One of Bernard Madoff’s first clients, along with 19 family members, settled potential lawsuits by agreeing to forfeit $625 million in profits from the con man’s investment fraud.
Carl Shapiro, a Boston-based philanthropist, held an account with Bernard L. Madoff Investment Securities LLC beginning in 1961. His son-in-law, Robert Jaffe, is the former vice president of Cohmad Securities Corp., a feeder fund that shared offices with Madoff’s firm.
“This agreement represents a financially rewarding outcome and it is a strong example of the progress we are making in assembling the largest fund possible for the benefit of BLMIS customers with valid claims,” Irving Picard, the court-appointed trustee overseeing the liquidation of Madoff’s firm, said yesterday in a statement.
With this settlement, Picard, who also yesterday sued the owners of the New York Mets baseball team for the return of profits earned from their Madoff investments, has recovered about $2.5 billion for victims of the fraud. Yesterday’s actions come as Picard faces a Dec. 11 deadline to file claims for money to return to Madoff investors.
Under the Shapiro settlement, the family agreed to turn over $550 million to Picard for distribution to Madoff creditors. They will pay as much as $75 million more to the U.S. Justice Department, which appointed Picard as a special master to distribute those funds, New York prosecutors said yesterday in a statement.
“The Shapiro family is pleased to have concluded this settlement with the Department of Justice and the trustee,” Stephen Fishbein, the family’s lawyer, said in a statement. “The settlement will allow substantial funds to be distributed to those hurt most by Madoff’s fraud.”
The Shapiros have cooperated with the authorities investigating the Madoff fraud, Fishbein said. They don’t admit any liability in the settlement.
The settlement resolves any civil claims that might have been made by Picard, U.S. prosecutors and Madoff creditors. It doesn’t remove the possibility of criminal charges. U.S. District Judge Thomas Griesa in New York approved the settlement yesterday.
The $625 million deal exceeds the net worth of Carl Shapiro and his wife, Ruth, according to prosecutors. Fishbein declined to say how much money the family will have after paying the settlement.
Part of the settlement, $38 million, is full payment of Picard’s claim against Jaffe in a claim the trustee filed against Cohmad in June 2009.
The Shapiro funds, held in accounts at JPMorgan Chase Bank NA, are traceable to money invested by victims of Madoff’s Ponzi scheme, the largest in U.S. history, according to prosecutors.
Madoff, 72, pleaded guilty in March 2009 and is serving a 150-year sentence at a federal prison in North Carolina. At the time of Madoff’s arrest, his firm’s account statements reflected 4,900 accounts with $65 billion in nonexistent investments. Investors lost about $20 billion in principal.
In a separate lawsuit filed under seal yesterday in U.S. Bankruptcy Court in Manhattan, Picard seeks the return of Madoff profits from Sterling Equities Inc., a real estate investment firm that is the owner of the Mets, Mets LP and Fred and Jeff Wilpon. The amount of money Picard is seeking in that case wasn’t disclosed.
In an e-mailed statement, Sterling said yesterday that it and its co-defendants are in settlement negotiations with Picard. Picard confirmed the talks in a statement.
“The New York Mets will have all the necessary financial and operational resources to fully compete and win,” Gregory Nero, general counsel for Sterling, said in the statement. “That is our commitment to our fans.”
Picard has said in court papers that Mets LP invested $522.7 million in two accounts with Madoff and withdrew $570.5 million during an unspecified period. Yesterday’s complaint names about 100 defendants connected to Sterling and the Wilpon family.
The trustee has rejected claims by the Sterling investors that their losses should be valued using the final account statements that Madoff sent customers in November 2008. Picard claims investors shouldn’t be credited with nonexistent profits fabricated by Madoff.
Facing the Dec. 11 deadline for filing so-called clawback lawsuits, Picard has sued hundreds of investors that withdrew more from their accounts than they invested.
The cases are: U.S. v. $625,000,000 on Deposit at JPMorgan Chase Bank N.A., 10-CIV-9116, U.S. District Court, Southern District of New York (Manhattan); Picard v. Katz, 10-ap-5287, U.S. Bankruptcy Court, Southern District of New York (Manhattan).