A Collaboration with the University of Pittsburgh

Federal judge blocks litigation endangering settlement for Bernie Madoff victims

[JURIST] A federal judge blocked [opinion, PDF] litigation on Wednesday dealing with Bernie Madoff's [CNN profile] former Ponzi scheme [BI backgrounder] customers. US District Judge Gregory Woods prevented [Reuters report] A&G Goldman Partnership and Pamela Goldman from pursuing a lawsuit aimed at recovering $11 billion from the estate of Jeffry Picower. Picower, who died in 2009, supposedly took part in perpetuating the Madoff Ponzi scheme fraud. This decision is considering a victory for Irving Picard, who is the trustee that is liquidating Bernard L. Madoff Investment Securities LCC. Picard has a settlement with Picower's estate and won a permanent injunction in 2011 barring competing claims against the estate. Picard claimed that if the Goldman plaintiffs were able to recover $11 billion of customer losses, it would undermine his authority to settle claims for the former Ponzi scheme customers. Woods found that there was no proof that Picower's wrongdoing was aimed at any particular Madoff customers. Therefore, as the complaint "seeks recovery for alleged wrongs that affected all creditors in the same way and therefore, presses a claim that belongs exclusively to the trustee" Picard's permanent injunction stands.

Madoff's scheme is believed to have defrauded investors of over $65 billion [Madoff trustee summary]. In September 2013 a bankruptcy judge ruled that the victims were not entitled to interest [JURIST report]. That April a federal appeals court rejected [JURIST report] the victims' suit against the US Securities and Exchange Commission for negligence in not catching Madoff sooner. In July 2012 the US District Court for the Southern District of New York approved the first payouts [JURIST report] to Madoff's victims. The trustee, Picard, filed almost 60 lawsuits for victims of Madoff's fraud in December 2010, including suits against large banks like JPMorgan Chase and HSBC. Judge Louis Stanton made Picard the trustee of Bernard L Madoff Securities, LLC in December 2008. Madoff was sentenced [JURIST report] in June 2009 to 150 years in prison for securities fraud stemming from his Ponzi scheme. He pleaded guilty [JURIST report] to 11 counts of securities fraud in March 2009.

About Paper Chase

Paper Chase is JURIST's real-time legal news service, powered by a team of 30 law student reporters and editors led by law professor Bernard Hibbitts at the University of Pittsburgh School of Law. As an educational service, Paper Chase is dedicated to presenting important legal news and materials rapidly, objectively and intelligibly in an accessible format.

© Copyright JURIST Legal News and Research Services, Inc., 2013.