When Bernie Madoff, the master Ponzi schemer, was sentenced to 150 years in the slammer, many of his victims felt some measure of justice had been served. But others were furious that members of Madoff's family appeared to have tap-danced away with millions in the months leading up to their patriarch's arrest.
Now Irving Picard, the court-appointed trustee, has filed a $199-million lawsuit against the disgraced financier's sons Andrew and Mark, his brother Peter, and his niece Shana, alleging that they benefited from Madoff's epic $60-billion fraud by using his investment firm as a "family piggy bank" to fund their lavish lifestyles.
Picard's lawsuit, filed in federal bankruptcy court in New York, alleges the family members all received improper or fraudulent funds from Madoff's $60-billion crime, which they used to fund business deals as well as purchase multimillion-dollar homes, luxury cars, boats and fancy clothes. Picard's plan to sue Madoff's family was first revealed in an interview he gave last Sunday with CBS News' 60 Minutes news program. Picard has already sued Madoff's wife, Ruth, for $45 million, and won a court order requiring the former Park Avenue matron to report all purchases over $100.
Now, Picard is seeking at least $198,743,299 from the other family members -- some $141 million of which the family members mysteriously received in the months leading up to Madoff's arrest, according to the lawsuit. Picard does not charge the family members with participating directly in the scheme, but rather being "completely derelict" in their duties as officers of Bernard L. Madoff Investment Securities.
Picard blasts Peter Madoff and Shana Madoff, who held the titles of chief compliance officer and compliance officer, respectively, and were probably the worst such corporate officers in the history of finance. Peter and Shana "were completely derelict in these duties and responsibilities. As a result, they failed to detect or failed to stop the fraud, thereby enabling and facilitating the Ponzi scheme," Picard says in the lawsuit.
"If the family members had been doing their jobs, honestly and faithfully, the Madoff Ponzi scheme might never have succeeded, or continued for so long," Picard said in a statement. Madoff's massive fraud lasted for decades, robbing thousands of people, investment funds and charities of billions.
Picard said that Madoff's brother Peter, 63, paid himself $60 million and used the money to buy homes on tony Park Avenue and in ritzy Palm Beach, Florida. The trustee also accuses Peter of backdating trades to allow him to withdraw more money from his accounts than he put in.
Picard's complaint charges that Madoff's "purportedly 'legitimate' proprietary trading and market-making businesses" were involved with the mega-scam as well. "All of the defendants knew or should have known that the majority of the revenue purportedly earned by the market-making and proprietary trading businesses, at least for fiscal years 2007 and 2008, was composed of 'commission' income" which came from Madoff's crooked investment advisory business in the form of trades which, "in fact, never took place."
Madoff's sons, Mark, 45, and Andrew, 43, responded quickly to Picard's lawsuit with declarations of their innocence. In a statement, their lawyer, Martin Flumenbaum, said: "We strongly disagree with the trustee's baseless claims. Mark and Andrew Madoff had no prior knowledge of Bernard Madoff's crimes and contacted the U.S. Department of Justice and the [Securities and Exchange Commission] immediately after their father told them he had defrauded his investment advisory clients."
In fact, Flumenbaum suggested that Madoff's sons themselves were victimized by their devious dad. The brothers "suffered substantial economic losses as a result of their father's crimes, and we believe it is legally appropriate that these losses be taken into account in resolving the outstanding financial issues."
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