NY feds: Boston businessman giving up $625 million
NEW YORK (AP) – A 97-year-old Boston-area apparel entrepreneur agreed Tuesday to forfeit $625 million to be distributed to cheated investors in jailed Bernard Madoff’s historic Ponzi scheme, authorities revealed, as a court trustee said negotiations are under way to recover money as well from the owners of the New York Mets.
The U.S. government said in papers filed in federal court in Manhattan that Massachusetts businessman and philanthropist Carl Shapiro, one of the first investors in Madoff’s investment business and a longtime Madoff friend, entered the forfeiture deal along with his partners.
The papers were filed to recover the money from the accounts of JP Morgan Chase Bank, N.A., where some of the Shapiro investments were held. The government said proceeds of the settlement with Shapiro would be distributed to Madoff investors. The papers said Shapiro held an account in his name with Madoff’s investment business since 1961 and had controlled accounts for others from time to time. Madoff started his investment business in 1959.
That action proceeded as court-appointed trustee Irving Picard filed a complaint under seal in U.S. Bankruptcy Court to recover money from Sterling Equities, along with its partners and family members. Picard said his office was “engaged in good-faith negotiations” with the Sterling defendants, who include the owners of the New York Mets baseball team.
In a statement of its own, Sterling agreed with Picard that the sealing of his lawsuit was necessary because the parties are negotiating a settlement.
It added: “Regardless of the outcome of these discussions, we want to emphasize that the New York Mets will have all the necessary financial and operational resources to fully compete and win. That is our commitment to our fans and to New York.”
The trustee overseeing jailed financier Bernard Madoff’s assets has labeled the New York Mets winners in the epic fraud.
A year ago, Picard said in a bankruptcy filing that the Mets made nearly $48 million in Madoff’s scheme. He said the Mets Limited Partnership originally invested about $523 million, but eventually withdrew about $571 million from the accounts.
The latest actions come as a deadline approaches this weekend to file court papers before the revelation of the fraud reaches two years.
In recent weeks, Picard has filed dozens of actions in which he tries to recover profits made by some investors at the expense of others so the money can be redistributed to everyone. The recovery of such funds is known as a “clawback.”
In December 2008, Madoff revealed to his sons and later to the FBI that he had operated a bogus investment business for decades, reporting to investors that their $21 billion had risen in value to more than $65 billion when it actually had dwindled to just a few hundred million dollars. The 72-year-old Madoff is serving a 150-year prison term after pleading guilty to fraud.
Picard said Tuesday in a statement that he had asked the U.S. Bankruptcy Court in Manhattan to approve the Shapiro deal, including $38 million to be forfeited by Robert Jaffe, Shapiro’s son-in-law, in connection with his role with Cohmad Securities Corp., an investment firm that was in the same building as Madoff’s company. He said the amount includes everything Jaffe withdrew from Madoff since the 1980s.
“This agreement represents a financially rewarding outcome and it is a strong example of the progress we are making in assembling the largest fund possible for the benefit of BLMIS customers with valid claims,” Mr. Picard said.
Securities Investor Protection Corporation Board Chairman Orlan Johnson called the settlement an important milestone.
“The Madoff case is now entering a new phase. I hope this marks the beginning of a period that will see many such settlements,” he said.
Oren Warshavsky, a lawyer who worked on the Shapiro settlement, said the $38 million to be forfeited by Jaffe was “particularly gratifying” because it exceeded Picard’s demand that Jaffe give up all fees paid to him along with an amount equal to all his withdrawals since he opened his accounts.
“In satisfying the Trustee’s demand in full, Mr. Jaffe has distinguished himself from the other officers and directors of Cohmad, who have yet to recognize any culpability for their involvement in recruiting victims for Madoff,” he said.
Shapiro spokesman Stephen Fishbein said the Shapiro family was pleased with the settlement. He said it will provide “substantial funds” to be distributed to those most hurt by Madoff’s fraud.
He added that the Shapiros had “worked closely with the authorities on this matter and appreciate the efforts of both the Department of Justice and the trustee in bringing about this resolution.”