Madoff Victims Set to Get $349 Million From TrusteeErik Larson
Bernard Madoff’s victims are set to get $349 million in a fresh round of payments by the trustee unwinding his firm, a day after five of its ex-employees were convicted of aiding the con man’s $17.5 billion Ponzi scheme.
The distribution, which needs approval by the U.S. Bankruptcy Court in New York, will bring total payouts to victims to almost $6 billion, or 34 percent of the lost principal, Irving Picard, the trustee for Bernard L. Madoff Investment Securities LLC, said in a statement yesterday. It’s the fourth such distribution since Madoff’s 2008 arrest triggered the liquidation.
“Our commitment is simple: to recover the maximum amount of funds stolen in the Madoff Ponzi scheme and to distribute these funds to their rightful owners as quickly as possible,” Picard, who recovered the money through lawsuits and settlements with alleged beneficiaries of the fraud, said in the statement.
A federal jury in Manhattan on March 24 found five former Madoff employees guilty of aiding his fraud for decades by creating fake trading documents and account statements. They were accused of targeting thousands of retirees, wealthy investors, charities and even family and friends, and getting rich in the process.
Madoff, 75, pleaded guilty to fraud in 2009 and is serving a 150-year sentence at a federal prison in North Carolina. At least seven other people have pleaded guilty to roles in the scheme, including his brother Peter Madoff, who is serving a 10-year term.
A hearing on the latest distribution to victims was scheduled for April 17, Picard said.
Picard’s payouts include advances of as much as $500,000 each to victims by the Securities Investor Protection Corp., an industry-backed entity overseeing the liquidation and paying Picard’s fees, according to the trustee’s statement. The advances have totaled about $811 million, he said.
“We hope that trend continues, and is even accelerated, as the remaining legal disputes are resolved,” Stephen Harbeck, SIPC’s president, said in a separate statement.
The trustee said he hopes to fully reimburse victims, including by pursuing claims totaling about $3.5 billion from UBS AG, HSBC Holdings Plc and UniCredit SpA, which the trustee has accused of benefiting from Madoff’s fraud. The banks have denied the allegations.
Two months ago, Picard reached a $325 million accord with JPMorgan Chase & Co., which he accused of negligence for failing to recognize the fraud and profiting from Madoff’s business in the process. With that accord, Picard’s recoveries for victims reached about $10 billion, or 59 percent of the principal lost by thousands of customers of Madoff’s investment advisory business.
JPMorgan also agreed to pay $218 million more to resolve two related class actions, or group lawsuits, filed with Picard’s assistance after an appeals court barred him from bringing common-law claims against the New York-based bank.
Billions of dollars earmarked to be paid to victims have been set aside pending the outcome of litigation among some victims who want a greater share of the recovered funds, according to Picard’s statement.
An interim distribution in 2011 amounted to $516 million. In 2012, another $3.75 billion was sent out, followed by $523 million last year.
Claims linked to more than 1,100 accounts with Madoff’s firm will be fully repaid after the latest distribution, representing almost half of the allowed claims in the case, Picard said.
The liquidation is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, 08-bk-01789, U.S. Bankruptcy Court, Southern District of New York (Manhattan).