Madoff trustee begins Round II : clawback suits against Noel’s clients

“Invested” with Walter Noel? Brace yourself, Bridgett, Picard is coming after you. Walt’s friends at the Round Hill Club are going to be really pissed.

Psst! Wanna buy a baseball team?

Met’s owners strike out in Madoff court, and don’t get to count their “profits”.  Look for a sale of the team, soon, because the Wilpons have no money. I’d say this judge got it right:

Dennis Jacobs, one of three judges hearing the case at the 2nd U.S. Circuit Court of Appeals, questioned whether a court-appointed trustee should be expected to make payouts based “on whatever amount Madoff made up while chewing on his pencil and looking at the ceiling.“

This ruling isn’t going to help Walter Noel with his own “we were victims too” argument.

UPDATE: I misread the article. As this WSJ makes clear, today’s hearing did not yield a ruling. But if the judges’ comments are indicative, the Wilpons shouldn’t hold out much hope.

How about a Bernie jacket to go with those blue jeans?

Madoff stuff is being auctioned off this weekend by the U.S. Marshalls. Custom satin Mets jacket, boogie boards, duck decoys and watches – lots of watches. Do you think Walt would like a decoy just to remember his friend by?

Looks as though Madoff’s pal will be staying in prison

Judge doesn’t see the value in his testimony.

A judge today questioned the value of any testimony from Bernie Madoff’s right hand man — coldly declaring that anyone who could be hurt by Frank DiPascali is “in prison in Butner, North Carolina or at the bottom of a swimming pool someplace.”

You may recall that DiPascali, who ran Madoff’s scam for decades, showed up in court a few months ago to plead guilty and, pursuant to a deal with the prosecutors, who claim they need his cooperation, expected to go home the same day. The judge didn’t buy it and if his comments today are any indication, still doesn’t. Fine by me.

(h/t, Horsejock)

The big sleep for Picower – Colombians or barbituates?

I’m guessing the latter. At the least, the man faced civil suits that would ruin him financially. And the DailyBeast (thanks, Horsejock) suggests he may have been the criminal mastermind behind the whole Madoff scam.

Picower benefited the most from Madoff’s scam, according to the bankruptcy lawyers who alleged he’d taken out $7 billion more than he’d originally put in—a felony, for which, investigators say, he would have likely faced criminal charges. “He made 30 times what Madoff did from the scam and about a third of the missing money went to Picower,” one investigator said, suggesting he may have been the mastermind behind the con or Madoff’s equal “partner in crime.” Investigators say Madoff documents prove that Picower frequently offered instructions as to how he could create false trades. Police said they did not know the cause of death and are awaiting the results of a full autopsy and toxicology tests.

Madoff scammer Picower found dead in pool

Jeffrey Picower was being sued by the Madoff trustee for $6 billion. Did angry Colombians find him before the subpoenas? “I don’t know,” Monica Noel told us when FWIW’s Scusie reached her comment, “but that’s why I had the pool here shut early this season. Walt’s just been sooo sad.”

Walt’s son-in-law and prime Colombian salesman for the Fairfield Greenwich Group, Andres Piedrahita was said to still be on his yacht  in the Adriatic – “not hiding,” a spokesman said, “it’s just that the sea trials for the potential buyer are taking a few moths longer than expected.”

Hey Andy, did Hoops know about this?

So why do you have to work late tonight, Andy?

Madoff offices were known as “The North Pole” for all the cocaine being spilled there, and the atmosphere was usually enhanced with drugs, booze and topless wimmin. I guess if you aren’t distracted by actually working, you have more time for partying.

Another tidbit I wasn’t aware of: Bernie’s new chef and pal in prison is a child molester. I wonder if he snuggles with old men too?

UPDATE: I haven’t read the article, but I wonder if Bloomebrg mentions Bernie’s office as part of its article, “Top Ten Ways to find Joy at Work”?

Finally, a little good news!

The Bureau of Prisons says Bernie Madoff is fit as a fiddle and the NY Post’s article is dead wrong. May you live one hundred years, pal.

