Bernard Madoff ran his multibillion-dollar Ponzi scheme for at least 15 years. Some of his victims could be battling nearly that long to get their money back.
The court-appointed trustee of the defunct Madoff firm, attorney Irving Picard, has recovered just $1.2 billion of the $13.2 billion in estimated net losses sustained by investors since December 1995.
While eligible victims may get payments of up to $500,000 from the Securities Investor Protection Corp., set up to compensate investors for theft or proven unauthorized trading in brokerage accounts, the rest of their losses will be partially recouped from whatever assets Picard manages to gather in the liquidation process.
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Last week, Madoff's wife, Ruth, agreed to a settlement with prosecutors in which she relinquished all the assets she shared with her husband. Mrs. Madoff will keep $2.5 million.
Mrs. Madoff gave up tens of millions in cash and securities as well as her $7.5 million interest in a New York City apartment and a $7 million Montauk, N.Y., property, and jewelry insured at more than $2.6 million. The agreement covers scores of items, including two fur coats valued at $48,500, $18,000 in linens and bedding, and $8,500 in silverware.
Prosecutors, the Securities and Exchange Commission and Picard's office are coordinating how to recover assets now considered tainted that were received by other Madoff family members and close associates, according to people familiar with the matter.
Much of Picard's take so far has come from liquidating Madoff's business. He recently sold Madoff's market-making operation for $25.5 million.
The investor kitty also includes $235 million from Banco Santander (STD, news,msgs). The Spanish bank, one of the largest conduits of investor money to Madoff's firm, Bernard L. Madoff Investment Securities, paid up to settle potential legal claims by Picard.
Bankruptcy law allows Picard to go after entities that received payments from the Madoff firm on or after Sept. 12, 2008, within 90 days of the bankruptcy filing. However, federal and state statutes are broader when it comes to recovering money that the courts deem to be fraudulently conveyed as part of the Ponzi scheme. Under New York state law, Picard could try to recover fictitious profits paid out within the last six years.
Picard already has sued to recover more than $10 billion from investors who withdrew sums from their Madoff accounts in recent years. The biggest targets include trust funds and partnerships run by investors Jeffry Picower and Stanley Chais, who collectively withdrew $6.1 billion over and above their principal investment with the Madoff firm, Picard has alleged. The men haven't formally responded to the suits. Their lawyers have said they were victims of the fraud.
He also is seeking more than $105 million in profits Cohmad employees and their families withdrew from the investment accounts they had with Madoff. Lawyers for Cohmad's principals deny any connection to the fraud.
Even as Picard gathers up assets, fights are brewing over how much will be paid out. Picard has said he intends to pay claims on a "net equity" basis, or the difference between what customers put in and what they took out.
SIPC has mailed out about $142 million in checks to eligible claimants, out of a total of $188.4 million that already has been approved. As the July 2 deadline for filing SIPC claims approaches, more than 10,000 claims have been filed. Many of those claims will likely be denied. Some people, such as those who invested with Madoff indirectly through feeder funds, probably won't be eligible for SIPC payments.
Many former Madoff customers want more. Some said their claims should be based on what was shown on their November 2008 account statements, which reflected balances of nearly $65 billion, before the fraud collapsed. Several investors have sued Picard over the matter. The suits are pending.