By David Thomas
(Reuters) – Lengthy earlier than cryptocurrency and Sam Bankman-Fried, the most important title in company fraud was Bernie Madoff.
Fifteen years after the FBI arrested Madoff on Dec. 11, 2008 for operating an enormous Ponzi scheme — and two years after his loss of life in a federal jail — legal professionals are nonetheless sifting by the fallout of his almost $65 billion fraud.
Greater than $14.6 billion has been recovered for Madoff’s victims thus far by Irving Picard, the court-appointed trustee overseeing the liquidation of Madoff’s agency, and his authorized group. Picard has estimated that Madoff’s fraud price his clients $17.5 billion.
One other restoration got here Friday, when Picard introduced he was poised to distribute $45 million extra to Madoff buyers.
The case has been a windfall for Picard, 82, and his legislation agency, 1,000-lawyer Baker & Hostetler. Since Picard’s appointment 15 years in the past, they’ve been awarded greater than $1.5 billion in charges, court docket data present.
The charges by November 2022 have amounted to almost 17% of Baker & Hostetler’s revenues in that point, based on a Reuters evaluation of court docket data and legislation agency knowledge from the American Lawyer — an unusually giant proportion from one case for a agency its dimension.
Picard and Baker & Hostetler declined to remark. Their newest request for charges to the U.S. chapter court docket in Manhattan seeks $37.9 million for greater than 68,000 hours of labor by 190 legal professionals and professionals from April by July.
Picard determined early on to deliver instances in opposition to “feeder funds” that funneled investor cash to Madoff, and “web winners” — buyers who took more cash out of Madoff’s agency than they put in.
About half of his recoveries got here from a 2010 settlement with the property of Madoff’s longtime good friend Jeremy Picower, which forfeited $7.2 billion. In recent times, Picard’s consideration has turned to recovering cash that was transferred abroad.
Marc Litt, who helped convict Madoff as a Manhattan federal prosecutor and is now at legislation agency Wachtel Missry, known as Picard’s recoveries “a exceptional consequence.” Normally, he mentioned, victims’ cash in a significant fraud is spent in methods that may’t be clawed again.
100 CASES TO GO
Picard’s and Baker & Hostetler’s charges are paid by the Securities Investor Safety Company, a nonprofit that Congress created in 1970 to help buyers with accounts at failed brokerage companies.
The charges come from assessments paid by SIPC’s member broker-dealers, not from Picard’s recoveries, mentioned Josephine Wang, SIPC’s president and CEO.
It is not unusual for legislation companies to reap huge charges from complicated company collapses involving fraud. The legal professionals that represented buyers in Enron Corp acquired about $688 million in charges in 2008 for recovering $7.2 billion from its lenders, auditors and administrators over seven years.
U.S. legislation agency Sullivan & Cromwell has already acquired a choose’s approval to gather greater than $77 million in charges for its work since final 12 months overseeing the chapter property of cryptocurrency alternate FTX, court docket data present.
Just like the Madoff case, the FTX chapter will doubtless stretch for years. The alternate collapsed in November 2022, and its CEO Bankman-Fried was convicted final month of stealing $8 billion from FTX clients.
In the meantime, Picard’s work goes on. Wang mentioned the trustee continues to be waging about 100 restoration lawsuits, down from 1,000 initially of the Madoff liquidation.
“Sure, the trustee and SIPC are working laborious to deliver a near the liquidation, however that can occur solely after the utmost restoration has been realized for purchasers,” Wang mentioned.
(Reporting by David Thomas; Enhancing by David Bario and Lisa Shumaker)
