Legal News

Rowr! Legal ?Clawbacks? Of Madoff Investors In Full Swing

By Amir Efrati

Madoff victims have been fretting for months.

They’ve agonized as they’ve played out these questions in their minds: Would the trustee of Madoff’s firm, who is charged with recovering assets for victims, seek to recoup money that investors withdrew as many as six years before the Madoff’s arrest? And would he target not just those investors who benefited financially from Madoff’s scheme (there were many), but also the ones who put more money into the firm than they took out over the years?

Over the past week, the trustee, Irving Picard (pictured, left), answered both those questions with a resounding “Yes.” Team Picard, over at Baker and Hostetler, sent more than 200 letters to investors, asking to get back $735 million the investors withdrew from Madoff’s firm as far back as December 2002 — six years before the firm’s collapse — which is the limit under New York common law. This so-called clawback provision is based on the logic that the redemptions were actually the fruit of a fraudulent scheme.Here’s the WSJ story by yours truly.

Lawyers repping Madoff investors told the Law Blog they intent to fight Picard’s attempt to recoup money from investors who had a net loss.

Meanwhile, the Law Blog welcomes the addition of Alan Nisselson to the Madoff asset turf battle. On Tuesday a federal bankruptcy judge appointed him the trustee in charge of liquidating Madoff’s personal assets. However, Nisselson can’t exactly liquidate anything right now: another federal judge, who is overseeing the criminal case against Madoff, ordered that Madoff’s personal assets be frozen so that prosecutors could use criminal forfeiture laws to seize them for the benefit of victims. (For background on the evolving turf battle, click here.)

Nisselson (pictured, right) told the Law Blog he’ll try to straighten out all these issues later this week. Good luck!

CORRECTION: Irving Picard issued a statement this morning that he doesn’t intend to seek funds from investors who had a net loss from the Madoff fraud. (That is, unless they were in on the fraud.) As previously reported, Picard sent letters to some net-loss investors, asking for the return of funds they withdrew from the Madoff firm in the six years before Madoff’s arrest. But a Picard representative later said those letters may have been sent because Madoff's records are incomplete and didn’t indicate they were net-loss investors.

Full post as published by Law Blog - WSJ.com on April 22, 2009 (boomark / email).