Trustee
The court-appointed trusteeTrustee
Trustee is a legal term which, in its broadest sense, can refer to any person who holds property, authority, or a position of trust or responsibility for the benefit of another...
for the Madoff Case, Irving Picard
Irving Picard
Irving H. Picard is a partner in the law firm Baker Hostetler. He graduated from the Wharton School, University of Pennsylvania, with a B.S. degree , from Boston University School of Law with a J.D. degree , and from the New York University School of Law with an LL.M. degree in 1967, and was...
, and lawyers from his firm, Baker Hostetler LLP
Baker Hostetler
Baker Hostetler is an American law firm based in Cleveland, Ohio and founded in 1916. One of the firm's founders, Newton D. Baker, was U.S. Secretary of War during World War I and former Mayor of Cleveland....
(a Cleveland-based firm which Picard joined the week before he was appointed), are locating assets for distribution to investors. U.S. District Judge Lawrence McKenna gave Picard power to seize assets and records, demand documents, summon witnesses, and enter Madoff’s residences around the world, including his Manhattan penthouse.
Claim procedures
On January 2, Picard sent letters to 8,000 potential claimants – advising customers they had until March 2, and creditors, until July 2, 2009, to place claims.On February 20, 2009, Picard, at a meeting with Madoff creditors who include individual investors, banks, charities and others, indicated that his investigation has to date not found any evidence that any securities were purchased on behalf of customers in at least 13 years. It was “cash in and cash out.” He identified more than $830 million in liquid assets that may be subject to recovery. David Sheehan, a lawyer working for Picard, indicated: "We are looking at every member of the Madoff family."
On April 23, 2009, Picard said he wouldn't seek to recover funds from "net losers" in the fraud, referring to those who lost more than they withdrew over time, but those investors must prove it. 223 investors who have a direct personal relationship with the Madoff clan have received letters seeking the return of funds totaling $735 million they redeemed from the Madoff firm as many as six years before the firm collapsed—the time limit allowed under New York law. Known as the legal doctrine of fraudulent conveyance
Fraudulent conveyance
A fraudulent conveyance, or fraudulent transfer, is a civil cause of action. It arises in debtor/creditor relations, particularly with reference to insolvent debtors. The cause of action is typically brought by creditors or by bankruptcy trustees...
in bankruptcy proceedings means that investors who withdrew their money before the fraud was revealed may be compelled to return their profits or even part of their initial investments. Many of these 223 investors - Madoff’s relatives, employees, and their relatives, and those managers who fed billions of dollars of investors’ money to him, withdrew funds within the previous 90 days of Madoff's December 10, 2008, arrest.
Seizures and clawbacks
On March 16, 2009, a bankruptcy court filing indicated the British enclave of GibraltarGibraltar
Gibraltar is a British overseas territory located on the southern end of the Iberian Peninsula at the entrance of the Mediterranean. A peninsula with an area of , it has a northern border with Andalusia, Spain. The Rock of Gibraltar is the major landmark of the region...
has found $75 million in Madoff assets.
On April 9, 2009, Irving Picard
Irving Picard
Irving H. Picard is a partner in the law firm Baker Hostetler. He graduated from the Wharton School, University of Pennsylvania, with a B.S. degree , from Boston University School of Law with a J.D. degree , and from the New York University School of Law with an LL.M. degree in 1967, and was...
sued Gibraltar-based Banque Jacob Safra
Jacob Safra
Jacqui Eli Safra is a Swiss investor, descendant of the Lebanon-Swiss Jewish Safra banking family. Some of his investments include Encyclopædia Britannica, Merriam-Webster, and Spring Mountain Vineyards, a large wine-growing estate located in Saint Helena, California. He is the nephew of Edmond...
in Manhattan
Manhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...
Federal Bankruptcy Court seeking $150 million Madoff wired as a "preferential payment" to the bank, invested on behalf of Vizcaya Partners, a British Virgin Islands
British Virgin Islands
The Virgin Islands, often called the British Virgin Islands , is a British overseas territory and overseas territory of the European Union, located in the Caribbean to the east of Puerto Rico. The islands make up part of the Virgin Islands archipelago, the remaining islands constituting the U.S...
company. Beginning in 2002, Vizcaya had wired a total of $327 million to Madoff's investment firm through 26 different wire transfers, by the end of October 2008. Coincidentally, Madoff's parents had an investment business called Gibraltar Securities, registered in his mother's name, using their home as the business address. In January 1964, the SEC dropped their investigation when Sylvia agreed to close "her" business.
On March 23, 2009, the bankruptcy trustee disclosed that French authorities are going to seize the French Riviera
French Riviera
The Côte d'Azur, pronounced , often known in English as the French Riviera , is the Mediterranean coastline of the southeast corner of France, also including the sovereign state of Monaco...
apartment on behalf of customers allegedly swindled in France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
. The property, listed in Ruth Madoff's name is located in Cap d'Antibes, is worth about $1 million, and contains approximately $900,000 in furnishings.
On April 17, 2009, Picard sued Kingate Management Ltd. for the return of $255 million transferred to it shortly before Madoff Investment’s collapse. Beginning in the mid-1990s, feeder funds Kingate Global and Kingate Euro, created by Carlo Grosso, channeled $1.7 billion of his client’s money to Madoff. The funds are registered in the British Virgin Islands
British Virgin Islands
The Virgin Islands, often called the British Virgin Islands , is a British overseas territory and overseas territory of the European Union, located in the Caribbean to the east of Puerto Rico. The islands make up part of the Virgin Islands archipelago, the remaining islands constituting the U.S...
