Madoff Prosecutors Taking A Look at Some of His InvestorsMay 18, 2009 | Parker Waichman LLP
U.S. prosecutors on the Bernard Madoff Ponzi scheme case have reportedly set their sites on some of his investors. According to The Wall Street Journal, eight such investors are among Madoff's friends, family and associates now being scrutinized by a criminal investigation.
Madoff pleaded guilty to 11 fraud counts on March 12. The former chairman of the Nasdaq stock exchange ran an investment advisory business for decades that was, in reality, a Ponzi scheme. Last November, Madoff told his investors that his fund held more than $64 billion, but in reality, he only had a fraction of that amount.
Because Madoff's Ponzi scheme went on for decades, it is suspected that he was far from the only person in his circle who knew of the swindle. It's been known that several people close to Madoff - including key employees, as well as his wife, sons and brother - were among those close to him caught up in the probe. But today's Wall Street Journal article is the first to acknowledge that some of his investors are also under scrutiny.
The Journal says eight such investors are in the spotlight. They include philanthropists Jeffry Picower and Stanley Chais, as well as Madoff's close friend, Carl Shapiro. According to The Wall Street Journal, there is allegedly evidence that both Picower and Chais told Madoff what return they wanted on their investments with him, and their accounts would eventually reflect those returns. Prosecutors are also trying to determine if Shapiro, one of Madoff''s oldest and closest friends, knew Madoff's funds were a fraud. Shapiro gave Madoff financial backing to start his business in the 1960s, the Journal said.
Prosecutors are also said to be taking a look at Frank Avellino, a Florida accountant who ran an investment fund that channeled client money to Madoff; Noel Levine, a real-estate investor who had an office next to Madoff's fraudulent business; and Robert Jaffe, a Palm Beach investor and Shapiro's son-in-law. According to the Journal, Jaffe recruited investors for Madoff.
So far, no investor has actually been charged with criminal wrongdoing, the Journal said. However, as we reported previously, both Picower and Chais have been sued by the trustee liquidating Madoff's assets. The trustee claims that both sought and received better returns than thousands of other Madoff investors. According to The Wall Street Journal, those suits allege that Chaise received returns as high as 300% from his Madoff investments, while Picower saw returns of more than 100% in 14 instances, reaching as high as 950%.