Madoff's Victims May Still Have More To Lose

On Saturday, Mark Madoff, the 46-year-old elder son of jailed financier Bernard Madoff, was found dead in his Manhattan apartment, in what authorities ruled a suicide. Mark Madoff had long insisted that he played no role in the Ponzi scheme perpetrated by his father.

But Irving Picard, an attorney appointed by the U.S. Bankruptcy Court, had sued Mark Madoff and multiple others connected to the firm in an effort to recoup some of the billions of dollars lost by investors in the fraud.

Picard is even filing a number of lawsuits against investors who had accounts with Bernard Madoff's firm and regularly received checks, even though they lost money in the end.

James Cox, a law professor at Duke University, spoke with NPR about Picard's efforts and some of the other legal issues that remain unresolved two years after Bernard Madoff's arrest. Here, a condensed version of the conversation:

Picard recently filed numerous lawsuits against people and institutions involved with Madoff. How does he hope to get money from them?

Picard essentially represents the creditors of Bernie Madoff, which is an extensive group. So, Picard's task is to retrieve the assets for which the creditors have a cause of action. He's filed these suits based on a couple of theories.

One theory involves the so-called forwarding brokers or investment advisers who were recommending to their clients that they invest their money with Madoff. Picard has alleged that several of them were reckless in not being aware that Madoff was engaged in a huge Ponzi scheme, or that they just turned a blind eye to it.

The other suits that are going forward are to some extent more intriguing, because Picard is trying to retrieve what are called "fraudulent conveyances." In other words, Madoff was taking money from investors in his fund today to pay to investors who made payments to him a week ago. So, investors who gave money a week ago actually benefited from the fraud that was being perpetrated on the newer investors. That's the essence of a Ponzi scheme.

So, Picard is attempting to retrieve funds that were paid to those who got back more money than those who subsequently invested.

Does Picard have a large pool of investors to go after?

We know that this Ponzi scheme went on for years, so that means all the investors — except perhaps for the very last one — is at risk of a clawback.

Is Picard going to try to get more money from some of the investors, including charities, who already lost money in the scandal and consider themselves Madoff's victims?

I think what you would find is Picard will probably be focusing his attention on those who still have some assets. It wouldn't do him much good to go after people who have no assets with which to make a payment. So, those who were clearly wiped out by Madoff would not be pursued. But Picard is going to pursue those who do have assets. And unfortunately, this is like rain: It falls on the good and the bad alike.

After Mark Madoff's suicide this weekend, Picard's office said it would continue to pursue him even though he is dead. How is that possible?

His estate would be liable. So, assuming Mark Madoff left assets behind, one does not discharge of those assets merely because one passed away, as unfortunate as that passing was.

So far, seven people — including some people who worked with Bernard Madoff — have been charged as part of an ongoing criminal investigation of the scandal. Why is this investigation taking so long to conclude?

One option for those who have been charged so far is to find out what the government knows and does not know, and then decide whether to become a cooperating witness. That would help the government's case by providing it with new evidence not now in its possession.

Since Madoff is already in jail, the real question now is what to do about the feeder funds that funneled money from their clients to Madoff.

To what extent can individuals within the Madoff organization provide information that would be useful in charging individuals outside the organization with complicity in sending business to Madoff? That's probably of utmost concern to prosecutors, and that would be a terrific score — much more exciting than going after the programmer or the office manager at Madoff's firm.

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