. The complaint also names Bank of Bermuda Ltd., a unit of HSBC Holdings Plc, as a defendant. The bank wired the money.
On May 1, 2009, Picard filed a lawsuit against Stanley Chais, 82. The complaint alleges he "knew or should have known" he was deep in a Ponzi scheme when his family investments with Madoff averaged 40% and sometimes soared as high as 300%. It also claims Chais was a primary beneficiary of the scheme for at least 30 years, allowing his family to withdraw more than $1 billion from their accounts since 1995 - money that belonged to Madoff victims. The case number is Picard v. Chais, 09-01172.
Stanley Chais is a wealthy investment advisor from Beverly Hills, California
Beverly Hills, California
Beverly Hills is an affluent city located in Los Angeles County, California, United States. With a population of 34,109 at the 2010 census, up from 33,784 as of the 2000 census, it is home to numerous Hollywood celebrities. Beverly Hills and the neighboring city of West Hollywood are together...
, who is accused of steering money to private interests, including Madoff, through Chais's Brighton Co., a limited partnership
Limited partnership
A limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners , there are one or more limited partners . It is a partnership in which only one partner is required to be a general partner.The GPs are, in all major respects,...
formed to manage money. He took about 3.8% of the profits as management fees. His Chais Family Foundation, which in 2007 reported assets of $178 million and charitable contributions of nearly $8.2 million, was wiped out and has shut down. He had a home in Beverly Hills, and an apartment in New York. (See Participants in the Madoff investment scandal
Participants in the Madoff investment scandal
Investigators are looking for other participants in the Madoff investment scandal besides Bernard Madoff who were involved in the Madoff investment scheme, despite Madoff's assertion that he alone was responsible for the large-scale operation...
.)
On May 7, 2009, Madoff Bankruptcy Trustee, Irving Picard filed a lawsuit
against J. Ezra Merkin
J. Ezra Merkin
Jacob Ezra Merkin is a former money manager and financier. He was a close business associate of Bernard Madoff, and is alleged to have played a significant part in the Madoff fraud. He served as the Non-executive Chairman of GMAC until his resignation on January 9, 2009, at the insistence of the...
, seeking to recover almost $500 million withdrawn from Madoff accounts in the last six years. The complaint alleges that since 1995, Merkin steered more than $1 billion to Madoff through three private hedge funds, Ascot Partners, Ariel Fund, and Gabriel Capital. Since 2002, the funds withdrew at least $494 million from Madoff — returns that Merkin “knew or should have known” were fraudulent. There were at least 500 instances in the last ten years when his Madoff account statements showed large blocks of stock bought or sold at prices that did not match the stock’s trading range for the day when the transactions supposedly occurred. The case number is 08-01789 (BRL): IRVING H. PICARD, Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC, v. J. EZRA MERKIN, GABRIEL CAPITAL, L.P., ARIEL FUND LTD., ASCOT PARTNERS, L.P., GABRIEL CAPITAL CORPORATION. On May 18, 2009, Merkin agreed to New York
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
Attorney General
Attorney General
In most common law jurisdictions, the attorney general, or attorney-general, is the main legal advisor to the government, and in some jurisdictions he or she may also have executive responsibility for law enforcement or responsibility for public prosecutions.The term is used to refer to any person...
Andrew Cuomo
Andrew Cuomo
Andrew Mark Cuomo is the 56th and current Governor of New York, having assumed office on January 1, 2011. A member of the Democratic Party, he was the 64th New York State Attorney General, and was the 11th United States Secretary of Housing and Urban Development...
's demands to step down as manager of his hedge funds and place them into receivership.
On May 12, 2009, Picard sued Harley International (Cayman
Cayman
Cayman may refer to* Cayman Islands, an overseas territory of the United Kingdom;* Grand Cayman, Cayman Brac, or Little Cayman, three islands that are part of the Cayman Islands;* Porsche Cayman, a sports car produced by Porsche;...
) Ltd., which invested more than $2 billion with Madoff, receiving an average annual return of 13.5%. The lawsuit alleges the Cayman Islands-based fund ignored warning signs that should have alerted it to the fraud. Harley withdrew more than $1 billion from the firm in the two years before its collapse on Dec. 11, 2008, including $425 million in those last three months.
On May 12, 2009, Picard filed a $5 billion lawsuit against Jeffry Picower
Jeffry Picower
Jeffry M. Picower was an American investor and noted philanthropist involved in the Madoff investment scandal...
, his wife, Barbara, and the Picower Foundation. The complaint alleges the Picowers, friends of Madoff for decades, "knew or should have known they were benefiting from fraudulent activity or, at a minimum, failed to exercise reasonable due diligence." The Palm Beach, Florida, foundation had given millions to the Massachusetts Institute of Technology
Massachusetts Institute of Technology
The Massachusetts Institute of Technology is a private research university located in Cambridge, Massachusetts. MIT has five schools and one college, containing a total of 32 academic departments, with a strong emphasis on scientific and technological education and research.Founded in 1861 in...
, Human Rights First
Human Rights First
Human Rights First is a nonprofit, nonpartisan human rights organization based in New York City and Washington, D.C....
, and the New York Public Library
New York Public Library
The New York Public Library is the largest public library in North America and is one of the United States' most significant research libraries...
