Madoff trustee: Lawsuits delay money for victims

Reuters

By Jonathan Stempel

NEW YORK (Reuters) - The trustee seeking money for investors hurt by Bernard Madoff's Ponzi scheme said he hopes to begin distributing money "in the near future" but that lawsuits challenging his efforts are causing delays.

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Irving Picard, the trustee, said he has won $9.8 billion in recoveries since the fraud was uncovered in December 2008.

But most of this sum is being held, including a $7.2 billion settlement from the estate of former Madoff investor Jeffry Picower that is being challenged by investors who complain the accord blocks other lawsuits against the estate.

Picard said he has filed more than 1,000 lawsuits in 30 countries to recover about $100 billion, and he and his legal team hope to recover "a majority of what we are seeking."

The trustee has sued individuals and businesses, including JPMorgan Chase & Co and HSBC Holdings Plc, that he believes aided Madoff or ignored red flags about the fraud.

"While we hope to initiate distributions in the near future, it will take some time to distribute all the funds," Picard said in a Tuesday conference call with reporters.

"We anticipate that our position will ultimately prevail" in the Picower case, he added.

Picard estimates that victims lost $20 billion in a fraud that started as early as 1983, not the early 1990s as Madoff has asserted. He has so far approved $6.86 billion of claims. Prosecutors have estimated the fraud at $65 billion.

Helen Chaitman, a lawyer for about 500 former Madoff investors, is appealing the Picower settlement and is also involved in other court challenges to Picard. She said the trustee is treating some former investors unfairly.

"If Mr. Picard would comply with the law, we wouldn't have these disputes," she said in an interview. "Mr. Picard asked the judge to enjoin my clients from suing the Picower entity. It wasn't necessary that he do that."

BIG LAWSUITS

A federal bankruptcy judge last March agreed with Picard that claims should be based on the difference between what investors put in and took out of Madoff's firm.

Some investors appealed, saying claims should be based on sums shown on their final account statements, even if they were fictitious. A federal appeals court is now deciding the issue.

"Appeals prevent people who are the most damaged from getting any sort of recovery in the immediate future," said Stephen Harbeck, president of the Securities Investor Protection Corp, which helps recover assets from failed brokerages.

Picard is seeking to recover money from "net winners" in Madoff's scheme, and repay investors who are "net losers."

Picard's largest lawsuit is a $19.6 billion case against Austrian banker Sonja Kohn and her Bank Medici, Italy's UniCredit SpA and its Bank Austria unit, and 53 other defendants. The JPMorgan lawsuit seeks $6.4 billion.

The trustee is also suing owners of the New York Mets, a $1 billion case that has clouded the baseball team's immediate future and caused owners to seek a buyer for part of the team.

(Reporting by Jonathan Stempel in New York; Additional reporting by Sarah N. Lynch in Washington, D.C.; Editing by Phil Berlowitz, Bernard Orr and Matthew Lewis)