Bernie Madoff's Ponzi scheme took in an estimated $20 billion. (Photo Credit: Public Domain/U.S. Department of Justice/Wikipedia)

The Associated Press and Reuters report that Irving Picard, the court-appointed trustee in charge of recovering funds for the victims of Bernard Madoff, has reached settlement with Madoff’s primary beneficiary in a massive Ponzi scheme. The estate of Jeffry Picower, the late Florida philanthropist and businessman, has agreed to repay $7.2 billion to Bernie Madoff’s victims.

Jeffry Picower’s estate denies involvement in Ponzi scheme

Jeffry Picower’s widow Barbara Picower, who is the official representative of the estate, has maintained that her husband “was in no way complicit” with Bernie Madoff’s fraud. The Madoff-related profits were supposedly made on “stock trades.” However, she has stated that the estate of Jeffry Picower will “return every penny received” from Madoff investments.

Initial estimates from U.S. prosecutors were that the Bernie Madoff Ponzi scheme took in about $65 billion. Trustee Irving Picard later reduced that figure to $20 billion, still considered the most lucrative instance of investment fraud in history. Jeffry Picower’s $7.2 billion settlement allegedly covers more than one-third of fraud funds. Picard argued in New York bankruptcy court that Picower had to have known that the returns were “implausibly high” and in some way tied to fraudulent activity.

‘The largest civil forfeiture payment in American judicial history’

According to the New York Times, prosecutors in the Bernie Madoff fraud case say that the settlement will be the largest of its kind in the history of U.S. courts. It should enable a sizable number of fraud victims to get “at least half” of their funds back, a remarkable achievement in the minds of those who had resigned themselves to the idea that they’d lost everything for good.

The many victims of Bernard Madoff

The Bernie Madoff Ponzi scheme cut a wide swath across America’s financial landscape. Individuals, banking institutions and various hedge funds invested money in Madoff investment schemes, only to see everything disappear when the fraud was exposed. Some, like Jeffry Picower, had been drawing massive profits for years. Unlike most at the time, however, Picower took the money and ran.

Sources

Associated Press/Reuters

What happened to Jeffry Picower

The New York Mets: second in New York, first in Ponzi lawsuits. (Photo Credit: CC BY-SA/Koe/Wikipedia)

The New York Mets have been used to coming in second when it comes to the race for New York City baseball fans’ hearts. However, when it comes to profiting from Ponzi schemes, ESPN reports that the New York Mets – as well as team owner Fred Wilpon and family – have been finishing first. Bernie Madoff victims’ fund trustee Irving Picard is suing the team and the Wilpon family as part of investor fund recovery. Mets Limited Partnership – a division of the New York Mets organization – is known to have invested and profited from dealings with Madoff and his investment company.

The New York Mets are in settlement negotiations

Like many well-off Bernie Madoff clients who have agreed to return funds to help repay other victims, the New York Mets are currently in settlement negotiations with the U.S. Bankruptcy Court for the Southern District of New York. Team executives have assured Mets fans that this situation will not impede operations of the team. According to the New York Times, the Mets Limited Partnership invested $522.7 million with Bernie Madoff and walked away with $570.5 million, a $47.8 million profit.

In a statement by the Wilpon-owned real estate company Sterling Equities, it was revealed that further details regarding ongoing settlement negotiations remain confidential. Much like the case between Irving Picard and JPMorgan Chase, however, more details could be revealed with time.

The pain of loss is greater for some

New York Mets owner Fred Wilpon, 74, told ESPN that he sympathizes with the victims of Bernie Madoff, saying that “(lost) money smarts,” but that the most painful element for people like himself is the betrayal.

“I’ll go to my grave (with) that one, as will (team president) Saul (Katz) and Jeff (Wilpon) and the rest of our partners. That was a total betrayal of us. We were investors for something like 25 years,” he said.

Wilpon assured the media that returning the money will not leave the New York Mets and Wilpon group of companies destitute. Real estate and development businesses were “running the shop,” by the owner’s estimation.

Sources

Boston Globe

ESPN

The New York Mets appear to be hiring…

JPMorgan Chase may be on the hook for billions of dollars for allegedly aiding and abetting Bernie Madoff. (Photo Credit: CC BY-ND/Market Mix Up)

The latest chapter in the Bernie Madoff financial scandal involves one of the United State’s largest banking and investment companies, reports PR Newswire. It has been announced via press release that Irving Picard, the trustee for liquidation of Bernard L. Madoff Investment Securities LLC (BLMIS), is filing a complaint in U.S. Bankruptcy Court for the Southern District of New York against several arms of JP Morgan Chase , including banks and securities companies. Picard seeks to recover $1 billion in fees and profits, plus $5.4 billion in damages for Madoff clients, from JPMorgan Chase, previously BLMIS’ primary banker. The allegation is that JPMorgan Chase aided and abetted Bernie Madoff and company in the largest known Ponzi scheme in U.S. history.

