Madoff investors get $7.2 billion settlement
NEW YORK – The estate of a man who pocketed $7.2 billion from Bernard L. Madoff’s Ponzi scheme has agreed to repay that amount, raising the surprising possibility that victims of the huge fraud could get back most of what they invested in it.
The settlement, the largest civil forfeiture ever, is being returned by the widow of Jeffry Picower, a Florida investor and philanthropist thought to be the single biggest beneficiary of Madoff’s scheme.
The agreement more than quadruples the amount available to reimburse Madoff’s victims to about $10 billion – roughly half the estimated amount lost by unwitting investors.
The court-appointed trustee overseeing Madoff’s estate recently filed many lawsuits that could recover substantial additional amounts for victims.
“The unprecedented settlement … makes the hope of significant financial restitution for Madoff victims a reality,” said Janice K. Fedarcyk, head of the FBI’s New York office. “People who two years ago faced a devastating prospect of losing everything now stand to recover about half of their investment – and the concerted effort continues to recover every available penny.”
The amount recovered on behalf of Madoff victims remains far short of the $65 billion that investors thought they had in their accounts at Madoff’s New York company just before his scheme was discovered in December 2008. But investigators estimate that true losses – the amount given to Madoff minus any withdrawals – totaled only $20 billion. Anything beyond that, they said, represented fictitious gains created by Madoff out of thin air.
The trustee, Irving Picard, said at a news conference Friday that he hoped to start distributing the money early next year. There is also the possibility that recoveries will exceed the $20 billion in actual estimated losses.
Madoff’s enormous scheme drew in thousands of investors after it began in the 1980s. When it was exposed it appeared to wipe out the life savings of many.
Since then more than 16,000 people have filed claims stating they lost money. Picard has said he can return money only to people who invested directly with Madoff, creating confusion for the thousands of people who had money tied up with Madoff through so-called feeder funds.
Picard’s team says it is almost finished processing victims’ claims and has approved $5.9 billion in payments to 2,363 investors.
In a controversial move, Picard has tried to “claw back” money from Madoff customers who withdrew more from their accounts than they initially put in – even if they honestly believed they had earned it and in some cases had already spent the withdrawn money.
In one recent example, the Jewish charity Hadassah agreed to pay back $45 million that it had taken out of its Madoff accounts.
Picower and his charities and businesses had invested $619 million with Madoff and taken out $7.8 billion.
Picower, a well-known donor to Jewish and medical causes and a close associate of Madoff, drowned in the swimming pool at his Palm Beach, Fla., house in October 2009. Before his death he denied that he had known anything about the fraud. But Picard had said in legal filings that Picower’s remarkable returns from Madoff meant he “knew or should have known” that something was wrong.
On Friday, Picower’s widow, Barbara, said in a statement that her husband was “in no way complicit” and added that “the Madoff Ponzi scheme was deplorable, and I am deeply saddened by the tragic impact it continues to have on the lives of its victims. It is my hope that this settlement will ease that suffering.”
The settlement does not touch the $619 million that Picower initially invested.
The settlement caps a dramatic couple of weeks in the case. Last weekend, on the two-year anniversary of the discovery of the fraud, Madoff’s older son, Mark Madoff, committed suicide in his Manhattan apartment. Only days before, Picard had sued both of Madoff’s sons and their wives and children.