Cheated Again: Madoff Victims Receive Millions Less Than Trustee

Irving Picard, the man charged with recovering funds for the many victims of Bernie Madoff’s Ponzi scheme, has been working tirelessly for four years to pay back those who collectively lost many millions in life savings.

But it turns out that the case has so far been much more lucrative for him than for Madoff’s victims.

To date, Madoff’s victims have received only $330 million. But Picard’s efforts have garnered a huge $554 million in legal and other fees for the trustee and a dozen law firms and consultants, the New York Times reports. Picard’s fee? A huge $850 an hour.

So, is he worth his weight in gold?

Here is a brief update on all the cases Picard has brought on behalf of the victims, and a report card of sorts.

So far, Picard has sought more than $100 billion, despite acknowledging that only around $17.3 billion had been invested by customers. Furthermore, judges have thrown out a vast majority of the claims — some $90 billion worth, according to the Times.

In February, judge Jed S. Rakoff of United States District Court in Manhattan threw out Picard’s $60 billion racketeering suit against UniCredit. He described some of the claims in the case as “paltry, and otherwise unexceptional.”

In another ruling, Judge Rakoff rejected a case against HSBC, describing it as “convoluted.” He said he was “mystified” by some of Picard’s arguments.

Another district court judge, Colleen McMahon, ruled against Picard’s $20 billion case brought against JPMorgan Chase, saying simply: “The trustee’s theories fail.”

From the New York Times:

According to a Government Accountability Office report quoting the Securities Investor Protection Corporation, which hired Mr. Picard as the bankruptcy trustee, it is unlikely he will be able to pay back Mr. Madoff’s customers the $17.3 billion that he had said was his goal, let alone the $100 billion he originally sought. Indeed, at the rate he’s going, he would be lucky to return more than half of the $17.3 billion.

A spokeswoman for Mr. Picard did not make him available for an interview.

In fairness to Mr. Picard, he has been successful in seeking to claw back money from “net winners” — investors who walked away with more money than they started with — so he can pay the “net losers.” Among the net winners with whom he has reached settlements is the Wilpon family, which controls the New York Mets.

Thus far, he has reached settlement deals worth some $9 billion. He has delivered only $330 million to Mr. Madoff’s victims, however, because so many of those settlements are being challenged in court.

It is unclear whether some of the settlements, which have been approved by a bankruptcy judge but are being challenged by others on appeal, will hold up. In a statement on the trustee’s Web site, Mr. Picard said he was “confident that the appeals on these settlements will fail, as they already have on several occasions.” Meanwhile, the legal fees keep piling up.

While Picard's fees have been approved by the bankruptcy court, Judge Rakoff and others have raised questions about his pay.

Perhaps this is one instance where the lawyers' pay day should simply be directly proportional to the amount of funds recovered for the victims.

Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio