Madoff clawback draws more blood
Trustee is now going after funds from investors who lost life savings.
NEW YORK - The news that some of Bernard Madoff's victims could be getting half their money back was of little comfort to Richard and Cynthia Friedman and others who saw their life savings erased in the mammoth fraud.
Just days earlier, the Long Island couple learned that Richard Friedman's 85-year-old mother was one of hundreds of longtime Madoff clients sued in recent weeks for millions by the trustee handling the case.
"He is going after innocent people," Cynthia Friedman said of the trustee, Irving Picard.
Picard's announcement Friday of a jaw-dropping $7.2 billion settlement from one of Madoff's richest investors left the Friedmans and other middle-income Madoff victims with mixed feelings.
Some fear that hedge funds will get the bulk of the cash being recovered, while others - especially those with modest incomes - worry that Picard will continue to sue them for what's left of their scarce savings.
The recent claim against Shirley Friedman, 85, offered a blunt, familiar argument: Yes, the family's investment had been wiped out. But over the many years that Friedman had been a Madoff client, her annual withdrawals from his funds had exceeded the amount of her late husband's original investment.
As a result, according to Picard, she owed $3.6 million.
To the family, targeting an old woman with Alzheimer's disease, and others like her, seems cruel.
"Many of these people are old, sick, and have been impoverished," said Richard Friedman. "Some of them are now terrified. They don't have money to pay an attorney."
After two years of trying to claw back false returns paid to big banks, hedge funds, and money managers who never questioned the unbelievable profits, Picard sent a wave of letters this month initiating legal action against a large group of smaller investors, including some who were wiped out in the scandal.
At a news conference Friday, Picard expressed sympathy for the victims he is suing and acknowledged that a large number of them were unaware of the Ponzi scheme. He said people with poor finances could enroll in a hardship program that might exempt them from having to make payments.
On Friday, the widow of Florida philanthropist Jeffry Picower agreed to return $7.2 billion her husband had received in profit over the decades from Madoff's fund.
Combined with other settlements and seizures, that brought the total amount of money available for victims to more than $10 billion, or about half of the money invested with the fraud king.
Picard has so far authorized payments to fewer than 2,400 of the nearly 16,500 Madoff customers who filed a claim for a share of recovered money.
Many of those claims were denied because they were filed by people who had invested in Madoff indirectly, through a fund run by someone else. They could still wind up receiving a share, but it will be up to the fund managers to redistribute any money they are awarded.