Picower Estate agrees to forfeit $7.2b to benefit Madoff's Victims
WASHINGTON: The estate of Jeffry Picower, an investor with imprisoned con man Bernard Madoff, has reportedly agreed to pay $7.2 billion to recover money he made from the fraud. Picower's estate will pay $5 billion to Irving Picard, the trustee overseeing the liquidation of Madoff's firm, and $2.2 billion to U.S. authorities, according to two people familiar with the matter. Bloomberg's Jon Erlichman reports. (Source: Bloomberg)
The estate of Jeffry Picower agreed to forfeit $7.2 billion that the investor got from Bernard L. Madoff's Ponzi scheme, bringing the amount collected by authorities for victims of the fraud to $9.8 billion.
Irving Picard, the trustee liquidating Bernard L. Madoff Investment Securities LLC, sued Picower in May 2009, claiming he withdrew $7.2 billion more than he invested. Picower died in October 2009 at age 67. Picard and U.S. Attorney Preet Bharara, who is probing the Madoff fraud, yesterday announced the settlement with Picower's widow, Barbara.
"I commend Barbara Picower for agreeing to turn over this truly staggering sum, which really was always other people's money," Bharara said at a news conference in New York. "This settlement provides a significant measure of hope to the many victims of Bernard Madoff's horrific crimes."
Picard said that investors in Madoff's Ponzi scheme, the largest in U.S. history, lost $20 billion in principal. Account statements at the time of Madoff's arrest in December 2008 showed total balances of $65 billion. Picard, who filed hundreds of lawsuits seeking $50 billion, has now recovered $9.8 billion.
Picower began investing with Madoff in the late 1970s, controlling dozens of accounts. He had a heart attack and drowned in his swimming pool in Palm Beach, Florida.
The settlement "honors what Jeffry would have wanted," Barbara Picower said in a statement by her lawyer, William Zabel of Schulte Roth & Zabel LLP.
"I am absolutely confident that my husband Jeffry was in no way complicit in Madoff's fraud," she said. "The Madoff Ponzi scheme was deplorable, and I am deeply saddened by the tragic impact it continues to have on the lives of its victims. It is my hope that this settlement will ease that suffering."
Picard, who was appointed trustee by a bankruptcy judge in Manhattan, approved 2,363 investor claims for recovery as of Dec. 10 and rejected 13,189. Reasons for rejection include that the claimants withdrew more money from their accounts than they invested. The Picower settlement, which must be approved by the bankruptcy court before it can take effect, covers all the money claimed by Picard.
"They're getting the whole thing?" said Madoff investor Timothy Murray, 58, of Minneapolis. "Wow. That's great. That's wonderful. I'm beginning to think that there's a real possibility that Picard could pay all the claims he approved and there could be extra money."
Murray said he and his family invested $12 million over two decades and are among those rejected.
Picower, his family and related entities, beginning in the 1970s, deposited $619.4 million with Madoff and took out $7.8 billion, according to a forfeiture complaint filed yesterday by Bharara in federal court in New York. The estate admitted no wrongdoing in settling the case.
In his will, dated 10 days before he died, Picower left $200 million in cash to his wife. He also left $25 million to his daughter, Gabrielle Picower, and about $15 million to 20 other beneficiaries. The unspecified remainder is to go to charity.
"My late husband was a talented and active investor who had extraordinary successes in business investments during his career, which will allow me to make this settlement and return to the philanthropic work that was so important to Jeffry and me," Barbara Picower said in the statement. Bharara declined to say yesterday whether prosecutors had concluded that Picower was complicit in Madoff's fraud.
In the suit, Picard said Picower knew or should have known he was reaping billions of dollars from a fraud.
"Picower's accounts were riddled with blatant and obvious fraud," Picard said in September 2009, in legal papers opposing Picower's attempt to have part of the claim dismissed.
In a statement yesterday, Picard said that, when he sued in 2009, "the records available led us to allege that Mr. Picower might have or should have known of Mr. Madoff's fraud. With the benefit of additional records, I have determined that there is no basis to pursue the complaint against Mr. Picower, and we have arrived at a business solution instead."
Zabel released a letter from Eric S. Lane, a Goldman Sachs Group Inc. managing director, that Picower was a client of the bank's investment management division for almost three decades. -Bloomberg