It carried a breathtaking price: $64.8 billion in paper wealth and at least $17.5 billion in cash losses.
It was the first global Ponzi scheme, a slow-motion crime wave that began in the Manhattan offices of a stockbroker named Bernard L. Madoff, spread to wealthy enclaves in Palm Beach, Florida, and Southern California, and reached as far as the Persian Gulf. It carried a breathtaking price: $64.8 billion in paper wealth and at least $17.5 billion in cash losses. Those affected ranged from carpenter-union pensioners to French aristocrats.
Early on December 11, 2008, Madoff was arrested at his Manhattan penthouse. Within hours, the news reached his investors, leaving them stunned. In doctors’ offices, beauty salons, executive suites and living rooms, they learned that all the money they thought was in their accounts invested through a trusted Wall Street statesman had vanished.
Madoff’s fate was quickly settled. He pleaded guilty and was sentenced to a 150-year prison term, which he is now serving. But five years later, many of his victims are still waiting to learn if they will recover even a small fraction of the wealth they lost. And some anxious investors, who withdrew much more than they put into their Madoff accounts, are facing lawsuits that seek to reclaim profits that, unknown to them, were paid with stolen money.
Irving Picard, the court-appointed trustee liquidating the Madoff estate in federal bankruptcy court, is suing to claw back those paper profits so he can redistribute them to victims who lost actual principal by investing directly with Madoff. So far, Mr. Picard has recovered $9.5 billion, and has distributed $4.8 billion of that. He hopes to raise more for eligible victims through thousands of lawsuits that are inching their way through the courts.
These eligible victims can expect to collect at least 54 cents for every dollar they gave Madoff. But they represent only 15 per cent of 16,000 Madoff-related claims. (Each claim could represent hundreds or even thousands of investors.)
Most investors, including those who lost cash through an intermediary will receive much less if anything and some may even be required to pay money to the trustee. Provided that they incurred a cash loss, they may be eligible for a separate $2.35 billion fund set up by the Justice Department, financed through civil settlements and the sale of assets seized in Madoff-related criminal cases. But that process has just begun.
Some victims, meanwhile, are edging into the light, recovering some savings, however slowly, and rebuilding satisfying, if simpler, lives. In recent interviews, a sample of Madoff investors cited some common lessons that emerged from their differing struggles: Diversify your savings. Focus on what really matters. And don’t give up or give in to rage or frustration.Beyond the country club
Burt and Joanne Meerow have told the story often enough that they can now laugh, a little, about the absurdity of the situation: They were in a doctor’s office, Joannes jeans around her knees, as she waited for a cortisone shot in her hip.
Burt, who had come with her to the appointment, took a call on his cellphone, listened for a moment and suddenly began crying out in panic, I have no money, I have no money.
Bernie Madoff had been arrested. About 80 per cent of their wealth, invested just a few years earlier through a money-management unit at a major insurance company, was gone.
Joanne Meerow drove her distraught husband to their home , went into the bathroom and threw up.
Today, the Meerows he is 75; she is 66 have settled into a new life.
When your life gets altered overnight, you realise you don’t have to keep doing everything you have been doing, Burt Meerow said. You don’t need to belong to a country club or drive an expensive car or buy expensive jewellery. You certainly don’t have to own three separate dwelling places. It was all pretty obvious. The Meerows have no idea whether, or when, they will recover any of the principal they lost. As indirect investors, they are not eligible for the cash being distributed by the trustee. The Justice Department has said indirect investors will be the primary beneficiaries of its fund, but that claims process began just last month.That looming lawsuit
David Iselin was a successful entrepreneur who sold a business, invested the proceeds with Bernard Madoff and then retired. Like more than 2,700 other Madoff investors, Iselin drew more out of his Madoff accounts than he had put in.
I had built up the account to around $500,000 by about the late 1990s, and I always kept it at around that level, said Iselin, 66. Most of it was the proceeds of selling my printing business about a dozen years ago. That’s what my wife and I had always planned to retire on.
Fortunately, they had other assets and didn’t lose everything to the Madoff fraud, but the crime still changed our life totally, Mr. Iselin said. Mr. Picard, the trustee, has sued the Iselins, and many others, to recover the money they withdrew over the years.
“I’m sure you’ve heard it a million times, but to treat me and lots of other people like me as if we are criminals that is probably the most difficult thing I’ve ever had to deal with financially, he said. I thought a claw-back suit was something they filed against those who knew what was going on. I never dreamed they’d be interested in me.”We live year by year
When Madoff was arrested, the small America-Israel Cultural Foundation in Manhattan was hit from all sides, recalled David Homan, 34, its executive director.
Its entire $13.7 million endowment, invested with Madoff for years, vanished overnight. A few regular donors were also Madoff victims, and their support vanished; others curtailed their gifts to steer more money to other struggling charities they supported. Then Mr. Picard filed a claw-back lawsuit to recover money the charity had withdrawn from its account over the years mostly cash spent long ago on the foundations work supporting and showcasing young Israeli artists.
The claw-back lawsuit remains a constant worry, and he says the foundation can’t really move forward until it is resolved. The amount being sought by the trustee is still under negotiation, he said.— New York Times News Service