For Madoff victims, 'tragedy goes on' after scammer's death

NEW YORK (BLOOMBERG) – Bernard Madoff’s death in prison on Wednesday (April 14) doesn’t change much for his victims, many of whom are still waiting to be made whole on their share of US$20 billion (S$26.7 billion) that vanished with the con man’s 2008 arrest.

The recovery effort, still underway in court more than a decade later, has been remarkably successful at recouping the lost principal, under the circumstances. But that’s little comfort to investors who lost their life savings or otherwise had their lives turned upside down. And none of them will ever see a cent of the US$45 billion in fake trading profits Madoff assured them was safely tucked away in their accounts for retirement.

“There are still people suffering vitally from what he did,” Burt Meerow, an 82-year-old Vermont retiree who declined to disclose how much he lost, said in an interview about the king of the Ponzi scheme, also 82 when he died. “The tragedy goes on. He doesn’t.”

Emotions still run high for Richard B. Shapiro, too. The 67-year-old real estate investor, who lost “in the seven figures” with Madoff and calls him a “psychopath,” said he’s never forgotten the shock of the news of Madoff’s arrest. He remembers the scam falling apart the way people remember the 9/11 terror attack or President John F. Kennedy’s assassination, he said.

Shapiro said he ultimately sold the bankruptcy claims for his two Madoff accounts, one for 61.5 cents on the dollar and the other – too early, he lamented – for 35, to help kick-start his financial recovery.

The Herculean effort to recover cash for the victims through litigation in bankruptcy court has so far repaid nearly 70 per cent of valid claims – a far better outcome than many expected when the fraud was fresh. Even so, the process has dragged on, creating uncertainty for many and a blizzard of paperwork for others. It has been overseen by New York lawyer Irving Picard, the trustee for Madoff’s company in court. He recovered the funds by suing hundreds of customers who withdrew more money from their accounts than they deposited, spending profits that existed only on paper.

Hundreds argued they were victimized a second time by that system. To them, they were spending money they had every right to believe was theirs. Ultimately that’s not how the courts saw it, and hundreds of former Madoff customers sued by Mr Picard have reached settlements to help pay victims who didn’t withdraw their principal.Mr Picard has recovered more than US$14 billion, much of it from large early investors who reaped billions from Madoff’s fraud, as well as from banks that effectively did business with a con man and allowed his scheme to continue.

Madoff, who pleaded guilty to securities fraud in 2009, was serving a 150-year sentence at a federal prison in Butner, North Carolina. Five of his top aides were convicted at trial in 2014. Several others, including his brother Peter, pleaded guilty.

The Madoff family was marked by tragedy in the years after the scam fell apart. Madoff’s elder son Mark, who was head of sales at the company’s legitimate market-making business, committed suicide in 2010, on the two-year anniversary of his father’s arrest. His younger son Andrew, who as head of equities helped build the company’s proprietary trading desk, died of cancer in 2014. Neither son was charged. The con man’s wife, Ruth Madoff, has been living in obscurity, most recently in Connecticut, after being forced from their luxurious Upper East Side home.

“Bernie, up until his death, lived with guilt and remorse for his crimes,” his lawyer, Brandon Sample, said in announcing Madoff’s death. “Although the crimes Bernie was convicted of have come to define who he was, he was also a father and a husband. He was soft spoken and an intellectual. Bernie was by no means perfect. But no man is.”

Madoff’s level of remorse has always been in question. Even from prison, Madoff has said in recent years that he ran a proper business for decades and that his biggest early investors were to blame for his crimes by demanding unrealistic returns. He could have proved as much, he argued, if he’d gone to trial.

The people who put him behind bars don’t buy it.

“Madoff is a good example of the extent to which people who are involved in fraud can often be so deeply invested in their own lies that where the truth ends and the lie begins gets obscured even for them,” said Randall Jackson, a former assistant US attorney in Manhattan who prosecuted Madoff. “I have no doubt Bernie completely understood that his activities were massively fraudulent for many decades and the sum total of his life was an enormous lie.”

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