Madoff Investors Ensnared In Criminal Probe

May 18 2009 | 10:50am ET

When Bernard Madoff’s Ponzi scheme collapsed in December, Stanley Chais and Carl Shapiro, two elderly billionaires who lost hundreds of millions of dollars in the scandal, received most pity from the press and public. Now, they’re receiving a most unwelcome sort of attention.

The two men, and at least six other Madoff investors and associates, have found themselves ensnared in the criminal probe that has already yielded Madoff’s guilty plea to running a $65 billion Ponzi scheme. The U.S. attorney’s office in New York is looking into whether the investors knew of the fraud or, in the case of Shapiro and fellow philanthropist Jeffry Picower, actually participated in it, The Wall Street Journal reports.

Prosecutors have found a “meticulous” record of the correspondence between Madoff and some of his clients, and it reportedly contains evidence that Chais and Picower actually told Madoff how much they wanted in returns, requests which Madoff allegedly obliged. According to lawsuits filed against Chais and Picower by the court-appointed liquidator in the Madoff case, the two men saw returns of between 300% and 950% per year, and that they withdrew some $6 billion in phony profits from Madoff’s firm over the years.

Both men deny any prior knowledge of Madoff’s scheme.

Also saying he knew nothing is Shapiro, the Boston philanthropist and longtime Madoff friend. The Journal says that investigators believe that Shapiro knew Madoff’s returns were bogus, but did not actually ask for sky-high phony figures as Chais and Picower allegedly did.

Prosecutors are now sifting through the evidence to determine if any of the investors committed a crime. The other five Madoff-linked individuals being investigated are Frank Avellino, a Florida accountant, Noel Levine, a New York real-estate investor, and Robert Jaffe, Shapiro’s son-in-law.


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