Madoff Victims Wait for Recouped Billions

Despite Successes, Legal Tangles Prevent Payouts Anytime Soon

Tangled Web: Billions have been recovered from Bernard Madoff’s Ponzi scheme. But legal tangles mean victims won’t see cash anytime soon.
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Tangled Web: Billions have been recovered from Bernard Madoff’s Ponzi scheme. But legal tangles mean victims won’t see cash anytime soon.

By Josh Nathan-Kazis

Published July 01, 2012, issue of July 06, 2012.
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One Madoff victim contacted by the Forward, who received funds under the hardship program, said that he had recovered only $130,000 of his $400,000 investment.

“One was grateful to get anything back,” said the investor, Steven Falk of Oakland, Calif.

Falk has done better than most. Picard has approved $7 billion in claims by Madoff investors. But in his October 2011 distribution, Picard paid investors 4.6 cents on the dollar.

One barrier to distributing the billions in recovered funds fell on June 25, when the U.S. Supreme Court declined to hear a challenge to Picard’s theory that investors deserve to recoup only the amount they initially invested with Madoff. Investors who had withdrawn more than they had deposited in Madoff accounts had sued to challenge Picard’s formula. The decision by the Supreme Court not to take up their case signifies ultimate approval of that aspect of Picard’s distribution plan.

When the Supreme Court’s decision was made public, Picard’s office responded triumphantly, saying that they could now file for a further distribution of recovered assets.

But plenty of stumbling blocks remain. In the first place, separate challenges to the $5 billion recovered for Madoff victims in a December 2010 settlement with the widow of investor Jeffry Picower, probably the biggest winner in the Madoff fraud, means that those funds still may not be available for disbursement. One attorney challenging Picard over access to the funds told Bloomberg News that he planned to end his appeal, but he or others could still file until mid-July.

Even then, other potential challenges will require that substantial funds be held back. Some litigants argue that Picard should factor inflation and interest into his calculations of the actual value of Madoff investments. Picard disagrees. That litigation is ongoing, and Picard’s office will keep reserve funds out of the disbursement to pay any claims that may arise out of those lawsuits.

The disbursement itself will take time. The first time Picard distributed funds to investors, it took six months between the initial filing and the actual mailing of the checks. If Picard’s office files for a second distribution in the next few weeks, it could be mid-fall before investors receive the cash.


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