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Madoff Trustee to Sue Sons, Other Relatives

Sep 29, 2009 | Parker Waichman LLP

It seems everyone has been awaiting word on when the court-appointed trustee—Irving Picard—in the historic Bernard Madoff Ponzi scheme would go after other members of Bernard’s family. Duped investors, investigators, and virtually anyone who has read about the massive financial swindle has long believed that Madoff’s family members were involved in the scam that stripped countless investors of their life savings.

CNN is now reporting that Picard intends on suing four more of Bernard’s family members for about $200 million this week, citing a CBS “60 Minutes” broadcast report. Picard will be suing both of Madoff’s sons, Mark and Andrew; Bernard’s brother, Peter; and Bernard’s niece, Shana for a combined total of $198 million, said CNN.

This lawsuit is in addition to another Picard filed for $44.8 million against Ruth, Bernard’s wife, this July, said CNN. The amount correlates to the monies Ruth transferred from Bernard’s investment firm over six years, CNN added. Picard was appointed by the U.S. Bankruptcy Court in New York and appeared on “60 minutes” with his attorney, David Sheehan. Picard said he believes the $198 million is what the four Madoff relatives took out of Bernard L. Madoff Investment Securities.

Madoff, 71, was sentenced to 150 years in prison for running a massive Ponzi scheme that is estimated to be the largest in history and which has allegedly cost investors as much as $65 billion. Bernard L. Madoff Investment Securities is the investment firm that served as a ”front” for the scam, noted CNN.

The disgraced financier apologized at his sentencing in June for lying to thousands of investors and deceiving his wife, brother, and sons, said Bloomberg.com previously. Peter was the firm’s former chief compliance office and both sons managed the trading division of Madoff’s now-defunct investment firm.

Daily Finance previously explained that it has been difficult to determine exactly what the family knew of Madoff’s deceit and activities noting that some have pointed out that while it would seem impossible that the brother and sons could be unaware of what was happening, there are those who believe Bernard found his sons to be incapable of handling his business affairs and, thus, kept them ignorant. Regardless, said Daily Finance, the sons received many benefits as a result of Bernard’s schemes.

Picard continues to work to determine how much Madoff stole because, although he claimed to have $65 billion, the figure was based on bogus investment statements, said CNN. The U.S. Attorney's office in New York said the losses suffered by Madoff’s 2,336 victims exceeded $13 billion, as of last week, said CNN.

Earlier this year, the Washington Post said the Security and Exchange Commission’s (SEC) internal investigation was focusing, in part, on the relationship between Madoff’s niece, Shana Madoff, and her husband, Eric Swanson.  Shana served as Bernard’s compliance officer, and Swanson, a former SEC official, was involved in the 2004 SEC examination of Madoff’s business before their marriage, the Post said.  Swanson also conducted an internal review of the 1999 examination. Although the SEC maintained that Swanson played no role in any Madoff examinations after his personal relationship with Shana began in 2006, according to the Post, Madoff reportedly bragged of their marriage at a conference last year, when he spoke of having “close” ties with regulators.


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