Climbing Above the Culture Clash

funds, institutions and entities of
almost unparalleled complexity and
breadth. … The relationships between
the involved entities are tangled and
frequently involve many nations, various
funds and complicated corporate
structures and jurisdictional issues.”
These recovery efforts fall into two main
categories: “preferential transfer” claims
and “fraudulent transfer” claims. The
preferential transfer claims are based on
the contention that much of the money
withdrawn in the 90 days before federal
authorities seized Madoff’s business was
based on insider tips that the axe was
about to fall. The numbers tell the story.
“We’re looking at something like
$6 billion that went out the door
in the 90 days before Madoff’s
company was seized,” said Picard.
For example, in July Picard filed a
$44.8 million suit against Madoff’s
wife, Ruth, claiming that in the last two
years alone she withdrew a staggering
$23.7 million from the company
to “support her lavish lifestyle.”
Of course, not all of the recent
withdrawals were shady. Some investors
were making routine withdrawals to
pay taxes, college tuition or medical
bills. So it is Picard’s responsibility to
determine which of these withdrawals
to go after and which to leave alone.
“We’re following the money,” he said.
“One of the things I always marvel
at when I do these cases is how much
paper these people maintain.”
Picard is also going after the so-called
“fraudulent transfers” — returns paid
to certain investors that were clearly out
of line with what any investor could
reasonably expect. These actions don’t
require Picard to prove the defendant
was a co-conspirator, only that they
“knew or should have known” that no
legitimate investment could produce the
kinds of returns they were receiving.
For example, while most investors were
receiving paper “earnings” of 10 to 12
percent, others were reaping profits that
were truly extraordinary. Picard filed a
$6.7 billion suit against Jeffry Picower
on May 12, claiming the former lawyer,
his hedge fund and his philanthropic
organization “claimed annual rates of
return that were more than 100 percent,
with some annual returns as high as 500
percent or even 950 percent per year.”
The complaint alleges that Picower
withdrew $12 billion from Madoff’s firm
in 2008, including $6 billion in the 90
days prior to seizure of the business.
“Picower and the other defendants
were among the primary beneficiaries
of this scheme, reaping billions of
dollars of other people’s money,”
Picard said in the complaint.
Picower has filed a motion to dismiss the
complaint, a move that indicates this is
likely to become protracted litigation.
So far, Picard has recovered $1.25
billion and has filed litigation (including
the Picower suit) to recover up to
$14 billion more. In addition, he is
in separate out-of-court settlement
negotiations with a number of other
individuals and institutions.
Another avenue of recovery available
to Picard would be to file suit against
those individuals and entities he
believes actively conspired with
Madoff to perpetuate the fraud.
These would be suits against feeder
funds that were knowingly funneling
clients into the Ponzi scheme in
return for preferred treatment.
As if all this weren’t enough, Picard also
managed a massive public information
operation geared toward ensuring
that everyone who was eligible to file
a claim did so by the July 2 deadline,
and he continues this operation to keep
claimants informed of his progress. In
addition to a steady stream of press
releases, Picard has held an in-person
informational meeting with creditors,
established 1,000 phone lines for those
who couldn’t attend the meeting,
posted a video of the meeting on the
Internet, established a toll-free hotline
that has fielded more than 6,000
calls, and set up a Web site (www.
madofftrustee.com) with up-to-theminute
information on his recovery.
He has also set up a hardship program
geared toward getting money
quickly to the people who were
hardest hit by the Madoff scam.
“There are parents caring for disabled
children, elderly people with serious
medical problems, people who are
potentially losing their homes,” said
Picard. “Some retired early because
they believed they had a lot of money,
then woke up one morning and found
out they had nothing. And this is
happening at a stage in their lives,
especially in this economy, when
they’re not going to find a job.”
“I know a lot of people don’t
think I stay up at night thinking
about them. But I do.”
Picard is 68 years old, so this is
likely to be the last case of his career
of such magnitude, one that could
very well define his legacy. What
is his ultimate goal in the case
“To recover as much money for the
victims as possible, of course,” he said.
“I would also like to be remembered
as a lawyer who was thoughtful, did
what he believed was right, did his
work to the best of his ability, and
had compassion for the victims.” •
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