Saturday, December 18, 2010, AM | Leave Comment
Yesterday’s news has it that the widow of a Florida philanthropist who had been the single-largest beneficiary of Bernard Madoff’s colossal Ponzi scheme has agreed to return $7.2 billion in bogus profits to the victims of the fraud, she and authorities announced Friday. A recovery of that size would mean that a sizable number could get at least half of their money back.
Here is how the story goes…
Once upon a time, there lived a man, a businessman, a philanthropist, a billionaire. His name was Jeffry Picower. Getting his life story short, he drowned after suffering a heart attack in the swimming pool of his Palm Beach, Fla., mansion a little over a year ago, on Oct. 25, 2009. He was 67 at the time of his death. Jeffry was at one end of the spectrum whereas Madoff was at another.
Bernie Madoff, the darling of Wall Street investors at one time, had developed a Ponzi scheme where he implemented the strategy of LIFO – Last In First Out. When the last one gave Madoff money for investment, let’s say today, he would give it to the first one who came on board yesterday. It’s like a stack of trays in the cafeteria except that when Madoff got the last one, he gave it to the first one.
The last ones were always left behind, at least that’s how it seems. They were the ones who lost money the most. Looks like Jeffry was among the first ones, perhaps at the very top of the list. Jeffry was probably a good friend of Madoff and he got most of the benefits of the Ponzi scheme.
A trust was formed for folks who had lost the most money. A tussle went on between Jeffry’s estate and the court-appointed trustee Irving Picard for over a year.
I assume his wife, Barbara, was the big beneficiary. I guess U.S. Attorney Preet Bharara was a go between, a facilitator if you will, with a big U.S. Government stick in his hand, so to speak – between the trustee and the Jeffry’s estate. [Preet means intense love in Hindi. The name fits him very well as a facilitator to get some money to the trustee.]
Investigators say the money recovered from Jeffry’s estate, $7.2 billion, is just about right because that’s how much the estate received from Madoff.
Even though Jeffry’s lawyers claimed he knew nothing about the scheme, but trustee Irving Picard had argued in court papers that he must have known that the returns were “implausibly high” and based on fraud. Whether he knew or not, Jeffry is dead. Let’s not try to wake him up.
Madoff’s clients had thought, based on his fraudulent account statements, that they collectively had more than $60 billion invested in stocks through the money manager’s funds. The investors probably were thinking principal plus the return on the investment. Investigators found out that at no point, the investment was more than $20 billion in principal.
In a Nutshell
I am glad that the trustee got at least $7.2 billion from just one estate. That comes out to be a little less than a third. Let’s hope the remaining amount is recovered as well if they are pursued by intense love as in Preet. Good job, man!
I may have used the word trustee differently. I wonder if $7.2 billion is in cash. If it is, where did the estate keep it? Perhaps under the mattress. It must have been. That’s why they sat on it for so long.Facebook.com/doable.finance