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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Further complicating matters is the Merkin settlement, which so far has nothing to do with Picard. The Merkin settlement was announced by the New York State Attorney General’s Office, which sued Merkin in April 2009. The settlement document has not been made public, but the Attorney General’s Office said that Merkin had agreed to pay a total of $410 million, all but $5 million to be disbursed to investors by two court-appointed trustees.

Merkin is a wealthy philanthropist and art collector who served on the boards of a number of prominent Jewish institutions before the collapse of the Madoff scheme. He oversaw three investment funds that invested all or most of their assets with Madoff. Merkin also steered charity funds into accounts he invested with Madoff. He was the chair of the investment committee of Yeshiva University, which lost investments worth a purported $110 million when Madoff was wiped out.

Merkin called Madoff “Uncle Bernie” and lived well. He owned a world-class collection of paintings by Expressionist Mark Rothko, which he sold in 2009 for $300 million.

(The Forward Association, which publishes the Forward, invested in a fund that had, in turn, invested in one of the funds that Merkin invested with Madoff.)

The attorney general accused Merkin of charging fees to manage money while simply handing over assets to Madoff. It’s unknown what proportion of his wealth will be forfeited in the $400 million settlement. A Freedom of Information Law request by the Forward for an accounting of Merkin’s assets and property filed with the Attorney General’s Office was denied in 2011.

The $400 million Merkin will pay back to investors in his funds is set to be administered by two trustees appointed by a judge. Those trustees have clashed with Picard in the past, as Picard has sought to pull recovered funds into the disbursement pool that he administers. In a heated exchange of legal memoranda in 2010, one of the trustees accused Picard of having “lost the necessary objectivity even to distinguish between the victims and the villains of the Madoff fraud.”

Picard and the Merkin trustees appear set to clash again over this latest settlement. In an emailed statement, a spokeswoman for Picard asserted that he should administer funds paid out by Merkin.

“[T]o the extent any third-party settlement seeks to divert funds that are rightfully sought by [Picard] for equitable distribution to all [Madoff victims] with allowed claims, we will have to consider taking appropriate steps,” the spokeswoman wrote.

Hanging over the lengthy proceedings are questions of the amount being paid to attorneys handling the case, Picard in particular. A much-noted May column by Andrew Ross Sorkin on The New York Times’ DealBook blog highlighted Picard’s hourly fee: $850.

Picard told the U.S. Government Accountability Office that he expects administrative costs billed in the unwinding of the Madoff bankruptcy to exceed $1 billion by the end of 2013.

In a response to the DealBook column, Picard spokeswoman Amanda Remus noted that the legal fees do not come out of the pool of recovered funds.

Falk, for his part, has more or less moved on. “I’ve grown to just accept what happened as a horrible loss,” he told the Forward.

Contact Josh Nathan-Kazis at or on Twitter @joshnathankazis

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