Friday, July 27, 2012

Madoff Trustee Giving More to Victims

Story first reported from USA Today

Victims of imprisoned Bernard Madoff's Ponzi scheme could be getting back more of their stolen money.

Irving Picard, the trustee in charge of liquidating Madoff's assets, is asking a New York court for permission to distribute another $1.5 billion to $2.4 billion to investors who lost money in Madoff's fraudulent investments.

Picard's job is to recover as much money as possible for the victims, and the process has been arduous. Ever since Madoff's firm collapsed, more than three and a half years ago, some victims have filed lawsuits and made other complaints over how Picard has chosen to distribute the money.

Picard estimates he has recovered $9.1 billion, but has been able to distribute only $1.1 billion.

But two recent developments have made more funds available for distribution. In June, the Supreme Court declined to hear the objections of some victims who protested Picard's formula for determining how much money victims should get. Picard had argued that investors should be entitled to recover only the principal they lost. Those are the allowed claims.

Investors who had made money with Madoff thought they should be able to get back more, with amounts based on the faulty statements about profits that Madoff provided them.

If Picard is able to distribute the extra funds, as he asked to do Thursday, then that distribution plus a previous payout could satisfy as much as half of the allowed claims. There are currently about $7.5 billion of allowed claims, though that amount will increase as more claims are accepted.

Picard called the Supreme Court's decision "great news" for investors waiting to get their money back. He called his request to distribute more money, filed with bankruptcy court for the Southern District of New York, "another major milestone in the worldwide Madoff recovery effort."

The other development came this month, when an extra $5 billion moved to the victims' fund. It came from a settlement with the estate of a businessman who benefited from Madoff's fraud.

But more challenges remain. For example, some victims think Picard should factor inflation or interest when determining the amounts they should recover from their investments with Madoff. Picard disagrees.

In a statement, Picard's chief counsel, David Sheehan, said that more money could be released to victims if they would drop such objections.

Thousands of people invested with Madoff during a multi-decade fraud. His investment advisory service was a giant pyramid scheme, using money from new investors to pay returns to existing clients while financing a lavish lifestyle for him and cheating rich people, charities, celebrities and institutional investors.

He pleaded guilty to federal fraud charges and is serving a 150-year prison sentence.

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