Legal News

Does Ruth Madoff Need Her Own Lawyer?

By Dan Slater

Covering the Madoff scandal we’ve notice that, while certain developments attract limited notice, other incremental stories seem to garner broad interest. If this morning’s buzz in our coffee shop is any indication, yesterday’s revelation that Bernie’s wife, Ruth, withdrew $15.5 million from a Madoff-related brokerage firm in the weeks before Bernie’s arrest falls in the latter category.

The disclosure, from the securities division of the Massachusetts Secretary of the Commonwealth, came as part of its complaint Wednesday that also offers new evidence of the close relationship between Bernard L. Madoff Investment Securities and the brokerage firm, Cohmad Securities.

As for Bernie, Massachusetts Secretary of State William Galvin said the timing of the withdrawals raises questions about the account he’s offered authorities that he acted alone. “The activities of Mrs. Madoff and the timing should draw interest on the part of the bankruptcy trustee and other regulators,” he said. On Ruth’s side, the Journal writes that her withdrawal raises questions about about how much she knew about Bernie’s business.

Ira Sorkin, who’s repping both Bernie and Ruth, declined to comment, as did Irving Picard, the court-appointed trustee.

But here’s the question we’ve been tossing around at LBHQ: At what point does Ruth need her own lawyer? Suppose, for instance, their respective interests diverge? For example, Ruth’s interest may be to claim that, in withdrawing the money, she was acting on Bernie’s instructions. Bernie’s interest may be for Ruth to remain mum.

Columbia University’s Daniel Richman, a former AUSA in the Southern District, says, while it’s still too early to tell, there’s certainly a potential for a conflict of interest, should Ruth and Bernie’s litigation strategies run in separate directions.

“There are plenty of cases where a husband and wife, for reasons of legal strategy or personal preference, find it perfectly reasonable to stay together,” Richman told the Law Blog. “Sometimes blame-shifting amounts to the best strategy. But sometimes standing together does, too. Should this go further, a court, in dealing with a lawyer representing both of them, would require assurances that [Bernie and Ruth] understood the full dimensions of the possible conflict.”

Full post as published by Law Blog - WSJ.com on February 12, 2009 (boomark / email).