Monday, May 18, 2009

White Collar Securities: Investigators Probing Some of Madoff's Purported Victims

The trustee in bankruptcy in the Madoff case has filed suit against some who have called themselves victims of the Madoff fraud. Irving Picard, the court appointed trustee for Bernard L. Madoff Investment Securities, LLC, has filed suit against two associates of Madoff. The suits allege that Jeffry Picower and Stanley Chais sought and received better returns than those purportedly made by other Madoff investors. Picard alleges that the returns received by these individuals reached as much as 300% or 950% annually. He has further alleged that the two defendants withdrew more than $6 billion in purported profits.

Criminal investigators from the United States Department of Justice are also beginning to look at the possibility of bring criminal charges against Picower, Chais, and several other investors. The investigation may be looking at the question of whether certain investors told Madoff how much in returns they wanted on their investments and received these amounts into their accounts.

A criminal case by the government would probably rest at least in part on the theory that these sophisticated investors either had direct knowledge of the fraud or knew that Madoff could not legally produce tremendous profits that matched the amount requested by these investors.

For more in depth discussions of the civil suit and criminal investigation, please see The Miami Herald, "Madoff Trustee Sues 2 Funds," May 14, 2009, page C1, and The Wall Street Journal, "Madoff Victims Investigated," May 18, 2009, page A1.

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