Bernie Madoff and the Koch Brothers – Irving Picard’s Efforts at Recovery Thwarted – Money Held Abroad…

The Madoff Judge’s Ruling Setting a Reprehensible Legal Precedent: Invest if you are savvy because the courts will protect you. If you are not, you are S.O.L.

The Koch Brothers and other investors who hold millions, if not billions abroad are being permitted to keep money that in our view should be available for all of the people who were defrauded by Madoff. Irving Picard, the attorney acting as Trustee for the Bankrutpcy estate and a strong advocate for recovery for those most affected by Madoff’s scheme, argued that the money should be disgorged (returned to the bankruptcy estate). The judge, contrary to Picard’s argument disagreed. We believe that this judge set a very toxic precedent by ruling as he did. The message: “If you invested through “feeder funds” or other similar entities which hold money abroad, that money cannot be brought back.”

In other words, the most savvy investors can manipulate the law (if not the court system) to the detriment of the ordinary “non-savvy” investors. Are the less savvy investors not the people the US Securities Laws are designed to protect?

Kochs and Other Madoff Investors Are Winners in Fight Over Profits Held Abroad

http://www.nytimes.com/2016/11/22/business/dealbook/kochs-and-other-madoff-investors-are-winners-in-fight-over-profits-held-abroad.html?_r=0

The company led by the American billionaire Koch brothers, along with dozens of banks and fund managers, kept billions of dollars in profit from Bernard L. Madoff’s Ponzi scheme in accounts offshore. As it turns out, that was a good decision.

Koch Industries and others who invested in the Madoff fund from offshore accounts won a key ruling in federal bankruptcy court on Monday, when the judge said certain funds held abroad — estimated at about $2 billion — could not be made available to victims of the Madoff scheme.

The ruling highlights the tug-of-war that has been raging between those who lost money when the scheme fell apart eight years ago and those who walked away before the fraud came to light, having recouped their original investments and then some.

Irving H. Picard, the trustee appointed to recover money for the victims, had argued that he should get the money because the investors used so-called feeder funds that operated in the United States even though they were registered offshore. Those funds gathered investor money on behalf of Mr. Madoff. But Judge Stuart M. Bernstein of Federal Bankruptcy Court in Manhattan said foreign bankruptcy proceedings blocked the trustee from accessing the money.

A spokeswoman for the trustee, Amanda Remus, said the decision by Judge Bernstein was “under review,” but added she could not comment on next steps. The decision can be appealed to the Federal District Court.

Mr. Picard is still trying to recover more than $5 billion for victims. So far, according to his website, he has obtained $11.5 billion for about $17.5 billion in claims.

Among the largest recoveries have been $5 billion from the estate of the Florida investor Jeffry Picower, $1 billion from Tremont Group, $550 million from the investor Carl J. Shapiro and others, and $470 million from Union Bancaire Privee, a Swiss bank that ran a Madoff fund.

Koch Industries is one of 88 cases in which management, service providers and investors received overseas transfers of money. They have been fighting Mr. Picard’s attempts to recover the money, arguing that it was transferred from these overseas accounts to banks and others outside the United States before the fund collapsed.

Koch Industries began investing in the Madoff fund well before its collapse and pulled its $21.5 million out in 2005. The money withdrawn from the Madoff fund went to a fund registered in the British Virgin Islands and then to a Koch entity in Britain.

In addition to Koch Industries, several European banks were listed in court papers as having had Madoff money offshore, including HSBC Bank of London, UBS AG and Credit Suisse of Switzerland, an international arm of Merrill Lynch and the French money manager Natixis.

THE MADOFF CASE

Bernard L. Madoff orchestrated the largest, longest and most widespread Ponzi scheme in history.

  • The Arrest

    On Wall Street, his name was legendary. But in December 2008, federal agents accused this consummate trader of running a multibillion-dollar fraud scheme.

  • Admitting Guilt

    When he entered a federal courtroom in March 2009, he was dressed as elegantly as ever. But, preparing for jail, he wore no wedding ring.

  • 150 Year Sentence

    In June 2009, a federal district judge condemned his crimes as “extraordinarily evil” and imposed a maximum sentence.

Collectively, the institutions represent “a ‘Who’s Who’ of the European investing class,” said Jonathan Sablone, an attorney from the firm Nixon Peabody in New York. The presence of Koch, based in Wichita, Kan., gives the issue “a political tone,” he added. Its main owners, the brothers Charles G. and David H. Koch, are known for supporting Republican political candidates and right-of-center causes.

Koch, whose oil refineries, chemicals, fertilizers and forest products generate estimated annual revenues of $100 billion, is the second-largest privately owned American business after agricultural commodity producer Cargill, according to Forbes magazine.

