Problems With Settlement Agreement Distributions in Madoff Scandal

The trustee in charge of liquidating Madoff’s firm, Irving Picard, has failed to disperse the money obtained in any of the settlement agreements that his firm made in the Madoff scandal. Picard has only returned about $330 million to the investors who lost money in the Madoff scandal. However, his firm is apparently holding about $2.3 billion in customer accounts. Furthermore, a number of challenges to settlement agreements that Picard won as the result of numerous settlement offers he made with former Madoff investors are in limbo. The settlement agreements’ amounts total about $ 6.4 billion. 

Furthermore, the strategy that Picard employed to get money back for investors has failed. He tried to sue for about a $100 billion worth in lawsuits; however, he has only received about $10 billion from his strategy. A bankruptcy court has dismissed about $90 billion worth of Picard’s claims. This is a challenge because now the costs associated with Picard and his firm are higher than the amount he has returned to Madoff’s customers. As a result of Picard and his firm’s actions, it is unlikely that the victims of the Madoff scandal will recover. As a result, the value of the bids on Madoff’s estate have decreased. 

Now, several of the customers who were victims of Madoff’s scandal claim that some of the settlement offers are unfair because the settlement agreements prevent the victims from filing suit against the estate themselves. For example, Picard settled with one of the largest investors, Picower, and not only can he not distribute the settled funds himself because they are subject to a suit, but the customers cannot sue the estate. Picard’s sole right to sue has created problems with several other interested parties, including California Attorney General Kamala Harris. Currently, much of the estate and its problems rest with the U.S. Supreme Court, who will consider the appeal by Madoff’s customers. The Court will decide whether they will be compensated for loss of profits.

See Bloomberg News, Madoff Costs Surpass Victim Payouts As Strategy Lies In Ruins, Newstimes.com, Apr. 30, 2012.

Special thanks to David S. Luber(Attorney at law, Florida Probate Attorney Wills and Estates Law Firm) for bringing this article to my attention.