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Friday
Dec172010

Good News For Madoff Victims: $7.2 Billion Recovered

Photo Courtesy - Getty Images(NEW YORK) -- In the biggest win yet for victims of Bernie Madoff, the estate of the single biggest beneficiary of Madoff's fraud agreed to pay $7.2 billion to the victims' recovery fund and the Department of Justice.

Irving Picard, the trustee recovering money for Madoff's victims, announced Friday that he had cut a deal with the estate of the late Jeffry Picower that would reap $5 billion for the victims' fund, with another $2.2 billion to be distributed to victims by the U.S. government. Picard had earlier recouped more than $2 billion for victims, meaning he has now made real headway in recovering lost funds; total investor losses have been estimated at about $20 billion.

Picard said the importance of the Picower settlement could not be overstated, "as it shows significant progress in our efforts...Every penny of this $7.2 billion settlement will be distributed to BLMIS [Bernard L. Madoff Investment Securities] customers with valid claims."

U.S. Attorney Preet Bharara called the settlement "historic" and a "game-changer," and praised Barbara Picower, Picower's widow, for agreeing to it.

"By returning every penny of the $7.2 billion her late husband received from BLMIS to help those who have suffered most, Barbara Picower has done the right thing," said Bharara.

Picower was one of Madoff's early investors and withdrew about $7 billion in profits from his account over three decades. The 67-year-old Palm Beach, Florida philanthropist drowned after suffering a heart attack in his swimming pool on Oct. 25, 2009, just under a year after Madoff's Ponzi scheme unraveled.

Picower's lawyers say he did not know that Madoff's investments were bogus, but the trustee claimed in court papers that Picower should have realized that his profits were unnaturally high and likely based on fraud.

In recent weeks, Picard has filed suits against hundreds of individual investors and big companies like JP Morgan, HSBC and UBS, which bring the total amount sought by Picard in the so-called "clawback" to at least $56 billion.

Through the end of September, Picard had filed 19 lawsuits worth $15.5 billion against longtime individual investors like Picower, members of Madoff's immediate family, and major feeder funds, including those operated by the Fairfield Greenwich Group and J. Ezra Merkin, a prominent Wall Street investment manager.

Picard followed by suing hundreds of individual investors believed to have profited from Madoff's multi-billion-dollar investment scheme by receiving more from Madoff than they invested. Those suits ask for amounts ranging from $500,000 to $60 million, and total $3.5 billion.

The big bank lawsuits started with UBS AG, which Picard and his team of lawyers sued the day before Thanksgiving for $2 billion, an amount later increased to $2.55 billion. JP Morgan was next, sued for $6.4 billion on Dec 2, followed by HSBC, sued for $9 billion on Dec 5. The banks have all denied wrongdoing and have pledged to fight the suits.

Picard last week filed the largest suit to date, asking Austrian banker Sonja Kohn and Medici Group for $19.1 billion, alleging that she masterminded a multinational money-laundering business for Madoff.

Picard was appointed by the court in 2008 to unravel the fraud and help victims recover losses. As of December 8, Picard and his law firm, Baker & Hostetler, have approved around 2,000 victim claims totaling $5.8 billion out of the more than 15,000 claims filed. The firm says they will continue to allow claims after the clawback deadline and by the end of the year, the value of the approved claims should soar to $18 billion.

When the fraud was discovered, there were $65 billion in profits on Madoff's books, but Picard estimates total investor losses to be closer to $20 billion. The lawsuits filed to date ask for far more than that, but they include demands for punitive damages, and the expectation that not all suits will be successful.

Prior to the Picower settlement, Picard had recovered more than $2 billion for victims through asset sales and out-of-court settlements.

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