Bernard Madoff
Madoff trustee seeks OK to start paying victims
The trustee in charge of recovering funds for victims of Bernard Madoff asked a bankruptcy judge to allow him to begin payments, 2-1/2 years after the imprisoned swindler's Ponzi scheme was uncovered.
Court-appointed trustee Irving Picard sought authorization to make an initial payout of $272m to former customers of Bernard L. Madoff Investment Securities LLC.
Picard also asked Manhattan U.S. Bankruptcy Judge Burton Lifland on Wednesday for permission to put $2.6bn of recovered money into a customer fund, from which the $272m distribution would be made. The average payment would be $222,551 on claims relating to 1,224 accounts.
"This initial distribution represents a significant milestone in the trustee's recovery efforts," David Sheehan, like Picard a partner at Baker & Hostetler LLP, said in a statement. "We can now begin to return stolen funds to their rightful owners."
Picard's requests require Lifland's approval. A hearing is set for July 12.
The $272m is in addition to the $795m that the SIPC - Securities Investor Protection Corp has advanced or agreed to advance to cover victims with valid claims.
Almost all of this $795m is in the hands of victims, Kevin Bell, senior associate general counsel at SIPC, said in an interview.
The SIPC is a federally chartered agency that supervises the liquidation of brokerages. Federal law limits SIPC protection to $500,000 per valid claim.
Picard said he has recovered more than $7.6bn for former Madoff customers, or 44% of the $17.3bn of principal they lost.
This sum includes $5bn of a $7.21bn settlement that he and federal prosecutors reached in December with the estate of Jeffry Picower, a Madoff investor who died in October 2009. The other $2.21bn went to the government.
Much of the money that Picard believes should go to former Madoff customers has been tied up in litigation, including challenges to the Picower settlement and a $220m accord with the family of longtime Madoff client Norman Levy.
Other lawsuits challenge Picard's "net equity" method to determine which Madoff customers may recover for their losses.
Picard believes some of these customers are in fact "net winners," meaning they withdrew more from their Madoff accounts than they invested, and should forfeit ill-gotten gains.
The trustee has filed more than 1,000 lawsuits to recover about $100bn. Among his targets are Madoff's longtime bank JPMorgan Chase & Co, and owners of the New York Mets baseball team.
Madoff, 73, was arrested on December 11, 2008. He is serving a 150-year sentence in a North Carolina federal prison.
The case is In re: Bernard L. Madoff Investment Securities LLC, U.S. Bankruptcy Court, Southern District of New York, No. 08-01789.
(Published by Reuters - May 4, 2011)
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