Posted on September 2, 2009
Madoff Liquidator May 'Claw Back' Money From Nonprofits
Madoff Trustee May Seek Return of Funds From Nonprofits
Irving Picard, the trustee overseeing the liquidation of Bernard Madoff's investment business, might sue nonprofits that received more money from Madoff than they had invested with the imprisoned con man to force them to return the difference, Bloomberg.com reports.
To date, Picard has only pursued groups that he claims should have known about the fraud. In May, for example, he sued longtime Madoff investor Jeffry Picower and his foundation for allegedly taking a fake profit of $6.7 billion over a twenty-year period.
According to William Josephson, a lawyer at Fried, Frank, Harris, Shriver, & Jacobson who previously ran the New York State Attorney General's Charities Bureau, state law does not differentiate between nonprofits and other institutions. So even if investors weren't aware of Madoff's $65 billion Ponzi scheme, Picard must file "claw back" suits against them and pursue the return of funds paid out in the six years before Madoff's arrest. "Picard has an obligation to the bankruptcy estate to collect all the assets he can find and, in theory, he has to treat everyone the same way," said Josephson.
One possible target is Hadassah, which invested $40 million with Madoff and received $130 million in profits. Picard, however, has been cagey in discussing which nonprofits might be sued. "We will look at charities on a case-by-case basis," he said, "before determining what action may be appropriate."