The American Jewish World continues to research the aftermath of the Bernard Madoff investment fraud, and has found more clawback complaints against local Jews. As reported previously, Irving H. Picard, the court-appointed trustee for the Madoff estate is trying to recover “fictitious profits” from Madoff’s Ponzi scheme and distribute the proceeds to victims of the scam.
Picard has filed around 1,000 lawsuits against those who transferred more out of their accounts with Bernard L. Madoff Investment Securities (BLMIS) than they put in. The lawsuits filed by Picard and his team of lawyers are trying to claw back funds from those they call “net winners” in the Ponzi scheme. The clawback period extends back six years from Dec. 11, 2008, the day Madoff, who is now serving a 150-year federal prison sentence, was arrested.
Here are some clawback lawsuits – which total more than $30 million – not previously reported in the Jewish World:
- Richard A. Broms, of Minnetonka, individually and as a trustee for the revocable trust bearing his name, is being sued for more than $7.5 million. The complaint filed by attorneys for Baker and Hostetler, Picard’s firm in New York City, alleges that Broms’ transfers “constitute non-existent profits supposedly earned in the Account, but, in reality, they were other people’s money.”
A BLMIS statement attached to the complaint shows that more than $1.5 million was transferred from the Richard A. Broms Revocable Trust account with the Madoff firm in 2008. The AJW previously reported that the Broms Family Foundation was one of the local Jewish philanthropies that suffered significant losses in the Madoff scam. The foundation’s assets plunged from $1.7 million to $330,037, according to its 2008 990-PF IRS tax filing.
- Theresa Berman and Lyle Berman, both of Minnetonka, are defendants in a lawsuit seeking more than $3.7 million. The complaint filed Nov. 12, 2010, in the U.S. Bankruptcy Court for the Southern District of New York, names the Bermans individually and as trustees for Theresa Berman Revocable Trust. Another trustee, Sharon Berman Snyder, is also a defendant.
Also, a separate complaint seeking more than $5.2 million names the Lyle Berman Family Partnership. Other defendants are trustees Neil I. Sell and Stanley Taube, and several Bermans, who are beneficiaries of the trust that was formed in Minnesota.
- The Madoff trustee is suing Alan and Diane Miller, of Wayzata, individually and as trustees of trust that bears their names, for exactly $4 million. The BLMIS statement for the Alan Miller Diane Miller Revocable Trust shows a $4 million transfer from the account on Oct. 7, 2008, which is within what the lawsuit calls the “preference period,” the 90-day timeframe prior to Madoff’s arrest and the seizure of his investment advisory firm. The second count of the complaint asks the bankruptcy court to disallow the Millers’ claim for reimbursment under SIPA, the Securities Investor Protection Act.
- Attorneys for Picard are seeking $2.7 million “in fictitious profits from the [Madoff] Ponzi scheme” from the Estate of Arnold M. Soskin, the Arnold M. Soskin Revocable Trust, Richard N. Soskin, Nancy S. Lurie, Debra Becker, Robert S. Soskin, Samuel S. Soskin and Renee R. Soskin. The defendants live in the Twin Cities, except for Renee Soskin, who has an address in Key Biscayne, Fla., according to the complaint.
- Candice and Charles Nadler, of Excelsior, are being sued for $860,000. The complaint names them individually and as trustees for the Candice Nadler Revocable Trust DTD 10/18/01, which had a Madoff account. The Madoff trustee also denied their claim for losses in the Ponzi scheme on June 22, 2010. Picard’s letter to the trustees stated: “Your Combined Claim for securities is DENIED. No securities were ever purchased for your account.” BLMIS issued quarterly reports to its clients that detailed profits and losses on stock trades and various investments; the statements were completely phony.
Also, the Nadlers’ charitable foundation was wiped out by the Madoff scam. The assets of the Charles and Candice Nadler Family Foundation went from $572,383 to $13,354, according to the organization’s 2008 990-PF tax filing.
