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Madoff victims to share in $7.2 billion recovery of funds: Justice Department

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below, from the Justice Department.....

ESTATE OF JEFFRY M. PICOWER TO FORFEIT

$7.2 BILLION FOR VICTIMS OF BERNARD L. MADOFF'S PONZI SCHEME

Multi-Billion Dollar Settlement to Benefit Madoff's Victims is Largest Single

Forfeiture Recovery in U.S. History

NEW YORK - The estate of Jeffry M. Picower has agreed to forfeit $7,206,157,717 to the United States, representing all the profits that Picower withdrew over the years from Bernard L. Madoff Investment Securities LLC (BLMIS), the fraudulent investment advisory business formerly owned and operated by Bernard L. Madoff. The distribution of funds to victims will be administered by Irving H. Picard in his dual capacities as the newly-appointed Department of Justice special master to assist the department in connection with the victim remission proceedings and as the court-appointed trustee overseeing the liquidation of BLMIS under Securities Investor Protection Act (SIPA). The more than $7.2 billion forfeiture announced today constitutes the largest single forfeiture in U.S. history, and will be used to compensate victims of Madoff's fraud.

Today's announcement was made by Preet Bharara, U.S. Attorney for the Southern District of New York; Orlan Johnson, Chairman of the Securities Investor Protection Corporation (SIPC); Irving Picard, SIPA Trustee; Janice K. Fedarcyk, Assistant Director-in-Charge of the New York Field Division of the FBI; and Charles R. Pine, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service (IRS) Criminal Investigation Division.

According to the stipulation and order of settlement, and accompanying civil forfeiture complaint filed today federal court in Manhattan, the investment advisory business of BLMIS was operated as a massive Ponzi scheme from at least as early as the 1980s, defrauding investors of billions of dollars. Rather than use client funds to invest in securities, as promised, BLMIS diverted those funds to pay other clients' redemption requests; fund transactions to disguise BLMIS's fraud; and enrich Madoff, his family and his associates. In order to support the lie that BLMIS was operating a legitimate investment advisory business, BLMIS created and disseminated fictitious account statements that, among other things, showed trades that never actually took place. During the course of the fraud, Madoff's clients lost approximately $20 billion in funds they invested with BLMIS.

Since at least the late 1970s, Jeffry M. Picower was an investor in BLMIS, holding an account in his own name and controlling accounts held by various individuals and entities. Over the course of his 30-plus year relationship with BLMIS, Picower withdrew a net total of $7,206,157,717 in profits from BLMIS. When Madoff was arrested in December 2008 and his fraud was revealed, it became clear that Picower - like all of BLMIS's investors who withdrew more money than they invested - had profited at the expense of more recent BLMIS investors.

Picower died in October 2009. In his will, Picower sought to establish a charitable foundation, which was to receive the overwhelming majority of his fortune, and continue his lifelong dedication to philanthropy and to funding medical research. In order to resolve potential civil claims by the government against Picower's estate, and to enable the creation of the foundation called for in Picower's will, the estate, through Picower's widow Barbara Picower, has agreed to give up the entire net total of any and all funds that Picower or any related entity received from BLMIS. The settlement contains no finding or admission of fault against Picower, and his estate has claimed that neither Picower nor any of the related entities participating in the settlement had any involvement in, or knowledge of, Madoff's fraud.

The U.S. Attorney's Office will use funds forfeited in the settlement announced today to compensate victims of Madoff's fraud. Last week, in connection with a $625 million settlement involving the U.S. Attorney's Office, the SIPA Trustee, and Carl Shapiro and his family, U.S. Attorney Bharara announced that the Department of Justice had appointed Irving H. Picard as special master to oversee the process of remission or mitigation under the forfeiture laws. Picard is already serving as the court-appointed trustee for BLMIS under SIPA. Under the terms of today's settlement, and a related settlement submitted to the U.S. Bankruptcy Court for the Southern District of New York, Picard will administer $5 billion of the funds being returned to Madoff's victims by the Picower estate through the SIPA liquidation proceedings. He also will administer the remaining $2,206,157,717 through the Department of Justice's remission or mitigation process.

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Lynn Sweet

Lynn Sweet is a columnist and the Washington Bureau Chief for the Chicago Sun-Times.

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This page contains a single entry by Lynn Sweet published on December 17, 2010 2:12 PM.

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