ROBERT SIEGEL, HOST:
In a separate action, the-court appointed trustee who's charged with recovering what he can for the investors who were fleeced by Bernard Madoff, today, announced a proposed settlement of his claims against JPMorgan. Trustee Irving Picard submitted two agreements to the bankruptcy court, agreements that add up to $543 million.
Joining us from New York are Mr. Picard and his counsel, David Sheehan. Welcome back to the program.
IRVING PICARD: Thank you very much.
SIEGEL: And first, before we get to your settlements today, do you expect all or most of that $1.7 billion Justice Department settlement to go to Madoff's victims? And if so, do you expect to be distributing it?
PICARD: Well, the first part of the question is the Justice Department has announced that it will go to the victims. And, no, I will not be distributing the funds. They'll be distributed by the special master who's been designated to distribute funds in the Madoff victim fund that's now, I guess, about $4 billion.
SIEGEL: Ah-ha. Well, now to your separate settlements with JPMorgan that were announced today. They're worth half a billion dollars, which certainly isn't chump change. But in 2010, you sued JPMorgan, which was Madoff's primary banker, for more than 10 times that amount, 6.4 billion. Why settle for what by your standards was about eight cents on the dollar?
DAVID SHEEHAN: Well, you know - this is David Sheehan. The $19 billion that we were suing for was the exact amount that we found was missing, that had been stolen from all of the customers. It was predicated on getting the $19 billion back. Well, as you know, we have collected now almost $10 billion ourselves - the government's collected this, Irving just noted four. So that means there's $5 billion left that we have to get. And so, at the end of the day, the $1.7 billion is a very significant outcome for the government, and obviously over half a billion dollars is significant for us.
So I think it's an appropriate judgment in connection with the overall damages that we were trying to recover.
SIEGEL: But what you're saying - if to read between the lines of what you've just said, asking $6.4 billion from JPMorgan was aiming rather high, you're saying. That was a big share of the overall amount, 19 billion, that you think was actually held by Madoff.
SHEEHAN: Well, I think that's right. And in fairness, we were on the cutting edge with regard to our complaint back in 2010, and many people criticized it. And we decided that given the difficulties associated with being on the cutting edge, as it were, that on balance we were better of taking the bird in the hand and taking the half a billion dollars and having that available to distribute.
SIEGEL: Are you saying you're on the cutting edge by going after a bank, by saying they should have known and they are responsible for the funds that they were taking in for Madoff?
SHEEHAN: I think, yes, that's absolutely true, that it's very rare that a trustee in Irving's situation actually sues the financial institution. I also think we were cutting edge because of the nature of our claims. Many people told us that we didn't have standing to bring them. We believe that it makes no sense whatsoever to suggest that a trustee who's trying to recover money for all these victims cannot go after financial institutions that are part and parcel of what we believe was the Ponzi scheme that was there.
If there was ever a case in which it should have been pressed, it seemed to us that Madoff was the case.
SIEGEL: How close would you both say your are to the liquidation of Bernard L. Madoff Investment Securities being wrapped up, being completed, having recovered as much of the money as can possible be recovered?
PICARD: I would say that the case has probably a good three to five years to go.
SIEGEL: Three to five years?
SHEEHAN: If I could, this is David Sheehan, I'd just add to Irving's remark. I think you really have to look at it from the perspective of the litigation, which is very long standing. It's been around for three years - took the first two years to actually just to investigate the massive nature of this fraud. Yet, we still are at the beginning in a lot of ways of most of litigation.
I think you're going to see a lot more activity, such as you saw today, over the next 12 to 18 months because things are now coming to the fore in a way that will yield these kind of settlements. And I think you're going to see a lot more of that.
SIEGEL: Irving Picard, let me just try to draw you out a little bit away from the actual settlement today. I'm just curious, is it your sense that the atmosphere on Wall Street and the kinds of cases that have been brought - criminal and civil - that they all make it far less likely that a Bernard Madoff, somebody like him, could be managing a Ponzi scheme of the type and the size that he did?
PICARD: I certainly would hope so. But pick up the paper on a regular basis and you read about Ponzi schemes - smaller, of course. I think it's out there and I think that, you know, fraudsters will always try find a way to get around the regulators and stretch to the limits and do what they do.
SIEGEL: Well, Irving Picard, trustee, and counsel David Sheehan, thanks to both of you for talking with us about Madoff investments and the agreements you've submitted to the bankruptcy court today.
PICARD: Thank you.
SHEEHAN: Thank you for having us on.
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