. It also funded diabetes research at Harvard Medical School
Harvard Medical School
Harvard Medical School is the graduate medical school of Harvard University. It is located in the Longwood Medical Area of the Mission Hill neighborhood of Boston, Massachusetts....
and Parkinsons research at Columbia Medical School. On July 31, 2009, Picower filed a motion to dismiss the claim, that he "genuinely believed in the personal and professional integrity of Bernie Madoff." He urged the Court that the lawsuit was a "paradigm of excess" that reflected a "frenzied effort" to recover large sums from one of Madoff's wealthiest investors.
On October 25, 2009, Picower, 67 was found dead at the bottom of his Palm Beach, Florida
Palm Beach, Florida
The Town of Palm Beach is an incorporated town in Palm Beach County, Florida, United States. The Intracoastal Waterway separates it from the neighboring cities of West Palm Beach and Lake Worth...
swimming pool.
As of May 14, 2009, lawsuits to recover $10.1 billion in fictitious profits have been filed.
On May 18, 2009, Picard sued Fairfield Greenwich Group
Fairfield Greenwich Group
Fairfield Greenwich Group is an investment firm founded in 1983 in New York City. The firm had among the largest exposures to the Bernard Madoff fraud.-History of the Firm:...
, seeking the return of $3.2 billion during the period from 2002 to Madoff's arrest in December 2008. $1.2 billion was withdrawn in the final three months of the fraud. Since 1995, the Fairfield funds invested about $4.5 billion with Bernard L. Madoff Investment Securities LLC, or BLMIS, through 242 wire transfers. The funds are Fairfield Sentry Ltd., Greenwich Sentry LP, and Greenwich Sentry Partners LP. However, the money may already be in the hands of Fairfield’s own clients, who are likely off-limits to Picard, since they were not direct investors with Madoff.
On June 22, 2009, Picard filed a claim against Cohmad Securities
Cohmad Securities
Cohmad Securities, whose name combines “Cohn” and “Madoff,” founded in 1985 by Bernard Madoff and Maurice Cohn, Madoff’s friend and former neighbor. It is in the Business Services, N.E.C. industry in NEW YORK, NY...
founder Maurice “Sonny” Cohn, daughter Marcia Cohn, and Robert Jaffe
Robert Jaffe
Robert L. Jaffe is an American physicist and the Jane and Otto Morningstar Professor of Physics at the Massachusetts Institute of Technology . He was formerly director of the MIT Center for Theoretical Physics.-Biography:...
, among more than two dozen individuals and trusts in U.S. Bankruptcy Court in New York. The lawsuit claims that up to 90 percent of Cohmad’s income came from referring clients and that the firm had a “symbiotic” relationship with Madoff, having earned hundreds of millions of dollars from the fraud. The lawsuit seeks more than $100 million paid to Cohmad six years prior to Madoff’s firm declaring bankruptcy, and more than $105 million in profits Cohmad employees and their families withdrew from the investment accounts they held with Madoff. The case is Picard v. Cohmad Securities Corp., 09-AP-1305, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
On June 26, 2009, Judge Chin ordered Madoff to personally forfeit $170 billion in assets, and his wife, Ruth agreed to relinquish her claims of more than $80 million and to retain only $2.5 million. The order allowed the U.S. Securities and Exchange Commission (SEC) and Picard to continue to pursue Mrs. Madoff's funds, and on July 29, 2009, Irving Picard
Irving Picard
Irving H. Picard is a partner in the law firm Baker Hostetler. He graduated from the Wharton School, University of Pennsylvania, with a B.S. degree , from Boston University School of Law with a J.D. degree , and from the New York University School of Law with an LL.M. degree in 1967, and was...
sued her for $45 million.
Madoff-owned United States properties were auctioned unfurnished after Labor Day
Labor Day
Labor Day is a United States federal holiday observed on the first Monday in September that celebrates the economic and social contributions of workers.-History:...
2009; artwork and possessions, including boats, will be auctioned later.
Madoff's home at 216 Old Montauk Highway, Montauk, New York
Montauk, New York
Montauk [ˈmɒntɒk] is a census-designated place that roughly corresponds to the hamlet with the same name located in the town of East Hampton in Suffolk County, New York, United States on the South Shore of Long Island. As of the United States 2000 Census, the CDP population was 3,851 as of 2000...
, was sold through the Corcoran Group for $9.4 million to real estate investor Steven Roth of Vornado Realty Trust
Vornado Realty Trust
Vornado Realty Trust is a New York based real estate investment trust. It is the inheritor of real estate formerly controlled by companies including Two Guys and Alexander's.- History :...
. Madoff's mansion at 410 North Lake Way, Palm Beach
Palm Beach, Florida
The Town of Palm Beach is an incorporated town in Palm Beach County, Florida, United States. The Intracoastal Waterway separates it from the neighboring cities of West Palm Beach and Lake Worth...
, is still on the market as of August 2010; in February 2010 the asking price for the property, also being offered by the Corcoran Group was lowered to $7.25 million, below the initial asking price of $8.49 million and the previous reduced asking price of $7.9 million. In May 2010, Madoff's penthouse at 133 East 64th Street in Manhattan
Manhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...
was sold to Al and Patsy Kahn for $8 million, a markdown from the original asking price of $9.9 million and the reduced listing price of $8.9 million.
