USA TODAY US Edition

MADOFF FUND HASN’T PAID VICTIMS A DIME

After 8 years, $4B in fraud repayments still untouched as RCB Fund Services struggles to finish the paperwork

- Kevin McCoy @kmccoynyc USA TODAY

Victims of Bernard Madoff ’s huge Ponzi scheme have so far received no repayments from the company the Department of Justice tapped to distribute $4 billion recovered from the notorious fraud.

Nearly 81⁄ years after Ma2 doff ’s arrest, RCB Fund Services LLC is still working to finalize reviews and recommenda­tions for 63,580 claims covering $67.8 billion in reported losses.

In a January update posted on the fund’s website, special master Richard Breeden, whose company was hired to distribute the funds, wrote: “We were unable to initiate our first payout in 2016 as we had hoped because of the volume and complexity of claims.”

“However, we now expect that the initial distributi­on will take place sometime in 2017 and will be larger than we had anticipate­d,” wrote Breeden, a former chairman of the Securities and Exchange Commission. He added that the fund was expected to make “two or more cash distributi­ons for approved claims.”

Although fraud victims have received nothing from the fund, Breeden’s company has been paid $38.8 million for its work, Bloom

berg News reported Tuesday, cit- ing records released by the government in response to a Freedom of Informatio­n Act request.

RCB Fund Services did not immediatel­y respond to a message seeking comment.

As of January, the company similarly had not yet distribute­d hundreds of millions of dollars earmarked for investors hurt by misreprese­ntations from BP after the explosion of its Deepwater Horizon oil rig in the Gulf of Mexico and an unrelated case in which JPMorgan Chase settled allegation­s that it misstated some financial results.

The delays highlight the challenges in verifying compensati­on claims filed by people and companies who say they lost money in complex cases of alleged wrongdoing.

Madoff surrendere­d in December 2008. The surrender came as his investment fund teetered toward collapse when clients tried to get their money back amid the financial crisis. The former Nasdaq chairman was sentenced to 150 years in prison in 2009 after he pleaded

“We were unable to initiate our first payout in 2016 ... because of the volume and complexity of claims.” Richard Breeden, above, special master of RCB Fund Services LLC

guilty to fraud charges and admitted he had used funds from some investors to pay others — all while living a life of luxury. The roughly $17.5 billion fraud devastated thousands of ordinary investors, charities, celebritie­s and pension funds that had entrusted their money to Madoff.

The Department of Justice in 2012 named Breeden as the federal government’s special master assigned to handle identifica­tion and repayment of Madoff scam victims. The fund largely consists of $2.2 billion seized in 2010 from the estate of deceased investor Jeffry Picower, one of Madoff ’s favored clients, and $1.7 billion JPMorgan paid for failing to alert authoritie­s to warning signs of fraud in his account at the bank.

In contrast with the repayment delay, a separate effort launched by the investment industry-financed Securities Investor Protection Corp. has amassed nearly $11.6 billion in Madoff-related recoveries and agreements and has distribute­d just over $9 billion to burned investors so far. That effort is led by court-appointed trustee Irving Picard, whose law firm has received millions of dollars from the fund for the work.

A 2014 court order created the $525 million BP Fair Fund and appointed Breeden’s firm to serve as the distributo­r of the money, which came from a deal the energy giant reached with the SEC.

A January 2017 case status update posted on the fund’s website said more than 70,000 investor claims had been received. “As with all such distributi­ons, we must know the final amount of all claims before we can determine the actual payout percentage on eligible losses,” the posting stated. “Once that is determined, cash distributi­ons can commence.”

The JPMorgan Fair Fund was created in 2013 as the bank agreed to a $200 million SEC settlement of allegation­s it misstated financial results and lacked effective internal controls to detect and prevent traders from overvaluin­g investment­s.

 ?? 2014 PHOTO BY MARIO TAMA, GETTY IMAGES ?? Bernard Madoff is serving 150 years in prison for running a massive Ponzi scheme.
2014 PHOTO BY MARIO TAMA, GETTY IMAGES Bernard Madoff is serving 150 years in prison for running a massive Ponzi scheme.
 ?? 2014 PHOTO BY PAT CROWE II, AP ??
2014 PHOTO BY PAT CROWE II, AP
 ?? GETTY IMAGES FILE ?? A separate Madoff fund led by Irving Picard, shown in 2010, has already distribute­d more than $9 billion to burned investors.
GETTY IMAGES FILE A separate Madoff fund led by Irving Picard, shown in 2010, has already distribute­d more than $9 billion to burned investors.

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