Was denying DiPascali bail a dumb move?

John Carney thinks so – if Frank’s cooped up in jail he can’t cooperate very well with the investigation into the Madoff matter and, worse, other conspirators will realize that they have nothing to gain by speaking up. Carney makes some good points – follow the link and read them – but I’m not so sure he’s right. True, if DiPascali is held in jail until his sentencing next May 10, he’ll be of little use to the prosecution and judging from their arguments in favor of bail, there is still much that DiPascali can tell them. But if, as the judge hinted, he can get sprung when something better than a $2.5 million bond, secured by $750,000 in real estate is offered, then maybe a few weeks contemplating what the rest of his life could look like will serve as a further incentive. Guess we’ll find out.

Madoff case about to metastasize

(Bumped)

Remember Fred DiPascall? He was Bernie Madoff’s “go to” guy, the one all the Madoff “victims” said they talked to about their accounts including Walter and the boys. He was arrested soon after Bernie was and then disappeared from view. I’ve always said he was talking – who wouldn’t after watching your co-conspirator get 150 years? – and that when the feds had milked him, he was going to bring down the House of Madoff. Milking is done and he’s pleading guilty next week.  [bad link before – sorry] You don’t get a plea deal from the government if you don’t deliver the goods – see, Madoff, Bernie, 150 year sentence, above – so the fact that DiPascall’s got a deal means he’s told what Bernie wouldn’t: who else was in on the scam.

So who gets bracelets next week? Ruth? Andy and Mark? Uncle Peter? I’m rooting for all of them, and maybe a few more like (don’t take this personally, guy) Walter and maybe that fat ex-Madoff lady in Darien – remember? She of the “fund for investing with women and minorities for a more just society fund” that dumped everything with Bernie in exchange for huge fees? Her – I’d like to see her standing in the dock, too.

UPDATE: Business Insider is thinking along the same lines and also mentions Walter Noel as a juicy target. Not that anyone wants to see the poor old codger marched off to prison, mind you, but it would enrich the story.

The noose tightens, the net spreads wider, whatever

JP Morgan is in the sights of the Get Madoff crowd. While the bank had a small amount ($250 million) of its own money in the game, it pulled it in September after a summer of rumors about Bernie. JP forgot to tell its clients, though, and they were left high and dry. Sort of like Walt Noel and his Fairfield Greenwich Group, but I believe they’re already named in this suit. Should continue to get interesting as this latest inclusion of a defendant is the result of the 4 1/2 hours Bernie spent talking with the lead litigator. Nervous yet, Walt?

By the way, why is the New York Post on top of the Madoff story while the New York Times and the Wall Street Journal ignore it? Just because a story is sexy and has legs is no reason to leave the field to the Post, is it?

Thank goodness that the library offers free ineternet access

So we can continue to hear from Walter Noel after he and Monica remove themselves from the Round Hill cottage and move to a cardboard box in Baldwin Park. News today that thea Madoff trustee has sued a second feeder fund, former GMAC Chairman Ezra Merkin, for $558 million in fees he took out when he “knew or should have known” that Bernie was a fraud. At the rate of one feeder fund every other day, I’d expect Walter and the Fairfield Greenwich Group to be teed up Monday or Wednesday, depending on whether that Rye firm (Trenton? How quickly we forget) goes first.

As trustee, Mr. Picard can sue investors for any money withdrawn from Mr. Madoff’s firm “in bad faith,” including if they knew or should have known Mr. Madoff was engaged in fraud. Mr. Picard is relying on records he collected from the Madoff firm going back to 1995 and, for now, will be able to seek funds withdrawn only in that period.

Mr. Picard, an attorney with Baker & Hostetler LLP, is expected to sue more feeder funds, said lawyers involved in the Madoff bankruptcy case. But even if he wins in court, Mr. Picard may have trouble collecting much of what he is seeking. That’s because most of the money has already been distributed to the funds’ clients [unless, like Walt, you were pulling out $270 million a year for yourself – Ed].  If those clients had no inkling there was fraud, Mr. Picard won’t be able to touch funds they withdrew from their accounts, those lawyers said.

