Madoff ‘Winners’ To Fight Huge Settlement

Jan 10 2011 | 4:33am ET

Of the roughly $10 billion the court-appointed receiver in the Bernard Madoff case has recovered for victims, the lion’s share comes from his settlement with the estate of longtime Madoff friend and investor Jeffry Picower. But some of the arch-Ponzi schemer’s victims aren’t happy.

A lawyer representing both the so-called “net winners”—those investors who withdrew more from their Madoff accounts than they invested—and indirect investors with Madoff are trying to derail the $7.2 billion deal struck by receiver Irving Picard. The problem? It leaves nothing for them.

The settlement “has the unfair effect of stripping the Picower defendants of assets that should be available” to the net winners, the lawsuit alleges.

“The trustee claims that he has uncovered new facts that tend to show that Picower did not know of or participate in the Ponzi scheme,” contrary to claims in his his original lawsuit against Picower, who died last year. “Yet, despite this purported exculpatory evidence, the Picower Parties are ‘settling’ the trustee’s claim for more than twice the amount the trustee is legally entitled to recover!”

The net winners and others, represented by lawyer Helen Chaitman, note that Picard originally sought only $2.4 billion from Picower, the largest single beneficiary of the Madoff fraud.

It is not the first time the net winners have done battle with Picard, who has sided with the so-called “net losers” in the case. Picard has argued, and has been backed by the courts, that restitution should be determined by how much victims invested with Madoff. Chaitman and the net winners believe that restitution should be determined by final account statements—no matter how fictitious.

Chaitman’s clients claim some $44.8 billion in losses under that methodology; Picard estimates total actual losses at closer to $20 billion.

Chaitman asked for permission to investigate Picard’s deal with the Picower estate. Picard has agreed to try to block other claims against the estate.

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