On April 1, 2009, the United States Marshals Service
United States Marshals Service
The United States Marshals Service is a United States federal law enforcement agency within the United States Department of Justice . The office of U.S. Marshal is the oldest federal law enforcement office in the United States; it was created by the Judiciary Act of 1789...
seized Madoff's several boats from marina
Marina
A marina is a dock or basin with moorings and supplies for yachts and small boats.A marina differs from a port in that a marina does not handle large passenger ships or cargo from freighters....
s on Florida's east coast; these included a restored, custom-made 1969 Rybovich wooden antique fishing yacht, Bull, valued at $2.2 million, featuring a hydraulic elevator
Elevator
An elevator is a type of vertical transport equipment that efficiently moves people or goods between floors of a building, vessel or other structures...
and teak
Teak
Teak is the common name for the tropical hardwood tree species Tectona grandis and its wood products. Tectona grandis is native to south and southeast Asia, mainly India, Indonesia, Malaysia, and Burma, but is naturalized and cultivated in many countries, including those in Africa and the...
woodwork, as well as several other boats ' as well as personal property within the family home in Palm Beach, Florida
Palm Beach, Florida
The Town of Palm Beach is an incorporated town in Palm Beach County, Florida, United States. The Intracoastal Waterway separates it from the neighboring cities of West Palm Beach and Lake Worth...
.
On November 19, 2009, many items formerly belonging to Madoff were auctioned off at a private auction conducted by the U.S. Marshals Service. Bull was sold at auction for $700,000 to an unknown buyer. At the same auction other items formerly belonging to Madoff were sold, including a 38-foot 2003 Shelter Island Runabout Sport, Sitting Bull, which sold for $320,000 and a 24-foot 2000 center console
Center Console (boat)
Center console is a type of single-decked open hull boat where the console of the boat is in the center of the boat. There is a cabin on some models; these cabins are usually located in the bow and hold small berths for sleeping...
from Maverick Boat Company, Little Bull, which sold for $21,000. A 1999 black Mercedes-Benz
Mercedes-Benz
Mercedes-Benz is a German manufacturer of automobiles, buses, coaches, and trucks. Mercedes-Benz is a division of its parent company, Daimler AG...
convertible formerly owned by Ruth Madoff sold for $30,000. A 61-foot 2003 Viking sport-fishing yacht formerly owned by Frank DiPascali
Frank DiPascali
Frank DiPascali, Jr. worked for Bernard L. Madoff Investment Securities LLC for 33 years and was a key lieutenant of Bernard Madoff. He referred to himself as "director of options trading" and as "chief financial officer". On August 11, 2009, he pled guilty to ten counts related to the Madoff...
sold for $950,000. A black 1999 Mercedes-Benz
Mercedes-Benz
Mercedes-Benz is a German manufacturer of automobiles, buses, coaches, and trucks. Mercedes-Benz is a division of its parent company, Daimler AG...
CLK 320
Mercedes-Benz W208
The Mercedes-Benz C208/A208 cars were produced from 1998 through 2003. They were sold under the CLK-Class model names. The C208 was a new model based on the W202 C-Class...
convertible
Convertible
A convertible is a type of automobile in which the roof can retract and fold away having windows which wind-down inside the doors, converting it from an enclosed to an open-air vehicle...
with 12,827 miles on it, owned by Ruth Madoff, sold for $30,000.
The Manhattan penthouse and Montauk Long Island summer home were seized in July 2009.
Picard plans to sell Madoff's plane and his interest in NetJets.
In an interview in July 2010, Picard said that he could potentially end up suing about half of the estimated 2,000 individual investors who withdrew more from Madoff's funds than they had invested. These investors claim such recovery would cause personal hardships. For example, one 87-year-old former school secretary had made mandatory withdrawals from her retirement account and had paid taxes on the withdrawals, but Picard had sent her two letters seeking repayment of $691,372. On November 12, 2010, Picard sued five former Madoff employees: Enrica Cotellessa-Pitz, Madoff’s former controller; Daniel Bonventre
Daniel Bonventre
Daniel Bonventre is one of five former Madoff employees charged in the Madoff investment scandal.He had worked as one-time company director of operations and as an accountant for Madoff since the 1960s...
, former head of operations; David Kugel, a trader; and employees Annette Bongiorno and Jo Ann Crupi. The suit seeks recovery of $70 million in allegedly fraudulent transfers. On November 17, 2010, Picard filed a clawback lawsuit seeking recover of $20.4 million in false profits from Melvyn I. Weiss and David J. Bershad, who both previously plead guilty to racketeering charges over a client-kickback scheme in an earlier securities fraud case.
Banco Santander SA
Geneva’s public prosecutor Dario Zanni, confirmed on June 20, 2009, that he has opened a criminal investigation into allegations that Banco Santander SA’s Optimal Investment Services S.A., based in Geneva, defrauded clients by misrepresenting its relationship with Madoff and the due diligence it was carrying out on Madoff's activities. The criminal complaint was filed by Franck Berlamont, the head of Geneva Partners, an independent asset manager.On June 16, 2009, Judge Burton Lifland approved the settlement between Picard and Banco Santander SA's Optimal Investment Services. The Optimal SUS fund, one of Madoff's largest feeder funds, agreed to pay $235 million, about 85% of the $285 million that the Geneva-based hedge fund group redeemed in the 90 days before Madoff was arrested. As of December 2008, Santander had $3.2 billion of clients' money invested with Madoff, a relationship that started in 1996. The fund continues to have claims against Madoff's estate. The largest Spanish bank earned nearly $100 million in management fees in 2006 and 2007 combined selling the feeder fund. Santander lost €17 million ($23.8 million) of its own money. 70% of its affected clients are in Latin America
Latin America
Latin America is a region of the Americas where Romance languages – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...