In his first suit alleging bad-faith withdrawals, Mr. Picard targeted the assets of another individual who ran a feeder fund, Stanley Chais. The suit seeks the return of $1 billion that Mr. Chais and his family withdrew from Mr. Madoff’s firm since 1995. Mr. Chais allegedly “knew or should have known” of the fraud because his family’s personal investment accounts with Mr. Madoff averaged annual returns of 40%, in some cases reaping 300% in one year, according to the complaint.

Mr. Merkin’s investments differ from those of Mr. Chais. The returns for Mr. Merkin’s funds averaged 11% to 16% annually. And, unlike Mr. Chais, Mr. Merkin didn’t have personal accounts with Mr. Madoff’s firm. Instead, Mr. Merkin collected a management fee.

In Thursday’s lawsuit against Mr. Merkin, Mr. Picard said that as a sophisticated fund manager, Mr. Merkin should have noticed the myriad warning signs that could have indicated Mr. Madoff was engaged in fraud. Among the clues: Purported trades made by Mr. Madoff, which were listed in account statements sent to Mr. Merkin, could never have taken place, a fact that Mr. Merkin could easily have detected, the suit alleges.

Nothing new under the Madoff sun

Jury’s still out on the Madoff sons, so to speak, but Bloomberg has a nice story on a 19th century swindler who was every bit as nasty as Bernie proved to be 150 years later.

John Sadleir – an Irish lawyer, which should satisfy at least two food groups, stole from tens of thousands of people and then, unlike Bernie, ended his life.

“He was well-liked and well-trusted and robbed everybody that he could lay his hands on,” O’Shea said in a telephone interview. “It’s exactly the same sad story.”

Mr. Merdle

Dickens, a regular at Jack Straw’s Castle, a pub next to Sadleir’s suicide spot on Hampstead Heath in North London, used him as the basis for Mr. Merdle, a financier whose fraud and suicide is the central action of his 1857 novel “Little Dorrit.”

“He was Chairman of this, Trustee of that, President of the other,” Dickens wrote of Merdle, presaging justifications used by Madoff investors a century and half later. “The weightiest of men had said to projectors, ‘Now, what name have you got? Have you got Merdle?’ And the reply being in the negative, had said ‘Then I won’t look at you.’”

Sadleir forged property deeds to secure mortgages and embezzled money from the banks he chaired, concealing barren balance sheets with false statements, said O’Shea, who cited a letter Sadleir wrote to his brother explaining how accounts “should be made to appear.”

“People aren’t bothered when boom times are rolling, but when they need their money again that’s what catches out the crooks,” said Terence Gourvish, director of the London School of Economics business history group. “They get away with it for quite a long time if there’s a boom because no one needs the money. They just leave it there.”

The madness of Bernie Madoff

Lucinda Franks has an interesting interview with an ex-Madoff employee, up today on The Daily Beast. Creepy company, in many odd ways. But Bernie paid them huge salaries while the legitimate business lost money and no one wanted to leave such a sugar daddy. The most interesting question for the future is how much Mark and Andy Madoff knew. If their trading firm never made enough profit to pay them such huge salaries, how did they think they were getting paid? The employee Franks interviews says they all wondered how Bernie could be making 8-12% while they were lucky to be cranking out 3-4%. Wondered, but never asked. Were the boys onto the scam? This man thinks so:

Ruth was the firm’s bookkeeper: “But I only saw her walk through once or twice,” Some friends of the employee, in hindsight, have said that Andrew and Mark must have known or suspected that things were not kosher. “They were educated guys, one of them had gone to Wharton, I think. They saw the balance sheets. We were making no money, some years losing it, and the brothers, I heard, were getting $4 million annually. That just didn’t track.”

