Madoff really made off. Billions looted just before arrest.

[Guest shebavon]

From today's NY Times.

 

 

Records Show Billions Withdrawn Before Madoff Arrest

 

 

 

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By DIANA B. HENRIQUES and ZACHERY KOUWE

Published: May 12, 2009

 

About $12 billion was pulled out of accounts at Bernard L. Madoff’s firm in 2008, according to several people briefed on an analysis of Mr. Madoff’s business records.

 

About $6 billion, or half, was taken out in just the three months before the financier was arrested in December and charged with operating an extensive Ponzi scheme, these people said.

 

Those figures offer a bit of hope for Mr. Madoff’s thousands of defrauded customers. Under federal law, the trustee overseeing the Madoff bankruptcy can sue to retrieve that money from the investors who withdrew it.

 

Indeed, the trustee, Irving H. Picard of Baker & Hostetler, filed two lawsuits on Tuesday seeking the return of a total of $6.1 billion, which he estimated had been withdrawn over the last decade.

 

One case seeks the return of $5.1 billion from various trust funds and partnerships run by Jeffry M. Picower, a prominent Palm Beach, Fla., investor whose charitable foundation was considered one of the notable victims of Mr. Madoff’s fraud.

 

Mr. Picard also sued to recover $1 billion withdrawn last year by Harley International, a hedge fund based in the Cayman Islands and administered by a unit of the Dutch bank Fortis.

 

Both lawsuits were filed in Federal Bankruptcy Court in Manhattan. And both assert that the defendants, as professional investors, should have realized that their profits were too high and too consistent — and Mr. Madoff’s paperwork and procedures were too sloppy — to be legitimate.

 

But the complaint against Mr. Picower goes further, accusing him of participating in a web of transparently false transactions with Mr. Madoff that were aimed at compensating him for “perpetuating the Ponzi scheme” at the expense of other investors.

 

In 1999, for example, one of Mr. Picower’s accounts posted an annual profit of more than 950 percent, the suit said. That account was one of two that reported annual returns from 1996 to 1999 ranging from 120 percent to more than 550 percent, the suit said.

 

In other 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.

 

A lawyer for Mr. Picower and his wife, Barbara, who was also named as a defendant, denied the allegations.

 

“Mr. and Mrs. Picower considered themselves friends of the Madoffs for over 35 years,” said the lawyer, William D. Zabel of Schulte Roth & Zabel. “They were totally shocked by his fraud and were in no way complicit in it.”

 

Mr. Zabel added: “They lost billions in personal assets, and most dear to them, all of the assets of their esteemed foundation.” The Picower Foundation closed its doors after Mr. Madoff’s arrest.

 

According to people familiar with the analysis of Mr. Madoff’s cash records, most of the $12 billion that flowed out of his fraudulent money-management operation last year was withdrawn by various “feeder funds,” which had raised cash from investors and pooled it to invest with Mr. Madoff.

 

Several of those feeder funds have already been the targets of lawsuits by Mr. Picard, who is searching for assets to be shared among customers who lost what they believed to be almost $65 billion in the Ponzi scheme.

 

It is not clear where the cash taken out of the Madoff accounts is located, or how much of it can be recovered through litigation.

 

In the lawsuit seeking to recover more than $1 billion withdrawn by Harley International, Mr. Picard asserts that the fund should have detected the fraud before investing more than $2 billion of its clients’ money.

 

According to that complaint, Harley International made 14 transfers out of its Madoff account over the last six years, including $425 million that was withdrawn three months before the Ponzi scheme became public.

 

A spokeswoman for Harley International, Jamie Moss, did not return calls seeking comment.

 

In the complaint, Mr. Picard said Harley International, which invested client money with Mr. Madoff since at least 1996, received “unrealistically high and consistent annual returns” of about 13.5 percent. That outpaced the swings in the stock index on which Mr. Madoff had apparently based his trading strategy.

 

Trading records indicate that the Madoff firm, Bernard L. Madoff Investment Securities, made at least 148 stock trades in Harley International’s account in the last decade at prices that did not match the trading range for those stocks on the dates the trades supposedly occurred.

 

Mr. Picard claims those trades should have raised red flags for “any investment professional managing the account.”

 

The Harley lawsuit is similar to one Mr. Picard has filed recently against J. Ezra Merkin, the New York financier who lost over $2 billion investing with Mr. Madoff.

 

The lawsuit against Mr. Picower mirrors similar allegations Mr. Picard made in a complaint against Stanley Chais, an investment manager and prominent Los Angeles philanthropist. Both investors have said they intend to fight the lawsuits.

 

Mr. Picard has raised about $1 billion in assets for Mr. Madoff’s victims, but the lawsuits filed in the last two weeks could push that number much higher.

 

Mr. Madoff pleaded guilty on March 12 to running the biggest Ponzi scheme in history. He is scheduled to be sentenced next month and faces 150 years in prison.