- A lawsuit seeks $744,375 from the Stanford M. Baratz Children’s Irrevocable Trust U/A Dated 11/90. Victor S. Greenstein, of Minnetonka, a trustee, is also named as a defendant. The same boilerplate language found in all of the Picard complaints notes that the “adversary proceeding arises from the massive Ponzi scheme perpetrated by Madoff.” The Baratz trust has an address on Ferndale Road in Wayzata. The complaint alleges that the $744,375 in transfers from the trust’s BLMIS account fall within the 90 days prior to the “filing date,” Dec. 11, 2008. One transfer, according to the BLMIS statement appended to the complaint, was made on Nov. 26, 2008, about two weeks before Madoff’s arrest.
The complaint also asks the court to disallow customer claims for relief under the SIPA.
- The AJW previously reported on the $11.4 million lawsuit against Steven and Susan Fiterman; another clawback claim for $4.5 million names as defendants the Miles and Shirley Fiterman Charitable Foundation, and Steven Fiterman and Valerie Herschman, as trustees for the foundation. Picard also denied the foundation’s SIPA claim, stating that $24.5 million was withdrawn from its BLMIS account, and $20 million was deposited, and that the Madoff firm never purchased any securities for the account. “Any and all profits reported to you by BLMIS on account statements were ficitious,” Picard wrote to the foundation on Oct. 7, 2010. The letter was addressed to the foundation, in care of Towers Management Co. in Golden Valley.
The Jewish World also reported in its Dec. 24, 2010, edition (“Local foundations sued in Madoff ‘clawback'”) that the Miles and Shirley Fiterman Endowment Fund for Digestive Diseases, which benefited the Mayo Clinic’s gastroenterology department, lost $18.8 in its Madoff investments. The foundation, which was destroyed, is now defending itself from a clawback lawsuit that seeks $716,294, in “preference period transfers” from its BLMIS account; two transfers totaling that amount were made in September 2008, according to the trustee.
In a related lawsuit, Marja Lee Engler, who was married to the late Mendel (Michael) Engler, is being sued for $1.7 million. The BLMIS account for the Mendel Engler Revocable Trust shows cash withdrawals totaling around $8.8 million, from 1986 to 2008. The clawback seeks the “fraudulent conyenances” going back six years.
As the AJW previously reported, Michael Engler was known as an “investment counselor” for Madoff, and recruited investors from fellow members of the Oak Ridge Country Club, a predominantly Jewish organization in Hopkins. This is how the Minneapolis area joined New York City and Palm Beach, Fla., as a center of the notorious Ponzi scheme.
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Irving Picard responds to Jan. 7 AJW story
January 7, 2011
To the Editor:
Your story “Kicking back against clawback” (1.7.11 AJW) reiterates misperceptions that add confusion and unnecessary heartache in the aftermath of the Madoff fraud.
As Trustee for the liquidation of Bernard L. Madoff Investment Securities LLC (“BLMIS”), I am guided in all actions by existing law and precedent. It is a sad but frequently overlooked fact that amounts withdrawn in excess of actual deposits in BLMIS were, in reality, funds unknowingly stolen from other BLMIS customers. This is the essence of a Ponzi scheme. There were virtually no securities purchases by BLMIS for customer accounts, so there could not be any “legitimate” BLMIS returns, as your article suggests. Under the law, I must pursue the recovery of withdrawals in excess of original deposits for fair and equitable distribution to customers with valid claims.
The efforts of my team may be the only hope for customers of BLMIS – many destitute – who withdrew little or none of their original deposits. They are not even considered in your reporting.
I fully realize that many of those who withdrew more than they deposited face severe financial hardship and are unable to return these funds. I have broad discretion in such cases, and I previously determined not to bring legal action against more than 200 Madoff customers and to dismiss certain actions against others who presented their circumstances to me. The Trustee’s continued Hardship Program will help many others, but only IF they come forward. I have made every effort to demonstrate compassion while maintaining my responsibility under the law, and I will continue to do so.
Further information about the continued Hardship Program can be found on the Trustee’s website (www.madofftrustee.com), including the Hardship Program application and guidelines.
Irving H. Picard
Trustee for the liquidation of Bernard L. Madoff Investment Securities LLC