NEW YORK - (Mealey's) The brother of convicted Ponzi scheme mastermind Bernard L. Madoff has agreed to pay more than $90 million to settle claims that he participated in his brother's massive Ponzi scheme but could escape any payment under a consent order filed Feb. 6 in a New York federal bankruptcy court (Irving H. Picard v. Peter B. Madoff, et al. [In re: Bernard L. Madoff], No. 09-1503, S.D. N.Y. Bkcy.).
Under the terms of the consent order, Peter B. Madoff agreed to pay $90,390,500 in money that he does not have, but Bernard L. Madoff Investment Securities LLC liquidation trustee Irving H. Picard has agreed to forbear from seeking to enforce the consent judgment as long as Peter Madoff "makes reasonable efforts to cooperate with the Trustee in the Trustee's efforts to recover funds for the BLMIS Estate, including providing truthful information to the Trustee upon request."
In addition, Picard has agreed to "forbear from seeking recovery of the Trustee's Claims against [Peter Madoff's daughter,] Shana Madoff[,] in this Avoidance Action; and . . . immediately voluntarily dismiss with prejudice the Trustee's claims against [Peter Madoff's wife,] Marion Madoff," in a separate, related adversary proceeding against her.
Peter Madoff lacks any personal or real property after agreeing to forfeit $143.1 billion as part of a criminal proceeding against him, while his wife, Marion, and daughter, Shana, have also agreed to forfeit their real and personal property to the U.S. government.
Picard sued Bernard Madoff's children, Andrew and Mark, as well Peter and Shana, in the U.S. Bankruptcy Court for the Southern District of New York on Oct. 2, 2009, claiming that they used BLMIS, "as if it were the family piggy bank."
Picard sought to recover nearly $200 million from "preferential payments, fraudulent transfers, and fraudulent conveyances they received."
He contended that the defendants "either failed to detect or failed to stop the fraud, thereby enabling and facilitating the Ponzi scheme at BLMIS" in violation of U.S. Bankruptcy Code Sections 105(a), 502(d), 542, 544, 547, 548(a), 550(a) and 551 and the New York Fraudulent Conveyance Act. Claims for constructive trust, an accounting, to set aside preferences, fraudulent transfers and fraudulent conveyances also were made, and Picard seeks to recover all money improperly received - identified as at least $198,743,299 - by Bernard Madoff's family members.
"Simply put, if the Family Members had been doing their jobs - honestly and faithfully - the Madoff Ponzi scheme might never have succeeded, or continued for so long," Picard says.
On Feb. 5, 2010, the defendants agreed to a consent order freezing their assets, limiting their spending ability and requiring them to seek permission from Picard before making any purchases of more than $1,000.
Sept. 22, 2011, Ruling
The defendants then moved to dismiss the complaint, and Bankruptcy Judge Burton R. Lifland granted the motions in part and denied them in part on Sept. 22, 2011.
Bernard Madoff pleaded guilty to 11 federal felony charges and was sentenced to 150 years in prison on June 29, 2009, for his role in orchestrating the Ponzi scheme. Picard estimates the total losses to be more than $18 billion.
Mark Madoff committed suicide in December 2010.
Picard is represented by David J. Sheehan, John Siegal and Marc D. Powers of Baker & Hostetler in New York.
Andrew and the estate of Mark D. Madoff are represented by Martin Flumenbaum, Stephen J. Shimshak, Andrew J. Ehrlich and Hannah S. Sholl of Paul, Weiss, Rifkind, Wharton & Garrison. Peter Madoff is represented by Charles T. Spada of Lankler Siffert & Wohl. Shana Madoff is represented by Timothy A. Valliere of Smith Valliere. All are in New York.
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