. In April, Santander offered its clients compensation for losses from the fraud, and 93% of clients affected by the Madoff fraud had accepted, which it originally valued at €1.38 billion. The offer has been widely criticized.
Fairfield Greenwich Group
On July 20, 2010, Picard amended his lawsuit against the Fairfield Greenwich Group claiming it had "actual and constructive knowledge" of the Madoff fraud. Picard is seeking to recover almost $7 billion from Fairfield, claiming that it had facilitatied the fraud as a set of feeder funds. Fairfield had previously settled a suit filed by the Massachusetts Secretary of the Commonwealth for $8 million to cover losses of 15 investors from that state.Value of recovered assets
As of September 1, 2010, Picard had reported approximately $1.5 billion found. Eight lawsuits against Madoff’s biggest “feeder funds” and other investors seek a total of $13.7 billion in damages. $301,407,190 of The Bank of New York Mellon's funds were in one Madoff company account, and $233,500,000 of JP Morgan Chase's funds in three other accounts.On October 31, 2008, Craig Kugel, human resource employee, was "designated" a trustee by Peter Madoff, who told him to sign a lease for his brother, as guarantor for a Mercedes S-550, because Madoff refused to provide the requisite company credit information. A Bankruptcy Court Judge Burton Lifland denied Kugel’s estimated remaining $58,212 lease liability.
Picard terminated Madoff's leases totaling $117,359 of a 2007 Land Rover
Land Rover
Land Rover is a British car manufacturer with its headquarters in Gaydon, Warwickshire, United Kingdom which specialises in four-wheel-drive vehicles. It is owned by the Indian company Tata Motors, forming part of their Jaguar Land Rover group...
, 2008 Cadillac
Cadillac
Cadillac is an American luxury vehicle marque owned by General Motors . Cadillac vehicles are sold in over 50 countries and territories, but mostly in North America. Cadillac is currently the second oldest American automobile manufacturer behind fellow GM marque Buick and is among the oldest...
, 2007, 2008, and 2009 Mercedes-Benzes, and a 2006 Lexus
Lexus
is the luxury vehicle division of Japanese automaker Toyota Motor Corporation. First introduced in 1989 in the United States, Lexus is now sold globally and has become Japan's largest-selling make of premium cars. The Lexus marque is marketed in over 70 countries and territories worldwide, and has...
.
On April 28, 2009, it was disclosed that the Bank of New York
Bank of New York
The Bank of New York was a global financial services company established in 1784 by the American Founding Father Alexander Hamilton. It existed until its merger with the Mellon Financial Corporation on July 2, 2007...
held $7 million in six Madoff accounts.
Business expenses
A May 5, 2009, court motion to consolidate business and personal assets, discloses that Madoff used $2.7 million of his firm’s cash to pay for a home in New Jersey for a longtime employee, JoAnn Crupi. The firm lent nearly $11 million to Madoff’s sons Andrew and Mark for real estate purchases. He also gave a $9 million loan to his brother Peter in 2007, none of which were ever repaid. The firm also gave money to two entities owned by Madoff family members, including $1.7 million in capital contributions to Madoff Energy Holdings LLC, owned by Andrew, Mark and Shana Madoff, who also worked at the firm. The Madoff firm also paid out $4.5 million to support Ruth Madoff's real-estate-related investments. More than $11.5 million was used to buy two yachts for the Madoff family. The firm provided corporate cards to his wife, Ruth, his son's wife and brother's wife, even though they didn't work at the firm. In January 2009, Madoff and his wife, Ruth, spent more than $100,000 on the firm’s American Express Corporate Card: $1,564 at Bistro Chez Jean-Pierre in Palm Beach, Fla.; $2,000 at Georgio Armani in Paris; and $2,813 at the Apple computer store in New York. Peter Madoff’s wife, Marion, was not employed, but was paid a salary of $163,500 by the Madoff firm last year. Madoff also paid out $471,000 to a marina in Long Island and nearly $1 million to exclusive country clubs including the Breakers, the Atlantic Country Club on Long Island, the Palm Beach Country Club and the Trump International Golf Club. Madoff paid the salary of the captain of a boat owned by Frank DiPascali. as well as his personal boat captain, his maid and his house-sitter in Florida.
Sale to Castor Pollux
Madoff had estimated the value of his Manhattan business as $700 million which included both the investment management unit and the market-making operation. At an April 27, 2009, Castor Pollux Securities LLC ("Castor Pollux") won the bidding for the acquisition of the assets related to the market making business of BLMIS. Castor Pollux will pay $1,000,000 at closing and up to $24.5 million in deferred compensation through December 2013. Three bidders competed in the auction. One entity that had submitted a bid on April 22, 2009, withdrew its bid prior to the auction. On April 30, 2009, the sale was approved by the Bankruptcy Court.
Lease termination
On July 1, 2009, Trustee Picard agreed to takeover the 1986 lease on behalf of the FBI for at least another year of the investigation.
