Madoff's Wife Wants to Keep Penthouse, Other AssetsMar 3, 2009 | Parker Waichman LLP
Bernard Madoff wants to hold on to his luxury penthouse in Manhattan, and has claimed that the $7 million dwelling belongs to his wife, Ruth. According to the Associated Press, Madoff's lawyers are also claiming that $45 million in municipal bonds and $17 million more in a separate account belong to Madoff's wife and should be exempt from any asset seizure.
Madoff - once a chairman of the Nasdaq stock exchange - was the founder and primary owner of Bernard L. Madoff Investment Securities LLC. The firm was primarily known for its business in market-making, or serving as the middleman between buyers and sellers of shares. However, Madoff also oversaw an investment-advisory business that managed money for high-net-worth individuals, hedge funds and other institutions.
According to the FBI complaint against Madoff, that business was largely a Ponzi scheme. The FBI said Madoff “deceived investors by operating a securities business in which he traded and lost investor money, and then paid certain investors purported returns on investment with the principal received from other, different investors, which resulted in losses of approximately $50 million."
Following his arrest, a receiver was appointed to undertake the liquidation of Madoff's assets in an effort to recover some of the his investors' missing money. At a meeting last month, the trustee told investors that so far he had recovered about $950 million from Madoff’s assets - a fraction of what they have lost.
According to Bloomberg News, Madoff's lawyers claimed that only Ruth Madoff has a "beneficial ownership” of the assets they want protected. The revelation was part of an order filed yesterday by U.S. District Judge Louis Stanton, which modified terms of an asset freeze on Bernard Madoff’s property. The order cited a claim by Ruth Madoff that some of her assets are separate from her husbands'. Judge Stanton is presiding over the civil lawsuit filed by the Securities and Exchange Commission against Madoff.
Among the assets Madoff lawyers are trying to protect are municipal bonds held in account at Cohmad Securities Corp. As we reported last month, Cohmad is an investment introduction business part-owned by Bernard Madoff which recruited investors for Madoff’s main fund. Massachusetts Secretary of State William Galvin is trying to prove that Cohmad was so intertwined with Madoff’s firm that it constituted a “common enterprise.”
Court papers recently filed by Galvin assert that Ruth Madoff removed $5.5 million on November 25, and another $10 million on December 10, the day before her husband’s arrest. Galvin is seeking to revoke Cohmad’s state securities registration because it allegedly withheld information about the Madoff case.
Robert Jaffe, one of the middlemen who recruited investors for Madoff, became the manager of the Boston office of Cohmad Securities in 1989. As part of his investigation, Galvin subpoenaed Jaffe, but according to court documents, Jaffe invoked his right against self-incrimination.