Madoff Investors Targeted in Trustee Suits Aiming Clawback of Phony Gains
The trustee, New York attorney Irving Picard, sued Lee, the financier who heads Lee Equity Partners, individually for $19.7 million, and Blue Star Investors LLC in U.S. Bankruptcy Court in Manhattan yesterday. Among those sued today were New York’s former chief judge, Sol Wachtler, and Tim Teufel, a former Major League Baseball player.
Picard is trying to recover money from people who withdrew funds in excess of their original investment with Bernard L. Madoff Investment Securities LLC. The money was recorded as profit on their accounts. Picard claims the purported returns are “other people’s money.”
“Funds recovered through these actions will be deposited in the BLMIS customer fund, and ultimately returned, pro rata, to their rightful owners, the customers of BLMIS with valid claims,” Kevin McCue, a spokesman for Picard, said in an e- mailed statement today.
Lee didn’t return a phone message seeking comment yesterday. Wachtler, who was sued for $1.4 million and Teufel, sued for $1.2 million, couldn’t be reached for comment.
Picard filed about 200 so-called clawback lawsuits yesterday and more than 200 so far today, claiming fictitious profits withdrawn during the past six years. He faces a deadline of Dec. 11 to file any additional clawback suits.
Picard sued 40 defendants on Nov. 26, all of whom were former employees of Madoff or are relatives of Madoff or his wife, Ruth Madoff, according to Picard.
Most of the earlier suits filed by Picard targeted Madoff relatives, employees or feeder funds that were alleged to have had knowledge of the fraud at Madoff’s firm.
In one of those suits, seeking to recover more than $1 billion from money manager Stanley Chais, U.S. Bankruptcy Judge Burton Lifland yesterday dismissed counterclaims against Picard by Chais, who died in September at age 84.
Lifland, who is overseeing the Madoff bankruptcy, threw out the claims, which were based on a letter Picard sent to Goldman Sachs Group Inc. in March 2009 asking the firm to block Chais’s account.
“The court cannot impose liability on the trustee for carrying out his duties in good faith and based on his business judgment,” Lifland wrote.
Madoff, 72, is serving 150 years in prison after pleading guilty to orchestrating the fraud that destroyed his New York- based firm, which collapsed in December 2008.
At the time of his arrest, Madoff’s financial statements reflected 4,900 accounts with $65 billion in nonexistent investments, according to Picard. Investors lost about $20 billion in principal.
The bankruptcy case is SIPC v. Bernard L. Madoff Investment Securities LLC, 08-1789, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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