The Bankruptcy Court Grants Picard’s Motion to Allow Hadassah to Keep $32 Million in Fictitious Profits – Installment 48

March 14, 2011Articles White Collar Defense & Compliance Blog

Several Installments in this series about the long-running, global Ponzi scheme of Bernard L. Madoff (“Madoff”), the most recent of which was Installment 47, have discussed the proposed settlement with Hadassah (the “Hadassah Settlement”) by Irving Picard, the Bankruptcy Trustee for the Madoff Estate (“Picard”) in contrast to his vigorous pursuit of the Wilpon/Katz Family private charitable foundations.

On March 10, 2011, as requested in the Motion filed by Picard, the Honorable Burton R. Lifland, Bankruptcy Judge for the Madoff Estate, approved the Hadassah Settlement, whereby Hadassah will pay, within 60 business days, $45,000,000 of its alleged $77,000,000 clawback exposure. This grants Hadassah the benefit of retaining $32,000,000 of the fictitious profits that it withdrew from the Madoff scheme.

As I have stated previously, while I agree that Hadassah is a very worthy charity and deserves to survive and thrive, it is perplexing that Picard and Judge Lifland have allowed Hadassah to keep $32,000,000 of fictitious profits at the expense of other Madoff victims. Nevertheless this chapter of the decades-long involvement by Hadassah with the Madoff scandal appears to be concluded.

What does remain is to see how many millions of dollars the effort to retain the fictitious profits probably cost Hadassah in professional fees to lawyers, accountants and consultants in 2010 and 2011. The 2010 costs will not likely become public until Hadassah publishes its financial statements and files its Forms 990 for 2010 with the Internal Revenue Service (“IRS”) later this year.

However, the inconsistent manner in which Picard is treating charitable investors with Madoff warrants further monitoring. As stated in Installments 46 and 47 of this series, Picard is seeking a total of $7,000,000 or more (which is actually more than the amount of fictitious profits subject to clawback) from the Wilpon/Katz Foundations, which have given away millions of dollars each year to highly respected and worthy charities according to their Forms 990-PF filed with the IRS.

[To be continued in Installment 49]