Madoff investors will have trouble getting money back

The legions of investors allegedly bilked by Bernard L. Madoff have several places to go to try to get their money back, but the process will be long, complex, and with limited prospects for success.

Investment funds that placed client money with Madoff may become targets, say lawyers who have been swamped with phone calls from investors contemplating lawsuits. The securities industry, meantime, has a fund to cover losses of individual investors of up to $500,000 called the Securities Investor Protection Corp. But the huge dimensions of Madoff's fraud - he allegedly misappropriated $50 billion - makes it likely that much of the money is gone for good.

"Typically, the recovery rates in fraud actions involving large numbers of investors are very low, often they run less than 10 percent," said Keith Dutill, a partner in the litigation department at Stradley, Ronon, Stevens & Young L.L.P.

Late yesterday, Christopher Cox, chairman of the Securities and Exchange Commission, said his staff failed over a decade to fully investigate allegations about Madoff.

Authorities have already begun phasing out Bernard L. Madoff Investment Securities L.L.C. and sorting through the firm's records to establish who might have claims. But officials of the SIPC, which is helping to oversee the process, said they anticipated a long and complicated review because the records were so disorganized.

The SIPC said that what was left would be paid to investors based on their share of the overall fund. It said it planned to send claims forms to investors once it had sorted through the records. The SIPC reimburses individual investors who placed funds with broker-dealers.

"I would be shocked if there is a bank account sitting somewhere with $10 billion in it," said Howard Silverstone, of Forensic Resolutions Inc., a Haddonfield firm that investigates financial fraud.

Silverstone, a CPA and fraud expert who on behalf of investors helped unravel the New Era fraud in Philadelphia in the 1990s, said schemes such as Madoff's are particularly difficult and time-consuming to investigate because they involve using the funds of more recent investors to pay returns to earlier investors.

The FBI said yesterday that it set up a hotline for investors who believe that they may have been victimized by Madoff. The number is 212-384-2359.

Madoff, a former chairman of Nasdaq, had been a pillar of Wall Street and apparently played on his reputation as a savvy investor to persuade institutions and individuals to place their money with him.

The victims ranged from major banks such as the Banco Santander Central Hispano S.A. of Spain to high-profile individuals such as Sen. Frank Lautenberg (D., N.J.) and former Eagles owner Norman Braman.

One victim was Mike Robinson, 36, of Downingtown, who said he and his family had invested between $15 million and $20 million with Madoff beginning in the early 1990s - money that is now gone.

Robinson said that his father was the first to invest with Madoff and that he became convinced the funds were secure because so many prominent people had entrusted money to him.

"He had this aura around him," said the Web designer. "If you look at some of the names of people who invested with him, you almost felt like an idiot if you didn't invest with him."