Revisiting Madoff and His Stakeholders – Is Trustee Picard Pursuing Hadassah and Other Charities as Candidates for “Clawback”? – Installment 32

August 2, 2010Articles White Collar Defense & Compliance Blog

This is the thirty-second in a series of installments on this blog that have focused substantially on issues of charities arising in the aftermath of the long global Ponzi scheme of Bernard L. Madoff (“Madoff”) and others. All potential stakeholders should consult professional advisors to have their positions evaluated.

Installments 14 and 16 of this series, among others, discussed Hadassah and its relationships with Madoff, as well as to how the organization has chosen to disclose publicly its involvement and investments with Madoff. Defined terms and links not otherwise contained herein are included in such Installments. Readers are encouraged to consult the earlier blog posts as a background for this Installment.

In particular, Installment 16, posted in September 2009, discussed the fact that it is alleged that Hadassah had received $40 million more in distributions from Madoff than it had invested with him. Additionally, an article by Diana B. Henriques in The New York Times was quoted in Installment 16 as having said, “[t]here is the widespread fear among some — unfounded, Mr. [Irving] Picard [the trustee in the Madoff bankruptcy proceeding] says — that he will sue struggling charities or people of limited means for money they withdrew in the past but no longer have.”

On July 26, 2010, Michael Rothfeld reported in The Wall Street Journal that Mr. Picard is preparing new lawsuits against approximately 1,000 individuals to claw back funds from investors with Madoff who received more in principal distributions than they had invested with him. According to the article, Mr. Picard is trying to commence such lawsuits in advance of the expiration of the two-year statute of limitations in December 2010.

Mr. Rothfeld states in his article that Mr. Picard is suing several types of Madoff investors, including “15 civil suits seeking more than $15 billion on a combined basis from Mr. Madoff's brother and sons, investment funds that fed money to the [Madoff] firm, wealthy investors close to Mr. Madoff who redeemed large amounts of cash, and other defendants.”

No mention is made in the article as to whether the “wealthy investors close to Mr. Madoff who redeemed large amounts of cash and other defendants” may or will include Hadassah or other charities that have been alleged to have received more in distributions from Madoff than the dollars they had invested with him. Again, as observed in Installment 16, the criteria that Mr. Picard will use to separate those from whom he will seek clawback and those “struggling” charities and “people of limited means” from whom he will not raise fundamental questions of fairness, size and relative value that will likely lead to much more controversy and potential litigation.

[Continued in Installment 33]