Chapter 7, Involuntary Personal Bankruptcy consolidation with SIPA liquidation of BLMIS
On April 10, 2009, U.S. District Judge Louis Stanton reversed his December 18, 2008, ruling and ordered that investors can force Madoff into personal bankruptcy proceedings, against the wishes of federal prosecutors and the Securities and Exchange Commission who claim it unnecessary and costly.On April 13, 2009, a petition by creditors Blumenthal & Associates Florida General Partnership, Martin Rappaport Charitable Remainder Unitrust, Martin Rappaport, Marc Cherno and Steven Morganstern was filed. The filing said their $64 million in claims against Mr. Madoff are based on the balances contained in the last statements they received from his firm. Claims are based on breach of contract
Breach of contract
Breach of contract is a legal cause of action in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other party's performance....
, conversion
Criminal conversion
Criminal conversion is the crime of exerting unauthorized use or control of someone else's property. It differs from theft in that it does not include the element of intending to deprive the owner of the possession of that property. As such, it is a lesser included offense of the crime of theft...
, and fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
.
On April 17, 2009, Denny Chin
Denny Chin
Denny Chin is a judge on the United States Court of Appeals for the Second Circuit. He was a judge on the United States district court for the Southern District of New York before joining the federal appeals bench. President Clinton nominated Chin to the district court on March 24, 1994, and...
, the U.S. District Judge presiding in Madoff's criminal case, separately granted a motion by prosecutors to restrain the transfer of assets held by Madoff or his wife, Ruth, and be subject to criminal forfeiture proceedings, rather than the bankruptcy proceedings.
SIPC
On June 10, 2009, Judge Burton Lifland allowed Picard's request to consolidate two court proceedings—those involving the liquidation Bernard L. Madoff Investment Securities LLC, brought by Securities Investor Protection CorporationSecurities Investor Protection Corporation
The Securities Investor Protection Corporation is a federally mandated, non-profit, member-funded, corporation in the United States. It protects investors in certain securities from financial harm if a broker-dealer fails...
(SIPC) and Madoff's involuntary personal-bankruptcy case, claiming "it was virtually impossible to separate Madoff's affairs from those of his company. The SIPC case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, 08-01789, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
On January 6, 2009, Picard and lawyers from his firm said some investors may get cash advances from SIPC well before March 4, 2009.
SIPC is a securities-industry fund formed by the United States Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
to help customers of failed brokerage firms. SIPC has $1.7 billion in assets, $1 billion in credit available from the U.S. Treasury, and another credit line
Line of credit
A line of credit is any credit source extended to a government, business or individual by a bank or other financial institution. A line of credit may take several forms, such as overdraft protection, demand loan, special purpose, export packing credit, term loan, discounting, purchase of...
from several international banks. Investors may each receive a maximum of $500,000 from SIPC, but only for cash or securities that are missing from their accounts. It could take several years before all investigations into the scandal are concluded and some investors are able to file claims.
On February 20, 2009, Picard, at a meeting with Madoff creditors who include individual investors, banks, charities. and others, confirmed that customers can each recover up to the $500,000 under the Securities Investor Protection Act
Securities Investor Protection Act
The Securities Investor Protection Act of 1970 codified at through , established the Securities Investor Protection Corporation .Most brokers and dealers registered under the Securities Exchange Act of 1934 are required to be members of the SIPC....
. David Sheehan, a lawyer working for Picard, indicated that the SIPC will be trying to recover “false profits” earned by some investors. “It was all just made up. ... You got somebody else’s money.”
As of September 3, 2010, a total of $722,970,275.94 of Securities Investor Protection Corporation (SIPC) funds have been committed in determination letters sent to 2212 claimants in the Securities Investor Protection Act (SIPA) liquidation proceeding. As of September 3, 2010, a total of 13,331 customer claims have been filed in connection with 3,565 customer accounts at BLMIS. Many of the rejected claims were due to the fact that they were from customers of feeder funds and not direct BLMIS customers , also numerous duplicate claims were rejected.
On June 12, 2009, a lawsuit was filed against SIPC's Bankruptcy Trustee, Irving Picard by Maureen Ebel, Roger and Diane Peskin claiming his breach of fiduciary duty for failing to follow rules to make payments to Madoff victims. Picard demanded the Peskins pay back $113,000 they withdrew from Madoff in the 90 days before the firm closed. They also invested more than $470,000 in the same period, a net loss of $357,000. Ebel claims she is owed for two accounts that held her life savings.
Hardship program
The Hardship Program is designed to give eligible people up to $500,000, the insurance limit of the Securities Investor Protection Corp. who are unable to pay living and medical expenses, filing for personal bankruptcy, and ages 65+ who have been forced to leave retirement and return to work. The claim will be decided within 20 days after qualifying is determined. The filing deadline was July 2, 2009.Taxes
On March 17, 2009, the IRS issued new rules for Madoff investors who claim theft losses. Revenue Ruling 2009-9, sets forth general rules for claiming theft losses from Ponzi schemes, and Revenue Procedure 2009-20, includes safe harbor elections for investors in such schemes.Under the rules, investors who do not sue Madoff or other parties will be allowed a theft-loss deduction for the 2008 tax year, equal to 95 percent of their total investment, including all fictitious earnings credited to their accounts on which they were taxed, but less any withdrawals, or actual or potential recoveries from SIPC or their own insurance. Victims who decide to sue Madoff or third parties, believing they might have the possibility of some recovery, may still deduct 75 percent of their investment. The deduction will not be subject to the limitations on deduction of itemized deduction
Itemized deduction
An itemized deduction is an eligible expense that individual taxpayers in the United States can report on their federal income tax returns in order to decrease their taxable income....
s. Any loss exceeding current income may result in a net operating loss
Net operating loss
Under U.S. Federal income tax law, a net operating loss occurs when certain tax-deductible expenses exceed taxable revenues for a taxable year. If a taxpayer is taxed during profitable periods without receiving any tax relief during periods of NOLs, an unbalanced tax burden results...
