NEW YORK: Unwinding the biggest Ponzi scheme in US history hasn’t been cheap.
Six years after Bernard Madoff’s fraud collapsed, the cost of liquidating his defunct investment advisory firm to repay thousands of victims has topped $1bn, though the con man’s former customers aren’t footing the bill.
The fees, paid by the industry-backed Securities Investor Protection Corp., which is managing the case, have financed a team of lawyers who this week surpassed $10bn in recoveries for victims, or almost 60 percent of the principal that vanished after Madoff’s arrest in December 2008.
Irving Picard, the bankruptcy lawyer who’s leading the effort as trustee for Madoff’s company, included the new fee total in an interim report posted on his website. A bankruptcy judge in Manhattan regularly approves the fees, sometimes over the objections of victims’ groups.
The victims, who believed their investments were used to buy securities, have been paid almost $6bn by Picard since he started distributing the recovered funds. The last distribution, about $349m, was in May.
The fraud, which prosecutors said started as early as the 1960s, involved millions of pages of fake trades and account statements for thousands of customers. Picard used hundreds of professionals to unravel the swindle.
“Our investigations, dissection and reconstruction of the fraud have proven invaluable in identifying how the Madoff Ponzi scheme began and lasted as long as it did,” David Sheehan, the trustee’s lead lawyer, said in an e-mail. Picard, of Baker & Hostetler in New York, recouped the cash through hundreds of lawsuits and settlements with Madoff’s customers and banks that benefited from the scheme, even if they weren’t aware of it.
Many of the cases have triggered appeals, some to the US Supreme Court. While $6bn has been paid out, billions more are being held in reserve until lawsuits are resolved that will determine who gets what. Madoff, 76, pleaded guilty to fraud in 2009 and is serving a 150-year sentence at a federal prison in North Carolina. At least seven other people have pleaded guilty to roles in the scheme, including his brother Peter Madoff, who is serving a 10- year term.
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