Case says JPMorgan Chase was center of Ponzi scheme

David Sheehan, court-appointed counsel for Irving Picard, said that “JP Morgan was willfully blind to the fraud, even after learning about numerous red flags surrounding Madoff.” While JPMorgan Chase was not the only financial organization involved in Bernie Madoff’s intricate investing scheme, Sheehan places the banking and investment corporation at the center of the misdeeds and says it was thoroughly complicit, despite knowing of various warning signs regarding Madoff’s activities over the span of 20 years. Despite what the prosecution calls overwhelming evidence, JPMorgan Chase says it “simply continued to collect fees and derive profit.” Without JPMorgan Chase’s participation, says Sheehan, the Madoff Ponzi scheme would not have been possible.

Currently, nearly all financial data involved in the complaint is filed under seal with the Bankruptcy Court. This is because JPMorgan Chase has designated all of the information confidential. Picard is fighting for the seal to be removed as soon as possible.

Madoff’s main account was held by JPMorgan Chase

If JPMorgan Chase had taken the initiative to review internal account records of the massive amounts of cash being moved, it could have easily seen that something was illegitimate, claims Sheehan. As suspicious activity was quickly discovered once the FTC began to investigate, supporters of Irving Picard believe that JPMorgan Chase was negligent in its duty to expose the fraud.

Sources

PR Newswire

Recent interview with Irving Picard re. SIPC Insurance

Blind faith in your money manager is not a viable option

In the wake of the Bernie Madoff scandal, debt relief has become a persistent theme. Madoff had a long running Ponzi scheme in which he bilked investors of over $13.2 billion.

Under the guise of a gifted money-manager, Madoff attracted high-profile clients like Steven Spielberg, Kevin Bacon, and Hall-of-Fame pitcher Sandy Koufax. Madoff claimed his client’s investments were earning them big returns, but in reality he was using the investment money provided by new customers to fund those returns. The remainder of the money was used to sustain his lavish lifestyle.

A new skepticism

In the wake of such a high-profile crime, a new skepticism has been introduced to the business relationship between investors and money. For example, Tony Guernsey, a wealth manager for over 40 years, said that his clients are beginning to ask him a new question: “How do I know that I own what you tell me I own?” Guernsey said that he understands the concern in the light of recent financial developments. “The bottom-line,” he added, “is that the foundation between wealth manager and client, has been called into question, if not destroyed.”

Tips for investors

In an effort to restore consumer confidence, the Securities and Exchange Commission offers the following advice to consumers.

Read statements

The law requires all money managers to provide written account statements. Studies have shown however, that most investors rarely read them. To assist their customers, some companies have created simpler ways to track wealth. HSBC Private Bank offers WealthTrack, a system that clearly shows investors what they own, where it comes from and what the projected return is. Advent software is a wealth management reporting system that is quickly gaining steam with money management firms who know they have to regain consumer trust. The reality, however, is that consumers need to be responsible for their own investments. Blindly sending money to a money manager is no longer a viable option.

Monitor money managers

Financial advisor Kelly Campbell of Fairfax, Virginia, said that investors should “call the firm that actually holds their money to check on the manager.” Most independent money managers use third-party custodial firms to hold investor funds. Bernie Madoff, on the other hand, held the funds himself, which should have triggered the immediate doubt of his investors.

According to Campbell, “every bit of information an advisor can get, a client can get too.” It takes research, but consumers can check up on their investments for added peace of mind. Knowing where the money is and what it’s invested in is integral to understanding how it will play into retirement funding, debt relief, and savings.

Ask questions

Consumers should consistently ask questions based on their monitoring and reading of documentation. Carl Loughton, financial advisor in Chicago, Illinois, stated, “Many people are too trusting…they hand money to their money managers and walk away hoping it will sustain them in the future. Good money managers will provide answers before [the questions are asked].”

Consumers rarely reach the level of understanding a money manager has, but they can gain a basic understanding of documentation provided. Loughton added, “If something looks funny, ask. The worst that can happen is your manager saying ‘I don’t know’ and then check[ing] on it for you.” In the end, money is the responsibility of the owner. Consumers need to be proactive about their finances to ensure that someday their money will sustain their retirement, help them find debt relief, or finance their children’s futures.