NY trustee sues philanthropy in Madoff case
NEW YORK — The trustee overseeing the liquidation of Bernard Madoff’s assets has sued one of the nation’s leading educational philanthropies, even though the organization claims it was wiped out by the disgraced financier’s massive fraud.
The complaint filed Tuesday in Manhattan bankruptcy court alleges the Picower Foundation and several related entities made nearly $7 billion by investing with Madoff. At least $5.1 billion of that came out of the pockets of victims of a giant Ponzi scheme, and should be returned, it said.
Trustee Irving Picard alleged that foundation founders Jeffry Picower and his wife Barbara — friends of Madoff for decades — “knew or should have known that they were benefiting from fraudulent activity or, at a minimum, failed to exercise reasonable due diligence.”
An attorney for the couple, William Zabel, said his clients were never aware anything was amiss.
“They were totally shocked by his fraud and were in no way complicit in it,” Zabel said. “They lost billions of personal assets and most dear to them, all the assets of their esteemed foundation.”
The Palm Beach, Fla.-based foundation had given millions to the Massachusetts Institute of Technology, Human Rights First and the New York Public Library. It also funded diabetes research at Harvard Medical School.
The trustee’s Picower complaint says Madoff managed accounts that earned astronomical returns over 13 years. One purported to earn 950 percent in 1999.
The returns “were a form of compensation by Madoff to Picower for perpetuating the Ponzi scheme by investing and maintaining millions of dollars in (Madoff’s firm),” the trustee’s complaint said. “The implausibly high purported returns have enabled Picower and the other defendants to collectively withdraw more than $6.7 billion since December 1995.”
Madoff, 70, pleaded guilty in March to charges that his secretive investment advisory operation was a multibillion-dollar scam. The former Nasdaq chairman faces up to 150 years in prison.
The court-appointed trustee, Irving Picard, has filed similar complaints against other big money managers in recent weeks in an aggressive bid to return funds to thousands of clients burned by Madoff. Defendants include J. Ezra Merkin in New York and Stanley Chais in Los Angeles, longtime Madoff associates who have denied deny any wrongdoing.
In another new complaint filed Tuesday, Picard similarly claimed an overseas hedge fund, Harley International Ltd., knew or should have known that its $1 billion in returns were fraudulent.
Also Tuesday, The New York Times reported that about $12 billion was pulled out of accounts at Madoff’s firm last year, citing people briefed on the financier’s business records. Most of that sum was withdrawn by various “feeder funds,” the paper said, including funds which have already been the targets of lawsuits by Picard.
The paper also said Harley International withdrew $425 million from Madoff-linked accounts three months before the Ponzi scheme became public.
Attempts to contact Harley International were not immediately successful. The complaint says the fund was organized on Cayman Island, but has an Isle of Man address.
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