, which can be carried back, at the taxpayer's election, 3, 4, or 5 years, with any loss still remaining carrying forward 20 years. These rules apply to all Ponzi schemes where there has been a federal or state indictment of the lead promoter.
Alternatively, victims may chose to file a refund claim for the full amount of their investment, including fictitious earnings on which they previously were taxed, but such claims will be subject to the standard rules for theft losses. Victims can also file refund claims based on excluding from income fictitious earnings which they previously reported, but such claims must be filed when the prior returns are still open for refund, generally three years from filing.
Civil proceedings
On February 9, 2009, a partial judgment in the December 11, 2008, civil suit by the U.S. Securities and Exchange Commission, case SEC v. Madoff, 08-10791 in U.S. District Court, Southern District of New York (Manhattan) was made permanent. As part of the judgment, Madoff was banned from the securities industry. He also agreed that his assets would remain frozen and not violate any securities laws. The agreement did not require Madoff to admit or deny any allegations against him. It also left the issues of any civil fines and repayments to be imposed against Madoff for a later time. The agreement was unrelated to any plea or indictment in the criminal matter.About 120 Madoff-related class action
Class action
In law, a class action, a class suit, or a representative action is a form of lawsuit in which a large group of people collectively bring a claim to court and/or in which a class of defendants is being sued...
s have been filed – mainly suits on behalf of investors who indirectly invested when they entrusted their money to funds-of-funds like Fairfield Greenwich Group
Fairfield Greenwich Group
Fairfield Greenwich Group is an investment firm founded in 1983 in New York City. The firm had among the largest exposures to the Bernard Madoff fraud.-History of the Firm:...
, (Case No: 09-118) in U.S. District Court for the Southern District of New York (Manhattan) Kingate Management, Tremont Group, and J. Ezra Merkin
J. Ezra Merkin
Jacob Ezra Merkin is a former money manager and financier. He was a close business associate of Bernard Madoff, and is alleged to have played a significant part in the Madoff fraud. He served as the Non-executive Chairman of GMAC until his resignation on January 9, 2009, at the insistence of the...
's Ascot, Gabriel and Ariel Partners. The contingency fee to the attorney is usually 25% or more of the recovery.
JP Morgan Chase Bank
Madoff opened a business account at what was then Chemical Bank in 1986. Chemical bought Chase ManhattanChase (bank)
JPMorgan Chase Bank, N.A., doing business as Chase, is a national bank that constitutes the consumer and commercial banking subsidiary of financial services firm JPMorgan Chase. The bank was known as Chase Manhattan Bank until it merged with J.P. Morgan & Co. in 2000...
in 1996, and the merged bank took the better-known Chase name. Chase merged with JPMorgan to form JPMorgan Chase in 2000, and Madoff retained his account there until his 2008 arrest.
On April 23, 2009, JP Morgan Chase and Company was served with a complaint from MLSMK
Investment Company, a Palm Beach, Florida
Palm Beach, Florida
The Town of Palm Beach is an incorporated town in Palm Beach County, Florida, United States. The Intracoastal Waterway separates it from the neighboring cities of West Palm Beach and Lake Worth...
partnership that directly deposited $12.8 million into Madoff's account between October and early December 2008. The lawsuit alleges the bank of aiding Madoff's crime by maintaining his checking accounts and trading with his brokerage firm long after the bank realized that he was running a vast fraud. In September 2008, Morgan Chase began withdrawing $250 million of its own money from the Sentry funds operated by the Fairfield Greenwich Group
Fairfield Greenwich Group
Fairfield Greenwich Group is an investment firm founded in 1983 in New York City. The firm had among the largest exposures to the Bernard Madoff fraud.-History of the Firm:...
, a Madoff feeder fund. If the bank had terminated Madoff's accounts then, the plaintiffs would not have lost their money.
On October 20, 2009, an amended complaint to an investor lawsuit in New York State Supreme Court added accounting firm KPMG
KPMG
KPMG is one of the largest professional services networks in the world and one of the Big Four auditors, along with Deloitte, Ernst & Young and PwC. Its global headquarters is located in Amstelveen, Netherlands....
, JPMorgan Chase and Bank of New York Mellon
Bank of New York Mellon
The Bank of New York Mellon Corporation is a global financial services company formed on July 1, 2007 as result of the merger of The Bank of New York and Mellon Financial Corporation...
Also named was Oppenheimer
Oppenheimer
Oppenheimer as a surname may refer to:* Alan Oppenheimer , film actor* Andrés Oppenheimer , Argentine author and journalist known for his analysis of Latin American politics...
