Attorney Conflict in Madoff Scam Brings Big Bucks

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Madoff Trustee Seeks Interim Counsel Fees of $15 Million
The New York Law Journal by Noeleen G. Walder - July 13, 2009

The trustee charged with liquidating the investment advisory firm of Bernard L. Madoff asked a bankruptcy judge on Friday to approve more than $15 million in interim counsel fees. In the nearly seven months since Irving H. Picard was appointed trustee by the Securities Investor Protection Corp., he and his counsel have made significant progress in investigating Mr. Madoff's massive Ponzi scheme, according to Baker & Hostetler's initial application for attorney's fees and expenses incurred from Dec. 15, 2008, through April 30, 2009. The $14.7 million that the team of lawyers, paralegals and non-legal staff is requesting amounts to a 10 percent discount off their customary rates.

A second fee application filed Friday requested $759,000 for Mr. Picard, "of which 20 percent is to be deferred through the conclusion of the liquidation period," and a mere $45 for his expenses. Mr. Picard and his team have recovered close to $1.1 billion in assets in connection with the liquidation of Bernard L. Madoff Investment Securities LLC (BLMIS). The team has also filed eight avoidance actions seeking to recoup more than $13.7 billion from feeder funds and related parties, according to a separate interim report filed on July 9 to Southern District Bankruptcy Judge Burton R. Lifland. All told, between Dec. 11 and June 30, Securities Investor Protection Corp. (SIPC) has spent roughly $214 million in connection with the liquidation of Mr. Madoff's firm. The 45-page report in In re Bernard L. Madoff, 08-1789, comes less than two weeks after Southern District Judge Denny Chin sentenced Mr. Madoff, 71, to 150 years in prison for his "extraordinarily evil" crimes (NYLJ, June 30). Mr. Picard's report stresses that as of June 30, SIPC has advanced $214.4 million "to pay all administrative costs associated with the liquidation of the estate," including $45.9 million for administrative expenses. The $169.4 million balance has been used to pay customer claims. 

In recent months, Mr. Picard has come under fire by some victims of Mr. Madoff's fraud, who claim they have been shortchanged because the trustee is looking at their entire account history, rather than relying on their most recent account statements to calculate "net equity" (NYLJ, June 11). But in the interim report, Mr. Picard detailed his progress in marshalling estate assets and attending to thousands of claims filed by Madoff victims. "Given the task of liquidating BLMIS and coordinating efforts with federal and state authorities investigating the criminal matter, the Trustee has also dealt with issues spanning a broad spectrum of legal and administrative specialities and disciplines," and received "material assistance" from his counsel in areas ranging from real estate to banking. And in spite of "the monumental and unprecedented task faced by the Trustee," he has "made substantial progress in reviewing and determining customer claims," the report states. As of the July 2 deadline for filing claims, Mr. Picard has received 15,400 in customer claims, 395 claims from general creditors and 16 claims from broker-dealers. Mr. Picard has set aside $231 million in SIPC funds to satisfy 543 claims from victims of the Ponzi scheme who contend they lost more than $2.97 billion. The $231 million is the "largest commitment" of SIPC funds in the history of the Securities Investor Protection Act of 1970. The trustee has also set up a Web site and a toll-free hotline. The trustee has "extensively investigated the Debtor's financial affairs" in the United States and abroad, and has "unearthed a labyrinth of interrelated international funds, institutions, and entities of almost unparalleled complexity and breadth," the report states.

It also chronicles the steps Mr. Picard has taken to generate $1.08 billion for the estate, including:

• settling four class action suits against Mr. Madoff's firm for $55,000;
• selling New York Mets season tickets as well as single game Minnesota Wild and NASCAR tickets for $92,000;
• and collecting $145,000 from political donations made by Mr. Madoff or his firm.

Meanwhile, Mr. Picard has had to defend himself against two motions to intervene in the liquidation proceeding, one launched by a federal prison inmate who has "taken to assuming the name of the Trustee when filing various baseless pleadings" and an unsuccessful bid in May by Ade O. Ogunjobi, who has made numerous outrageous bids to purchase major companies, to buy Mr. Madoff's securities firm for $100 trillion in stock. Noeleen.Walder@incisivemedia.com

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$14.6M 'BERNIE' BONUS
The New York Post - AP - July 11, 2009 

A Big Apple law firm working with a court-appointed trustee in the $65 billion Bernard Madoff Ponzi case has racked up more than $14.6 million in legal fees. Bankruptcy Court papers filed yesterday also show that trustee Irving Picard is separately seeking about $760,000 for his work locating and liquidating Madoff's assets. A securities-industry group that compensates victims of fraud is covering the legal fees. Victims of Madoff's massive Ponzi scheme have filed more 15,400 claims against the disgraced financier, who was sentenced to 150 years in prison. This week, Madoff through his lawyer said he would not appeal the effective life sentence.

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See Related Story, "Massive Attorney Conflict in Madoff Scam"