Feds to investigate Irving Picard's 'clawback' suits to see if Madoff Ponzi scheme victims are hurtBY Michael O'Keeffe
July 28, 2011
A federal watchdog agency has agreed to investigate allegations that Irving Picard, the trustee charged with liquidating Bernie Madoff's estate, is punishing the Ponzi scheme scammer's victims by filing "clawback" lawsuits, Rep. Scott Garrett (R-N.J.) announced Wednesday.
The "comprehensive evaluation" of Picard's work as the Madoff trustee will also include a review of the legal investigative costs Picard and his firm, Baker & Hostetler, have incurred during the cost of the investigation.
"Defrauded investors - whom the government failed to protect in the first place - are terrified of being victimized once again," said Garrett, the chairman of the House Financial Services Subcommittee on capital markets. "I look forward to reviewing the GAO's findings."
In a June 3 letter, Garrett and several House colleagues - Rep. Carolyn McCarthy (D-N.Y.), Rep. Peter King (R-N.Y.) and Rep. Ileana Ros-Lehtinen (R-Fla.) - asked U.S. Comptroller General Gene Dodaro, who heads the Government Accountability Office, to launch the investigation.
Nikki Clowers, the GAO director of financial markets, confirmed that the agency had agreed to embark on an investigation into Picard but declined further comment.
"We will provide our full cooperation in conjunction with any inquiry by the GAO," said Amanda Remus, a spokeswoman for the trustee.
Among the clawback lawsuits Picard has filed is a $1 billion suit against Fred Wilpon and Saul Katz that claims the Mets owners knew or should have known that Madoff's investment firm was a front for a $64 billion Ponzi scheme. The suit, filed in December, was moved from federal bankruptcy court to district court on July 1.
Wilpon and Katz, who are in the process of selling a minority stake in the team to hedge-fund manager David Einhorn for $200 million as a result of the suit, have said Picard has badly distorted the intent of investor protection laws. Former Gov. Mario Cuomo was appointed by a bankruptcy judge to mediate the dispute.
Garrett and his colleagues asked the GAO in their June 3 letter to prepare a thorough review of how Picard and his firm were selected to straighten out the mess left by Madoff, who is serving a 150-year prison sentence.
The lawmakers also asked the GAO to review why Picard chose not to review investors' final statements to determine their net equity, but instead used a formula called Net Investment Method that left investors who withdrew more from their accounts than they invested open to "clawback" lawsuits. Picard has said the suits are necessary to recoup fictitious profits in order to compensate other victims.
"We are pleased the GAO has agreed to shine a light on SIPC and its Trustee's approach to the Madoff liquidation," said Network for Investor Action and Protection president Ron Stein, referring to the Securities Investor Protection Corporation, the government agency that appointed Picard. "NIAP continues to have serious concerns about the Trustee's methods, compensation, and accountability, as well as SIPC's rubber stamp throughout the process."