Almost seven years after the collapse of the largest Ponzi scheme in U.S. history, many victims who lost big in Bernard Madoff’s crooked plot will be getting a handsome paycheck, officials said today.
Stephen Harbeck, President and CEO of the Securities Investors Protection Corporation, told ABC News that anyone who invested up to $1,161,000 will “be made completely whole” in the latest round of distribution payments, per a new motion filed in a New York bankruptcy court today. Harbeck said that will affect a majority of the people who had valid claims to being a Madoff victim.
For those who invested more, Harbeck said they could get back at least 61 cents on the dollar for their investments if their claim has been approved.
“Coming out of a Ponzi scheme with 61 percent of what you started out with is a major victory,” Harbeck said.
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U.S. officials have managed to recover $11 billion of the $17 billion that they believe was lost when the Ponzi scheme collapsed in 2008, the biggest chunk coming from the bank accounts of a deceased alleged co-conspirator of Madoff’s, Jeffrey Picower. Picower’s widow agreed to turn over $7.2 billion to the victims, virtually every dollar her husband made in the Madoff scheme – more than Madoff himself, officials said.
“I think it was Mr. Picower probably as an individual by far made the most money,” said David Sheehan, a partner at BakerHostetler working with his colleague Irving Picard, the court-appointed banking trustee charged with recovering Madoff’s ill-gotten profits. “That was an amazing day when we actually settled the case and I was getting reports from J.P. Morgan Chase where we actually had the escrow account. In would come a billion dollars, in would come two billion dollars. Phenomenal event.”
Picard told ABC News that after the next round of payouts, the trust will have paid out over $9 billion, and it hopes to recover and distribute $3 to $4 billion more. The distribution payment plan filed in court today is the sixth so far.
“It’s been very exciting and the most extraordinary experience of my career,” Sheehan said.
It has also been profitable for Sheehan, Picard and his associates at BakerHostetler. Sheehan estimated total legal fees could reach up to $1 billion for the various battles the trustees are fighting with those, he says, who ended up profiting off Madoff’s less fortunate victims.
Helen Chaitman, an attorney who has represented hundreds of Madoff victims and was one herself, says the Securities Investors Protection Corporation is a “disgrace,” saying that Picard and his associates have misinterpreted legal statutes in part to enrich themselves through legal fees.
Acting like the new round of distribution is a win for the investors, she said, “is a terrible perversion of justice,” Chaitman told ABC News.
Picard said that the $1 billion in legal fees leading to the payouts they’ve won for victims is a “very good return on an investment.”
“As a number, it’s high,” Picard said, “but in the context of what’s going on in this case, I don’t think [it’s too high].”
Ronnie Sue Ambrosino, another Madoff victim, also criticized the trustee’s work, saying there’s been “no justice.”
Ambrosino told ABC News she and her husband got a much smaller payout because they had taken out so much from their account over the years and that was subtracted from the total due. She says she should have been reimbursed for the full amount on her final account statement, but the bankruptcy trustee said it would not be “fair” to reimburse victims based on the fictitious profits Madoff created. Ambrosino disputes the way the trustees calculate the payouts.
In 2009 Madoff was sentenced to 150 years in prison. The 77-year-old is serving his time in at FCI Butner, a medium-security facility in North Carolina.
ABC News' Lee Ferran contributed to this report.