Court Backs Trustee’s Method for Dividing Up Madoff Losses

By Forward Staff August 16, 2011

A federal appeals court has approved the method used by the trustee liquidating Bernard Madoff’s scandal-plagued financial firm to divide up the losses from the Ponzi scheme, wire services reported Tuesday.

The decision means court-appointed trustee Irving Picard can use the so-called “net equity” method, meaning investors’ losses will be calculated based on what they put into Madoff’s funds, minus what they withdrew.

The method may lead many investors to have much smaller losses than they thought. Sine sued to force Picard to tabulate losses based on what their statements showed at the time of Madoff’s arrest, figures that were bloated by years of fraud.

Some investors actually had gains under Picard’s calculation method, and may now be ordered to pay significant amounts.

Among the most prominent losers under the ruling are New York Mets owners Fred Wilpon and Saul Katz. Picard has claimed $300 million in fictitious profits from a group of defendants tied to Wilpon and Katz. He is also seeking $700 million in principal from Wilpon and Katz, claiming they should have known Madoff was running a fraud.

Madoff claimed to have grown investors’ money to some $60 billion, but most of that stemmed from a decades-long scheme in which he concocted phony returns.

Madoff, 73, was arrested in December 2008 and is serving a 150-year prison term.

The Forward’s staff contributors are listed in our masthead.

A message from our Publisher & CEO Rachel Fishman Feddersen

I hope you appreciated this article. Before you go, I’d like to ask you to please support the Forward’s award-winning, nonprofit journalism during this critical time.

The coming year promises to be filled with more complex and historic developments. We are entering an era where independent, fact-based Jewish journalism will be more important than ever. We need to be ready for whatever 2025 will bring, and with your help, we can be.

We’ve set a goal to raise $260,000 by December 31. That’s an ambitious goal, but one that will give us the resources we need to invest in the high quality news, opinion, analysis and cultural coverage that isn’t available anywhere else.

If you feel inspired to make an impact, now is the time to give something back. Join us as a member at your most generous level.

— Rachel Fishman Feddersen, Publisher and CEO