Recovery Comes Slowly for Madoff Victims

Last year, Irving Picard, the trustee responsible for liquidating Bernard Madoff’s firm, said he hoped to pay customers victimized by the convicted swindler as much as $65 billion. He filed claims totaling $100 billion in lawsuits against investment funds that funneled money to Madoff, banks that Picard said aided the fraud, and clients who took out more money from their Madoff accounts than they put in. That strategy has collapsed as Federal judges led by U.S. District Judge Jed Rakoff in New York have dismissed about $90 billion of Picard’s claims, saying he exceeded his powers or failed to prove his case. “There is a huge risk about making predictions, because you can never be sure what a court will do,” says Chip Bowles, a bankruptcy lawyer with Bingham Greenebaum Doll in Louisville, who is not involved in the matter.

Picard’s latest estimate of the size of Madoff’s Ponzi scheme that imploded three years ago is $52 billion. Of that amount, $17.3 billion represents money invested; the rest is fake profits that appeared on customers’ account statements. So far, Picard has set aside about $2.6 billion for customers, of which only about $330 million has been paid out. After an appeals court ruled in August that customers were eligible to recover only the money they invested—not the fictitious profits—the Madoff account holders appealed. The Supreme Court has postponed a conference on whether it will consider that appeal until after May 25. It is waiting for the U.S. Securities and Exchange Commission to give its views. Picard won’t pay out any more of the remaining $2.3 billion set aside for customers until there’s a “final unappealable decision” on the question, according to his website.