Corporate Law

Trustee Sues Madoff Kin for $199M, Says 'Family Piggy Bank' Broke Fiduciary Duty

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Four relatives of Bernard Madoff employed at an investment firm they treated as a “family piggy bank” should have to return nearly $199 million handed to them during the years they worked in high-level positions there, a New York bankruptcy court filing today by Irving Picard contends.

Athough no one but Bernard Madoff, the firm’s finance chief and its outside accountant have been criminally charged with wrongdoing, Picard, a court-appointed trustee in charge of recovering assets for investors swindled in Bernard Madoff’s record-breaking $65 billion Ponzi scheme, says in the civil suit that the four were negligent and breached their fiduciary duty, according to Bloomberg and the Associated Press.

“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,” says Picard, who is a partner at Baker & Hostetler, in a written statement.

A lawyer for two of the defendants, Madoff’s sons Andrew and Mark, characterized the suit as “baseless.” The two saved investors $170 million by blowing the whistle on their father last year immediately after he confessed the Ponzi scheme to them, says their attorney, partner Martin Flumenbaum of Paul Weiss Rifkind Wharton & Garrison, in an e-mail to Bloomberg.

The news agency couldn’t immediately obtain comments from the lawyers for the other two defendants, Madoff’s brother, Peter, and niece, Shana.

The complaint says that Peter Madoff, 63, paid $60 million to himself, family members and entities under his control and that the two Madoff sons, who are in their mid-forties, each received approximately $30 million for their services between 2001 and 2008. In addition, the suit contends, the Madoff sons each improperly received over $60 million more for themselves and/or family members and entities, Bloomberg reports.

Shana Madoff allegedly improperly received more than $10 million in customer funds, the suit says.

Bernard Madoff, 71, is serving a 150-year federal prison term.

Additional coverage: “Trustee to Sue Madoff Kin for $150M, Says ‘60 Minutes’ in Upcoming Interview” “Trustee Sues Madoff’s Wife for $45M, Cites ‘Life of Spendor’” “Madoff Thought Jig Was Up in 2006, But SEC Didn’t Check Trades”

The Deal: “Picard: Could be bankruptcy for Madoff clan”

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