Acquisition Corp, Massachusetts Mutual Life Insurance (MMLIC.UL), Tremont
Tremont
-Places:Australia*Tremont, Victoria, a suburb of MelbourneCanada*Tremont, Nova ScotiaUnited States*Tremont, Illinois*Tremont, Maine*Tremont, Bronx, New York*Tremont, Cleveland, a neighborhood in Ohio*Tremont City, Ohio...
funds founder Sandra Manzke and former Tremont Chief Executive, Robert Schulman
Robert Shulman
Robert Shulman was an American serial killer. Shulman, a postal worker from Hicksville, New York on Long Island, was convicted of murdering five prostitutes between 1991 and 1996, the year when he was arrested....
. The amendments were based on the Plaintiffs' attorneys' prison interview with Madoff in July 2009 and an investigation. "The complaint alleges Bernard Madoff's fraud was not accomplished in isolation," the law firm's statement said. "The sheer size and scope of the fraud make it impossible for Madoff to have acted alone. The complaint alleges JP Morgan and the Bank of New York as well as powerhouse accounting firm KPMG LLP and their international counterparts, KPMG UK and KPMG International were primary players necessary to accomplish the fraud."
On December 2, 2010, Picard sued JPMorgan Chase, seeking damages and restitution of at least $6.4 billion. The suit was initially sealed due to confidentiality concerns on Chase's part, but both parties agreed to unseal it on February 3, 2011. The suit alleges that Chase knew or should have known that Madoff's wealth management business was a fraud. However, Chase didn't report its concerns to regulators or law enforcement until October 2008, when it told the UK Serious Organised Crime Agency
Serious Organised Crime Agency
The Serious Organised Crime Agency is a non-departmental public body of the Government of the United Kingdom under Home Office sponsorship...
that the performance of Madoff's investments was "too good to be true." The suit also claimed that Chase bankers were making profitable deals with Madoff even as risk management executives expressed concern about the nature of Madoff's business. It also claimed that Chase officials knew that Friehling & Horowitz wasn't peer review
Peer review
Peer review is a process of self-regulation by a profession or a process of evaluation involving qualified individuals within the relevant field. Peer review methods are employed to maintain standards, improve performance and provide credibility...
ed or registered with the Public Company Accounting Oversight Board
Public Company Accounting Oversight Board
The Public Company Accounting Oversight Board is a private-sector, non-profit corporation created by the Sarbanes–Oxley Act, a 2002 United States federal law, to oversee the auditors of public companies. Its stated purpose is to 'protect the interests of investors and further the public interest...
(it subsequently emerged that the Friehling firm had stated in writing for more than a decade that it didn't conduct audits). Almost as seriously, Picard charged that Chemical/Chase's retail bankers failed to perform even basic oversight of Madoff's banking activities, despite several transactions dating as far back as the 1990s that raised the appearance of money laundering
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
or check kiting
Check kiting
Cheque fraud/check fraud refers to a category of criminal acts that involve making the unlawful use of cheques in order to illegally acquire or borrow funds that do not exist within the account balance or account-holder's legal ownership...
. Picard argued that even a cursory glance at Madoff's account activity at Chase would have revealed his business could not possibly have been legitimate. He also argued that even after Chase reported its concerns about Madoff's performance to UK officials, it didn't put any restrictions on Madoff's banking activities until his arrest two months later.
Luxembourg settlement with UBS
LuxembourgLuxembourg
Luxembourg , officially the Grand Duchy of Luxembourg , is a landlocked country in western Europe, bordered by Belgium, France, and Germany. It has two principal regions: the Oesling in the North as part of the Ardennes massif, and the Gutland in the south...
Treasury Minister Luc Frieden
Luc Frieden
Luc Frieden is a Luxembourgian politician for the Christian Social People's Party . He was Minister for Justice and Minister for the Treasury and Budget from 1998 to 2009, and has been Minister for Finances since 23 July 2009.In the capacity of Minister for the Treasury and Budget, Frieden was...
is negotiating a settlement with custodial Swiss Bank, UBS. Luxalpha, a Luxembourg-based fund created at their request by the bank was holding about $1.4 billion of assets. UBS has denied recommending to clients any Madoff products, stating that clients knew what they were investing in. Financial regulator CSSF has given the bank three months to reform its practices.
About 70 investors whose money was put into Access International Advisors LLC’s LuxAlpha Sicav-American Selection are suing UBS, the fund’s custodian bank, Ernst & Young
Ernst & Young
Ernst & Young is one of the largest professional services networks in the world and one of the "Big Four" accountancy firms, along with Deloitte, KPMG and PricewaterhouseCoopers ....
, its auditor, and directors of the fund. René-Thierry Magon de la Villehuchet
René-Thierry Magon de la Villehuchet
René-Thierry Magon de la Villehuchet, also known as Thierry de la Villehuchet for short was a French aristocrat, money manager, and businessman, and one of the founders of Access International Advisors .The AIA Group is a research analyst investment agency that specializes in managing hedged and...
, chief executive officer of Access International, which managed LuxAlpha, was found dead in his New York office after losing all of the money he had invested with Madoff. (See:Madoff Investment Scandal#Impact and aftermath)
External links
- Madoff Coalition For Investor Protection
- Corporate AMEX bill, January 2009
- Complaint against J P Morgan Chase (April 23, 2009)
- Complaint against Stanley Chais (May 1, 2009)
- Complaint against J. Ezra Merkin (May 7, 2009)
- Complaint against Harley International (Cayman) Limited (May 12, 2009)
- Picard v. Fairfield Greenwich Group 08-01789 (May 18, 2009)
- Picard v. Cohmad Securities Corp. 09-AP-1305 (June 22, 2009)