Legal News

In L?Affaire Madoff, the Spotlight Swings to Peter

By Ashby Jones

Just when we thought the Bernie Madoff story was starting to fade ever so slightly from the public consciousness, two things happened: a thinly-disguised Madoff character shows up on Law & Order Wednesday night (ripped from the headlines!), and, uh, perhaps more importantly, Bernie’s brother, Peter, gets himself a little taste of the limelight.

In regard to Peter, it was a strange twist, indeed. A judge in Nassau County, New York on Wednesday temporarily froze Peter’s assets in a lawsuit brought by a Brooklyn Law School student who claims he lost a nearly $500,000 investment in Madoff Securities. Click here and here for stories from the WSJ and NYT.

The lawsuit alleges that Peter Madoff served as sole trustee between 2003 and 2008 for a trust established for the student, Andrew Ross Samuels, in 1997 by his grandfather, Martin J. Joel Jr., and breached his fiduciary duty to the trust.

Peter Madoff, as chief rules-compliance officer for the firm, “had full knowledge that it was a fraudulent Ponzi-scheme and nothing more than an unprecedented fraud,” the lawsuit alleges.

“We’re doing this because we think what Peter did was wrong,” said Howard Samuels, a Dix Hills, N.Y., lawyer and Andrew Ross Samuels’s father. “Either he knew or should have known” that Bernard Madoff was operating a massive fraud, “and either way, he was grossly negligent,” he said.

Peter Madoff hasn’t been accused of wrongdoing in the alleged fraud. A lawyer for Peter Madoff didn’t return calls seeking comment Wednesday but has previously said his client didn’t know about the fraud.

The Times story adds an interesting detail pertaining to Peter. According to the story, an investor who withdrew a money entrusted to Bernard Madoff in July 1985 received a $10,000 check drawn on Bernie’s account - but signed by Peter Madoff. The investor, who insisted on anonymity, said other investors in his family had told him that they also received checks in the mid-1980s with Peter Madoff's signature.

Bernie Madoff has insisted that his Ponzi scheme did not begin until the early 1990s, years after his younger brother signed those checks, though prosecutors have insisted that it began much earlier.

Full post as published by Law Blog - WSJ.com on March 26, 2009 (boomark / email).