Bernie Madoff, probably the most infamous Wall Street scam artist is complaining from his North Carolina prison cell that it’s just too hot down here. I wonder why the heat never bothered him in Hawaii? Or the Bahamas? Or any other warm-weather tropical locale he frequented on the greenbacks of so many investors who trusted him with billions. In a great example of the power of Karma, Ms. Madoff’s wife is now being sued by the trustee who was appointed to handle the liquidation of assets from his recent bankruptcy filing. Ms. Madoff is being asked in the suit to repay $44.8 million. No doubt, the suit will result in her filing bankruptcy as well.
Citing that she profited from years of illegal investment activity, trustee Irving Picard filed suit in New York to claim what he believes is recoverable under the federal bankruptcy code. Up until now, Ms. Madoff has been relatively unaffected by the impact of her husband’s problem, which involved funneling investments from client to client, passing each payment off as income from previous investments.
From the bankruptcy perspective, the case is really about fraudulent transfers. Ms. Madoff claims she was never a part of her husband’s back-door dealings and has hired a team of lawyers for her own defense. The suit also alleges that Ms. Madoff’s American Express card, with balances of up to $2 million at times, was also paid by company funds, which should come as no surprise to anyone, as that is the very point of a Ponzi scheme.
The government did allow Ms. Madoff to keep $2.5 million and maintained that she personally did not engage in criminal activity but rather innocently benefited from it. A large amount of the Madoffs’ property was seized as part of the criminal investigation, including a $7 million Manhattan penthouse. Its contents will be sold to reimburse victims but is hardly going to blanket the full extent of the losses, which was primarily spent as fun money by the Madoffs. Opponents to the suit against Ms. Madoff argue that it is pointless, as she has already forfeited a vast array of assets as part of the victim recovery effort.
Mr. Picard will also be selling Mr. Madoff’s share in a private jet, which is worth $753,000. Controversy is brewing over Mr. Picard’s handling of the bankruptcy, however, as claims for returned funds are being rejected by Picard. Charities, investors and companies of all sizes are pursuing a part of the bankruptcy payouts, paving the road for a train of additional lawsuits, court challenges and just general headaches.