Lawsuit Filed Against Madoff Client Who Saw 950% Returns

The trustee overseeing bankruptcy proceedings for disgraced financier Bernard Madoff has sued one Madoff client for $6.7 billion. Why? Because Jeffrey Picower, his wife, Barbara, and the Picower Foundation "knew or should have known they were benefiting from fraudulent activity or, at a minimum, failed to exercise reasonable due diligence"—they received 950% in returns one year and for a few years, returns ranged from 120% to 550%.

Picard's suit contended, "At least $5 billion of [the $6.7 billion] was fictitious profit from the Ponzi scheme. In other words, defendants have received, at a minimum, more than five billion dollars of other people’s money...The high returns reported on defendants’ accounts were a form of compensation by Madoff to Picower for perpetuating the Ponzi scheme by investing and maintaining millions of dollars." The Picowers' lawyer said, “Mr. and Mrs. Picower considered themselves friends of the Madoffs for over 35 years. They were totally shocked by his fraud and were in no way complicit in it... They lost billions in personal assets, and most dear to them, all of the assets of their esteemed foundation."

Still, Picard's suit claims, per the NY Times, "In other [Picower] accounts, backdated transactions generated billions of dollars of fictional year-end losses and one account grew by 30 percent in just two weeks in 2006 — thanks to trades that purportedly occurred months before the account was even opened." Picard's lawyer also says that $12 billion was withdrawn from Madoff's fake investment fund in 2008—and half that amount in the three months leading up to Madoff's December arrest.

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By Jen Chung in News on May 13, 2009 3:59 PM

Comments [rss]

Dead Himmler

If you buy stolen shit like a car it will be taken. These profits were stolen money.

jermar000

You forget that these are white collar criminals, and are to be respected more than the common thief. (Sigh)

Mr Mel

Picower probably kicked back to Madoff. Either that or he was blackmailing him.

Ronnie Dobbs

It the Picowers "knew or should have known they were benefiting from fraudulent activity or, at a minimum, failed to exercise reasonable due diligence", shouldn't that be true of everyone who ever invested with Madoff?

So they cashed out before he fucked them over, good for them.

Politburo

No. The key factors here are:

1. Picower is/was a professional investor.

2. He participated in clearly fraudulent transactions.

It doesn't sound like they fully cashed out, but the article indicates that $5 bil was withdrawn over the past 10 years.

NannyState

They simply cashed out? Or did they funnel much of the loot back to Madoff? Since everyone's lying, just follow the money...

TuraLura

It doesn't say anywhere they cashed out. That's not what this is about.

This is about the profits they they posted during the party days. Whoever had fiducuary responsibility for the Foundation and for the Picowers personal finances should have known they couldn't be making as much as they were putting on the balance sheets. Even if the profits ultimately were returned to Madoff's pocket, he was rewarding them in the short term for sending all that cash his way. Either they knew flat out it was quid pro quo, or they chose to look the other way. That's why they're getting sued.

Rocknrope

Exactly. Are they going to go after everyone who withdrew money before Madoff got nailed? Another reason for this whole "I'm shocked that gambling is going on at this establishment" attitude is a joke.

hotstepper

i love how a lot of these wealthy scumbags have "charitable foundations" so they can strut around acting like they care about society. dissonance indeedy.