“But I don’t want to believe that they knew or were involved,” the employee said. “I believe they’re innocent. They were really nice guys, they looked very straight. They treated me well even though as a computer programmer, I didn’t command the respect the hotshot traders did. When I told them I wanted to leave, Andrew tried to persuade me to stay and when I declined, he let me work only four days a week so I could start up my computer business.

I hope Franks will divert some of her investigative energies into Walter Noel’s operations. The woman is a talented writer (well, that might explain her Pulitzer prize) and is great at digging. Maybe if I promise her a gold-plated shovel she’ll come out to Round Hill and ask around.

My favorite bit from the interview?

“We all joked that the motto of the place was that ‘it was good to work for Bernie.”

You bet. Tough luck if you invested with him, too.

It didn’t add up

Bernie Madoff’s accountant has been charged with fraud. I almost feel for the poor schnook – he’s 49 years-old and facing 105 years in prison (an unlikely outcome, but still enough to keep one awake at night). His problem: he probably doesn’t know enough about the workings of the fraud to be useful to the Feds, so no deal for him. He’s been charged with falsely certifying that he’d examined Madoff’s books when in fact he did no such thing (but collected $150,000 or so a year for so swearing). If he wasn’t looking, he has nothing much to say, so it’s up the river with him. Wait, though, until the Feds grab someone with knowledge of the players and squeeze him. Bernie may be content to spend the rest of his days in an 8 x 12 ‘ room – others will not.

Feds target Andy and Mark’s homes

No mention of their Greenwich homes but the feds are looking for at least $31 million from the boys, an amount loaned to them by papa to buy houses in NYC and Nantucket. Cherry Valley and Tomac Avenue next?

 

And, bye the bye, spoke with someone today who knows the Noel family quite well. Walter does not have Alzheimer’s, according to this source. Of interest is that the son in law, Andres Piedrahita, was long rumored within the family to be laundering money for his Colombian friends. He “was forced to leave Greenwich” in 1997, fled to England where something else happened to cause him to pull up stakes and flee again, this time to Spain. Anyone have details on these sudden departures?

Walter, this person says, is a harmless straight arrow, known to say such harsh things as “golly gee, Monica” when perturbed. You can believe it or not, but this story is that the guy was on the straight and narrow until son-in-law Andres insisted, based on the money he was pulling into the fund, on being made a partner at Fairfield Greenwich Group. It was downhill from there. Andres, not from wealth originally, suddenly had Bentleys, jets and mansions. Of course, Walter didn’t seem to be doing so badly either, until December 12th.

Update: as I was writing this, Guest of a Guest was sending me a link to its own article on Andres’ father. Not a nice guy, apparently.

$49,900,000,000 to go

Feds move to seize Madoff assets. Despite last week’s news stories about Madoff being worth $800,000,000, $700,000,000 of that was the value of Madoff Securities which is worth, maybe, $10,000,000. There might be a hundred million of yachts, real estate , antique silver and a piano to grab, and that includes the cash and securities Ruth Madoff claims is hers to keep. It’s the cardboard palace for you, Ruthie, unless the feds are successful in switching you to concrete and steel housing.

Madoff and his victims

The Times’ Joe Nocera takes an unsympathetic view of Madoff’s victims. Hard not to agree with him that, sorry stories or not, we taxpayers shouldn’t make them whole.

“These were people with a fair amount of money, and most of them sought no professional advice,” said Bruce C. Greenwald, who teaches value investing at the Graduate School of Business at Columbia University. Mr. Hedges said: “It’s like trying to do your own dentistry. It is a real lesson that people cannot abdicate personal responsibility when it comes to their personal finances.”

And that’s the point. People did abdicate responsibility — and now, rather than face that fact, many of them are blaming the government for not, in effect, saving them from themselves. Indeed, what you discover when you talk to victims is that they harbor an anger toward the S.E.C. that is as deep or deeper than the anger they feel toward Mr. Madoff. There is a powerful sense that because the agency was asleep at the switch, they have been doubly victimized. And they want the government to do something about it.