Next Article in Business (1 of 47) » A version of this article appeared in print on May 13, 2009, on page B1 of the New York edition.

 

[Guest MonkeySee]

Are they still saying Bernie Madoff acted alone in his ponzi scheme?

[Guest fountainhall]

O what a tangled web we weave,

When first we pracise to deceive!

 

Sir Walter Scott

[Guest xiandarkthorne]

Sue as they mihgt, does anyone here really believe that they'll get even half of it back to compensate anyone?

[Guest shebavon]

Are they still saying Bernie Madoff acted alone in his ponzi scheme?

 

 

Authorities are trying to nail some family members and highly placed employees. No one in their right mind believes he acted alone.

[Guest GaySacGuy]

Well he isn't the only one that got away with a lot of money...he just got caught. The wall street people that had inside information about many of these companies sold short, and the rest of us got screwed. There were a handful that made a bundle!!

[Guest shebavon]

Under Bush it was open season for guys worse than the robber barons of the 1880's. If memory serves me correct, their excess also led to a financial debacle for the USA.

[Bob]

Under Bush it was open season for guys worse than the robber barons of the 1880's. If memory serves me correct, their excess also led to a financial debacle for the USA.

 

 

You're quite correct and, although I likely share your bad views of Bush, it's probably not that fair to single him out for blame. The problem has been around for years here in the states and long preceded the W idiot. We pay alleged experts millions of dollars to run a company and then, after they screwed up the company, we gave them millions (or hundreds of millions) to go the hell away. And we're still in the game of not going after the directors (fiduciaries) of companies that somehow had no idea that a significant percentage of the alleged "assets" they were paid to oversee was no more than worthless paper.

 

The idiocy and lack of ethics in big business has been with us for far too long. And the notion that government regulation of business is bad for business (which has been in the forefront since at least the Gingrich view of the early 1990's) seems still to be with us.

 

Madoff was and remains a crook. But the culture and politics of the US for the last 30-40 years aided and abetted his existence.

[Guest shebavon]

 

Bob, you raise valid points.

 

Let us not forget it was the Republican majorities which got rid of the wall between the securities industry and banking, and than got rid of the uptick rule.

 

Coincidentally, lol, that's largely what led to the excess and crashes, beginning with the tech bubble.

 

And yes, the Democrats pushed for mortgage availability to low-income citizens, and an end to the practice of red-lining which destroyed large areas of cities across the nation. However it was the lack of regulation which led to the housing boom and bust. Especially the predatory mortgages that were pushed by the lenders. Remember when housing prices would go up forever.

 

Lack of regulation of hedge funds, derivatives, again we can see the resulting debacles.

 

While we point at Madoff, let's not forget Kenny Boy Lay, Sir Stanford, and the many other crooks we have seen in recent years.

[Guest fountainhall]

Madoff got 150 years. Pity he'll not live a fraction of that so he avoids having to serve the full term.

[Gaybutton]

Pity he'll not live a fraction of that so he avoids having to serve the full term.

I take pity on him. I think he should be set free after he serves half the sentence . . .

 

If he dies in his cell, I think they ought to string him up in the cell and leave him there:

 

"He'll hang there till he rots!" - Charles McGraw (Marcellus), 'Spartacus'

[Guest Astrrro]

He'll have lenty of time to read.

Guess first on his list will be Who Moved My Soap?

[Guest fountainhall]

One thing surprises me. This guy had been stealing millions and then billions for decades. Perhaps he just got over confident, but in the last few months it must surely have been obvious that his house of cards was starting to collapse in an alarming fashion. Being a rational man (I assume), why did he not make plans for his 'retirement' - a bolthole he could escape to in a country without an extradition treaty with the USA and with an army of bodyguards to fend off the bounty hunters who would come for him. True, it would have been a huge change from his former life and he might not have found the lifestyle entirely to his liking, but surely it would have been preferable to spending the rest of his life in jail?

[Guest Astrrro]

That's what I don't get either. He could go wherever Thaksin went.

 

"Maybe" Bernie felt if he did that then his family might be prosecuted. And if they all ran, then they couldn't claim innocence.

[Gaybutton]

That's what I don't get either.

It's on my "I Don't Get It" list too. Why didn't he get out while the getting was good? Obviously he knew he was committing a serious crime. One would think he would have had an escape route planned ages ago. Perhaps he did, but maybe things happened so quickly he didn't see it coming and thought he still had time.

 

Just think, he could have gotten together with Thaksin and the two of them could have literally bought a country somewhere. If they had opened some good gay venues I might even have visited.

 

The only thing that makes any sense to me, and it doesn't make much, is he may have been convinced that nothing would happen to him. Often major criminals think that they're somehow immune to consequences. Al Capone comes to mind. He easily could have gotten out, even when he was still on trial. There have been many cases when super rich criminals could have easily escaped, but didn't.

[Guest Astrrro]