Madoff's Brother Gets Some Money, and Lesson, from Future Attorney

Madoff's Brother Gets Permission To Pay Living Expenses, Legal Fees
The New York Law Journal by Vesselin Mitev - April 06, 2009

A Long Island judge has thawed a freeze of Peter B. Madoff's assets enough for him to pay household bills and the attorneys defending him from accusations of complicity with the massive Ponzi scheme orchestrated by his brother, Bernard L. Madoff. Supreme Court Justice Stephen A. Bucaria on Friday accepted a stipulation modifying the temporary freeze on the assets he imposed last week on Peter Madoff, of Old Westbury. The agreement will allow him to spend $10,000 a month for housing, food, transportation and other "necessary" living expenses.  In addition, Mr. Madoff can tap his assets to pay "legitimate, necessary and reasonable expenses and fees" to attorneys representing him in the ongoing legal fallout from his brother's Ponzi scheme. An amount was not specified. Peter Madoff is being sued by Andrew Samuels, a Brooklyn Law School student who claims his $500,000 trust fund was drained to pay "fictitious returns" to Bernard Madoff's investors (NYLJ, March 26).  Peter Madoff, the senior managing director and chief compliance officer for his brother's investment firm, served as sole trustee of the fund for Mr. Samuels and his sister from 2003 to 2008.

According to the complaint in Samuels v. Madoff, 09-5534, Peter Madoff had "full knowledge that it was a fraudulent Ponzi-scheme and nothing more than an unprecedented fraud." His attorneys have denied any wrongdoing. Lawyers for Mr. Samuels, who had requested the asset freeze, negotiated a stipulation to modify the freeze with Mr. Madoff's attorneys before Friday's proceeding. The stipulation "provides some security for a potential recovery and an ongoing ability for Mr. Madoff and his family to function in society," John Spellman, of Spellman Rice Schure Gibbons McDonough & Polizzi, one of his attorneys, told the court.

Steven R. Schlesinger, who represents Mr. Samuels and his family, said the intent of the stipulation was to mirror a voluntary confidential agreement executed between Peter Madoff and the U.S. Justice Department in December 2008, in which he agreed not to dispose of personal assets and limit his spending.  Friday's hearing got off to a slow start, with a skeptical Justice Bucaria initially refusing to approve the stipulation, as he had not been provided the terms of the agreement.  The document "makes reference to an agreement that I know nothing about . . . most importantly, it does not articulate what the court will or will not need to do," Justice Bucaria told the parties, holding up the two-page stipulation. "I certainly cannot ratify and sign on to an agreement I haven't read." "I understand Peter Madoff's reluctance to disclose to everyone in the world what his assets were and what they are," Mr. Schlesinger said, asking the court to consider an amended stipulation that would include similar terms to the Justice Department agreement.

Brief Appearances

After further discussion, Justice Bucaria adjourned the hearing for a five-minute break to allow both sides to hammer out an agreement in acceptable form. Forty-five minutes later, the judge retook the bench, joking that, "You know now what the legal definition of five minutes is." Mr. Madoff, who had been absent for the first part of the proceeding, then entered the courtroom dressed in a dark brown suit, brown-and-white striped tie and black square glasses.  Flanked by Charles T. Spada, another one of Mr. Madoff's lawyers, Mr. Schlesinger then read into the record the agreement capping Mr. Madoff's expenditures at $10,000 per month. Mr. Spada, of Lankler Siffert & Wohl in Manhattan, made no objection, only saying, "My client's here, and that's acceptable to us." During the entire process, Mr. Madoff stared directly at the pair but showed no emotion. He took the stand for only a minute "Do you agree to abide by the terms of [this] agreement?" Justice Bucaria asked him. "Yes," replied a nodding Mr. Madoff. When he left the courtroom, Mr. Madoff looked straight ahead without acknowledging the parents of Mr. Samuels, who were sitting in the audience. Bernard Madoff was a close friend of Mr. Samuels' grandfather; he and his wife provided $40,000 in seed money for the trust. Mr. Madoff did not make any comment as he left the courthouse, surrounded by a phalanx of attorneys, but his planned exit hit an unexpected glitch when the procession mistakenly turned into a podium set up for a post-hearing press conference and had to turn back before entering a waiting car.

Mr. Samuels, 22, who skipped a constitutional law class to attend the hearing, also took the stand briefly to state that he was satisfied with the process and accepted the agreement.  Outside of court, Mr. Samuels said he was "devastated and shocked" to learn of the Ponzi scheme and hoped that there would be money left over to recover.  "Personally, obviously I'd like to be reimbursed," he said.  His father, Howard Samuels, a Central Islip attorney, said that he was proud of his son and called the experience a valuable one for a first-year law student.  Asked if he had any contact with Peter Madoff since news of the investment fraud surfaced, Howard Samuels had some pointed words.  "I didn't speak with him, and no he didn't apologize - he's either a crook or an idiot," he said. The extent of Peter Madoff's assets is unknown, but Mr. Schlesinger, of Garden City-based Jaspan Schlesinger, said outside of court that the modification gives his client a first shot at recovering any assets that may be left over.  To his knowledge, Mr. Madoff's Old Westbury home is worth between $3 million and $5 million and has no mortgage. He added that Justice Bucaria's modification puts his client "in a position of uniqueness" to recover money that may otherwise be seized by the government.

As for Mr. Madoff, "he can now afford that MTA card," Mr. Schlesinger said, in a parting shot referring to a comment made by Mr. Spada that his client could not afford a subway ride under the previous terms of the freeze.  Earlier in the week, Mr. Spada had told the Appellate Division, Second Department, that his client could not afford a cup of coffee. In an interview, Mr. Spellman said his client ran the "legitimate and profitable end of the business," citing Bernard L. Madoff's allocution at his March 12 guilty plea (NYLJ, March 13).  "Our position is, these are separate people and separate businesses," said Mr. Spellman, adding that his client has not been criminally charged with anything.  The civil suit resumes May 8 before Justice Bucaria.  Meanwhile, Bernard Madoff has pleaded guilty and is set to be sentenced June 16. He faces a maximum of 20 years in prison on each of the six top charges and will most likely spend the rest of his life behind bars.  Vesselin.Mitev@incisivemedia.com