Even Mr. Wiesel thought the government should help the victims — or at least the charitable institutions among them. “The government should come and say, ‘We bailed out so many others, we can bail you out, and when you will do better, you can give us back the money,’ ” he said at the Portfolio event.

But why? What happened to the victims of Bernard Madoff is terrible. But every day in this country, people lose money due to financial fraud or negligence. Innocent investors who bought stock in Enron lost millions when that company turned out to be a fraud; nobody made them whole. Half a dozen Ponzi schemes have been discovered since Mr. Madoff was arrested in December. People lose it all because they start a company that turns out to be misguided, or because they do something that is risky, hoping to hit the jackpot. Taxpayers don’t bail them out, and they shouldn’t start now. Did the S.E.C. foul up? You bet. But that doesn’t mean the investors themselves are off the hook. Investors blaming the S.E.C. for their decision to give every last penny to Bernie Madoff is like a child blaming his mother for letting him start a fight while she wasn’t looking.

Bernie Hung Tough

Bloomberg reports that the Fed’s plea deal with Madoff when Bernie refused to plead to a conspiracy with his cohorts. That’s interesting: the guy stole from widows, orphans and Elie Wiesel, so who wouldn’t he screw? My guess is wife Ruth and the boys, which makes their protestations of innocence even more suspect than before, if that’s possible.

Bernie’s off to the big sleep, feds turn their attention to Ruth, Walt and the gang

Ruth Madoff is probably in line for a criminal indictment, according to The Daily Beast, while Walter Noel may get off with just a civil suit brought by the SEC.

But watch out for money laundering charges in Britain, Walt.

A source close to the Madoff defense team agreed that Madoff’s main concern was to preserve as much assets as possible for his wife and children and to keep them from legal entanglements. “The US attorney’s office is still trying to resolve what is tainted or clean money, what real property in the US is appropriate for the Madofffs to keep,” the source said.

That may prove difficult. Sources say new information has surfaced that suggests several members of Madoff’s inner circle transferred assets to their wives, transactions thought to be laundered through an English bank.

Ruth Madoff, who was considered “innocent at first,” according to this source, is believed to have received at least $70 million from her husband and is now therefore an object of the investigation. That is one reason why she recently decided to retain her own lawyer, leaving Ira Sorkin, who has represented both of the Madoffs since December, when the Ponzi scheme was revealed.

Investigators are focusing their attention on three groups of possible co-conspirators. “There should be at least 20 indictments, between the three groups, if the feds are doing their jobs,” said one highly placed lawyer involved in the case. “Some will be conspiracy, the ones who were deep into it with Madoff, and others will be civil cases sent to the SEC for prosecution.”

(Lawyers and prosecutors who spoke to The Daily Beast for this article declined to go on the record, citing their legal involvement in the case.)

In the first group are employees of Madoff’s firm who concocted false trades and sent out phony statements to thousands of unsuspecting clients.

The second group is comprised of principals in feeder funds such as Cohmad Securities Corp. and Fairfield Greenwich Group, which funneled investor dollars to Madoff and received large fees for steering this business. If they were aware of Madoff’s fraud, they could face criminal charges; if they were not, they could be hit with civil charges for a lack of due diligence.

“It’s a question of state of mind,” said a lawyer for a Madoff employee. “If the feeder fund principals like Walter Noel of Fairfield Greenwich or Robert Jaffee of Cohmad didn’t ask Madoff any questions, if they simply turned the money over to a Madoff account without doing the work they were supposed to do to make sure their clients were well-protected, they would be guilty of fiduciary violations, which is a civil matter. But if they knew about the Ponzi scheme, if they had the intention to deceive, that is a felony.”

One attorney close to the defense team of Walter Noel, who is reported to have offshore bank accounts, says the belief is that Noel could be indicted in England on money laundering charges.

UPDATE: The Wall Street Journal reports on the status of investigations of Madoff’s in-house conspirators, including Ruth and brother Peter. Nothing earth shattering there, yet.