Money Matters - Simplified

Trustee to sue Madoff family to recover money

Madoff with his wife, Ruth, during happier times. Madoffs family faces lawsuits as the court-appointed trustee now intends to focus on the trickster’s inner circle and recover money from the kith and kin

New York, September 28 -- Irving H. Picard, the court-appointed trustee who is supervising the liquidation proceedings of jailed financier Bernard Madoff's assets, intends to sue Madoff's two sons, his brother and a niece to recover $198 million for distraught victims of the ponzi scheme.

The trustee and his deputy, David J. Sheehan of the Baker Hostetler law firm, made their intentions clear in a "60 Minutes" interview aired Sunday on CBS. Madoff reportedly paid an amount of more than $150 million by way of loans, transfers or other payments to these four family members.

The 71-year-old swindler is now serving a 150-year prison sentence after his ponzi scheme was uncovered in December last year and he confessed to orchestrating one of the largest frauds in Wall Street’s history.

Charge of breach of fiduciary duty and negligence
The lawsuits, to be filed in U.S. bankruptcy court in New York under the Securities Investor Protection Act, against Madoff’s sons Mark and Andrew, his brother Peter and niece Shana will charge them of breach of fiduciary duty and negligence.

“Whether or not they have a criminal problem we will pursue them as far as we can pursue them. And if that leads to bankrupting them, then that’s what will happen,” said Picard.

Mark and Andrew have maintained their innocence so far. “If you were those sons and you knew today about where all that money came from, wouldn’t you be embarrassed to keep that money? They should give it all back,” Sheehan said.

The four were executives with Madoff’s firm where the billion dollar fraud was carried out for decades. The lawsuits would also accuse them of profiting personally while working at the firm. Madoff's sons and brother reportedly drew 80 million dollars in salaries over the last seven year.

The trustee has already filed 13 suits, including one against Madoff’s wife, Ruth, seeking to recover about $15 billion. Ruth spent millions of dollars from company funds for shopping and other extravagances.

Several big investors who had funneled money into Madoff operations have also been named in various suits.

Hidden money
The investigators are being carried out by Picard and Sheehan on the assumption that all of the $65 billion has not been invested in the ponzi scheme and that there is still hidden money.

Picard said of the purportedly hidden money, "We'd assume it's millions and millions of dollars."

Sheehan estimated that close to $36 billion went into the whole scheme. “About $18 (billion) of it went out before the collapse. And $18 (billion) of it is just missing. And that $18 billion is what we're trying to get back," he said.