Payday for Madoff Victims

by Allan Dodds Frank Info

Allan Dodds Frank is a business investigative correspondent who specializes in white collar crime stories. He also is the former president of the Overseas Press Club of America, one of the many journalism organizations that protests the arrests of journalists abroad and repression of freedom of speech.

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The widow of a Madoff associate has agreed to give back $7.2 billion in “profits” from the Ponzi master. Allan Dodds Frank on the Picower fortune’s origins, and why it’s not nearly enough for some of the defrauded.

When 67-year-old billionaire investor Jeffry Picower died in the swimming pool of his oceanfront mansion in Palm Beach, Fla. on October 25, 2009, so did the potential criminal case against him.

But the civil litigation against Picower raged on until Friday, when Irving Picard, the lawyer appointed as trustee to Bernie Madoff’s seized assets, and U.S. Attorney Preet Bharara announced “a truly staggering” $7.2 billion settlement with Picower’s estate. Bharara said it amounted to ”every last dollar of the Picowers’ profit from Madoff’s epic fraud” and is the largest single forfeiture in U.S. history.

For the 2,300 Madoff victims whose claims already have been approved by the trustee, the settlement more than doubles the amount of money available for distribution to them—perhaps as early as January of 2011. It means they could recover more than 50 cents on the dollar, Picard said.

Picower—an “investor” with Bernie Madoff for 35 years—was one of the few who actually earned money from Madoff’s historic Ponzi scheme, withdrawing billions of dollars more from Bernie than he gave. Not surprisingly, criminal investigators and the bankruptcy trustee suspected that Picower was one of Bernie Madoff’s main co-conspirators, despite the Picowers’ insistence that they—and the charities they funded—were actually among Bernie’s biggest victims.

Picower had been trained as an accountant and lawyer and was an early investor with Ivan Boesky, the insider trader who was the real life role model for Gordon Gekko in the Wall Street movies. Picower worked as an accountant with the late Saul Alpern, the father of Bernie’s wife Ruth.

Before Picower died, the suit filed by Picard’s team from the law firm Baker & Hostetler claimed that through a series of questionable and probably illegal transactions, Picower had gotten billions more than he invested. Filed in U.S. bankruptcy court in Manhattan, the civil complaint read like an invitation to prosecutors to figure out how it was that Picower alone managed to beat Bernie Madoff out of at least $7 billion while most other investors got stiffed.

Jeffry Picower – an “investor” with Bernie Madoff, right, for 35 years – was one of the few who actually withdrew billions of dollars more from Bernie than he gave to history’s biggest Ponzi artist. (Photos: Getty Images; AP Photo)

The civil complaint released Friday was officially filed against $7,206,157,157 on deposit at JPMorgan Chase. The court papers said that over the years, Picower had invested slightly less than $620 million with Madoff—yet he had taken out more than $7.8 billion through a variety of accounts, resulting in “profits” of $7.2 billion.

Asked about Picower’s role in Madoff’s scheme and whether the settlement cleared Picower’s name, U.S. Attorney Bharara said, “Mr. Picower passed away a year ago and so the question of whether he had a role—as a criminal matter—is now moot.” Bharara refused to say more, but he did stress that Mr. Picower’s widow Barbara had done “the right thing” by agreeing to give back “every penny” of the $7.2 billion the Picowers made through Bernard L. Madoff Investment Securities.

The settlement means that Madoff victims could recover more than 50 cents on the dollar.

As protestations of innocence go, it was a pretty grand gesture by Barbara Picower, who spent decades as a star in New York philanthropic and social circles while her husband stayed out of the spotlight. It means the rest of his will, which he rewrote only 10 days before his death, can be carried out, including a minimum of $200 million bequeathed to his wife and daughter. Most of the remainder of his estate will be donated to a newly reformulated charitable trust. (The New York Times reported that other Picower accounts at Goldman Sachs and other banks may leave the estate with $3 billion or more after the settlement.