Madoff Trustee Compromises with Former SEC General Counsel

Madoff Trustee Compromises With Ex-SEC GC, Brothers
The New York Law Journal by Sue Reisinger  -  March 1, 2012

The trustee handling Ponzi schemer Bernard Madoff's bankruptcy has reached a compromise with David Becker, the former general counsel of the Securities and Exchange Commission, and Mr. Becker's two brothers.  The Beckers agreed to pay back $556,017—about $1 million short of what the trustee originally sought.  "The trustee, in the exercise of his business judgment, has determined that it is appropriate to reach a business resolution in this matter rather than continue the litigation," states the motion for approval filed on Feb. 27.  The deal put together by court-appointed trustee Irving Picard still must be approved by Southern District Bankruptcy Judge Burton Lifland. The court has scheduled a hearing on approval of the settlement for April 3.  The mother of David, Daniel, and William Becker had originally invested in the fund, and the proceeds from it went into her estate when she died in June 2004. In February 2005, the fund wired more than $2 million into an account held by the probate estate, and the money was commingled with other probate funds, according to court documents.  All this occurred years before Mr. Madoff was exposed as a fraud and received a 150-year prison sentence in 2009.  Mr. Picard of Baker & Hostetler, the court-appointed trustee, originally asked for nearly $1.55 million in so-called "fictitious profits," meaning that he claimed the probate estate withdrew $1.55 million more from the mother's account than was ever invested.

Mr. Picard explained in an affidavit why he settled for much less: "I recognize that litigating the trustee's claims would undoubtedly be complex, create significant delay, and would involve litigation risk, particularly considering the unique facts and Massachusetts probate law issues involved in this case… The settlement furthers the interests of the customers [of the Madoff fund] by, among other things, adding $556,017 to the Fund of Customer Property without the added delay and uncertainty of further litigation."  Mr. Picard's motion also states that the settlement amount represents the "total amount" of Madoff money actually received by the three brothers subsequent to their mother's death.  A statement issued by Amanda Remus, spokeswoman for the trustee and his counsel at Baker & Hostetler, repeats Mr. Picard's reasons why he is willing to settle for less than he originally sought.  Ms. Remus declined comment on Feb. 28 when asked about the additional $1 million. According to a source close to the case, the remaining money went to estate taxes and various fees.  Mr. Picard's counsel are David Sheehan, Marc Hirschfield, and Karin Jenson, from the New York office of Baker & Hostetler.  The Beckers were represented by William Baker III of Latham & Watkins in Washington, D.C.  The trustee's suit against the Becker brothers led to congressional hearings and an ethics investigation by the SEC inspector general's office. David Becker was accused of a conflict of interest because he was involved in shaping the SEC's policy toward Madoff investors and their claims.  In his defense, Mr. Becker said he told the SEC's ethics office about his mother's account, along with SEC chairwoman Mary Schapiro. They cleared him to participate in the policy discussions, and nothing came of the ethics investigation.  Mr. Becker first became GC of the SEC in January 2000; he left in 2002 and then rejoined the agency as GC in 2009 to help with the post-financial crisis policy-making.  The trustee filed suit against the Beckers in 2010, and Mr. Becker resigned from the SEC in February 2011. He is now a partner at Cleary Gottlieb Steen & Hamilton in Washington D.C.  "As Mr. Becker repeatedly said, he was unaware of his mother's account until long after it was liquidated, and he always expected that he would return any fictitious profits that he unknowingly received," Mr. Becker's attorney said in a statement.  He added, "While at the SEC, Mr. Becker made full disclosure of his mother's account and strictly followed SEC ethics procedures. Mr. Becker has done everything possible, both at the SEC and in his private affairs, to assist the victims of the Madoff fraud."  Sue Reisinger, a reporter at Corporate Counsel, an affiliate, can be contacted at sreisinger@alm.com.