Mr. Picard sued Koch Industries in February 2012, arguing that the money ultimately went back to Koch’s parent company.

Asked about the case in June, a Koch Industries spokesman, Rob Carlton, said in a statement: “The Koch entity involved made an investment in an entirely separate fund. That Koch entity no longer exists and its investment was redeemed in 2005, long before anyone knew of Madoff’s fraud.” Asked for comment about Monday’s ruling, Mr. Carlton declined to comment.

A so-called extraterritoriality issue in this case centers on whether investor money withdrawn from the Madoff feeder funds counted as overseas distributions beyond Mr. Picard’s reach.

In Monday’s ruling, Judge Bernstein noted that two key funds in the case are being shut down, and the people engaged in that overseas process are trying to go after the same assets being pursued by Mr. Picard.

Although Koch’s name appeared in the Madoff court record as early as 2012, its involvement was not publicly revealed until June 3, when its role in the cases was reported by Bloomberg News.

Mr. Picard has noted that the Madoff fund transferred $3 billion to Fairfield Sentry in the six years before the fraud came to light in December 2008, with $1.6 billion of that total withdrawn in the two years before December 2008, and $1.1 billion transferred just 90 days before that same date.

A July 2014 decision by Judge Jed S. Rakoff of the Federal District Court in Manhattan blocked clawbacks of feeder-fund transactions outside the United States between foreign parties, in this case money that went from the Madoff firm to foreign funds and then to other investors outside the United States.

But in subsequent bankruptcy court filings and arguments, Mr. Picard has said the funds were really in the United States and should thus be fair game. Both main funds at issue “did business in New York, almost all their employees were in New York, they listed New York as their primary place of business, and they dealt with their shareholders from New York,” lawyers for Mr. Picard said in a filing on June 27, 2015.

To read the article in its entirety click, here.

Further reading:

KOCH BROTHERS WIN RIGHT TO KEEP MADOFF MONEY THEY HELPFULLY TRANSFERRED TO OFFSHORE ACCOUNTS

http://www.vanityfair.com/news/2016/11/koch-brothers-madoff-money-offshore-accounts

You were probably blissfully unaware of this, but until Monday, Thanksgiving 2016 threatened to be a tragic one for billionaire brothers Charles and David Koch. Despite having a combined net worth of $85.6 billion, they almost sat down to dinner several million dollars poorer, on account of the lawyer overseeing recovery for the victims of Bernie Madoff’s $65 billion Ponzi scheme, in which Koch Industries started investing in the mid-90s before pulling out in 2005, three years before the fund’s collapse. So far, Irving Picard has collected $11.5 billion of the principal lost by investors, and he was hoping add other $2 billion to the pile, $20-plus million of which belongs to the Koch brothers’ company. Thankfully, though, a judge wouldn’t let that happen, and Charles and David can still afford to put food on the table tomorrow:

Koch Industries and dozens of other former Madoff customers are poised to keep as much as $2 billion they gleaned from the con man’s bogus securities transactions after U.S. Bankruptcy Judge Stuart Bernstein in Manhattan ruled the cash is out of reach of a trustee recovering money for victims. . . . Koch Industries and defendants in about 100 other suits argued the profit was beyond U.S. jurisdiction because it had been transferred—usually from offshore feeder funds to foreign banks—in the years before Madoff’s December 2008 arrest. Irving Picard, the lawyer who is liquidating the New York-based firm, contended the money could be clawed back because investors and feeder funds must have known they were subject to U.S. law. Bernstein disagreed.

To read the article in its entirety click here.

FURTHER READING:

Koch brothers can keep millions they received from Bernie Madoff’s Ponzi scheme, Manhattan judge says

http://www.nydailynews.com/news/crime/koch-brothers-2-billion-received-madoff-article-1.2883877

The Koch brothers and some other investors in Bernie Madoff’s Ponzi schemecould keep up to $2 billion they netted in the investment scam.

Manhattan Bankruptcy Judge Stuart Bernstein decided a trustee charged with getting victims’ back their money can’t touch the chunk of disputed money, Bloomberg reported Tuesday.

The billionaire brothers, Charles and David, and about 100 other Madoff customers had claimed a victims’ advocate couldn’t recoup their profits for distribution because the money had been transferred outside the U.S. long before Madoff was arrested in December 2008, according to Bloomberg.

Irving Picard, the lawyer charged with liquidating Madoff’s firm, maintained the money could be brought back. He argued that U.S. law applied, but the judge did not agree.

Koch brothers can keep $2 billion they received from Madoff

Picard spokeswoman Amanda Remus said Bernstein’s decision is “presently under review by the legal teams working on behalf of the (trustee) for the Madoff Recovery Initiative.”

To read the article in its entirety click here.

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