Around $12 billion was pulled out of accounts at Bernard Madoff’s firm in 2008, according to the Times today, and Irving Picard, the trustee in charge of Madoff's estate, has been dropping lawsuits left and right in hopes of recouping some of it for his investors. This figure should offer "a bit of hope" to the thousands of customers who were defrauded by the Ponzi scheme, as the Times notes, but it's also where things get messy. After all, the money Picard recoups for said defrauded customers is ultimately at the expense of Madoff's other defrauded customers, the people that until now were thanking their lucky stars they withdrew what they see as their money before the whole thing went up in smoke. Until now, these people have been able to commiserate with everyone else as victims: No one was as rich as they thought they were, and they were all in it together. But now, as the smoke clears, investors are finding out that some of their fellow Madoff investors may have, well, made off.
Such as Jeffry Picower, a Palm Beach investor whose charitable foundation, the Picower Foundation, was shuttered in the wake of Madoff's fraud. Picard has just sued him for the return of $5.1 billion, and accuses him of “perpetuating the Ponzi scheme” by ignoring his suspiciously high returns. Per the Times:
A lawyer for Mr. Picower and his wife, Barbara, who was also named as a defendant, denied the allegations.
“Mr. and Mrs. Picower considered themselves friends of the Madoffs for over 35 years,” said the lawyer, William D. Zabel of Schulte Roth & Zabel. “They were totally shocked by his fraud and were in no way complicit in it.”
Mr. Zabel added: “They lost billions in personal assets, and most dear to them, all of the assets of their esteemed foundation.”
Will the investors who didn't withdraw funds sympathize? We doubt it. If the Picowers intend to contest this, they'd better watch their backs in the Jell-O line at the Palm Beach Country Club.