Lawyer for Bernie Madoff victims calls for resignation of 'dishonest' trustee Irving Picard
BY Wayne Coffey, Teri Thompson and Michael O'KeeffeDaily News
March 24, 2011
Three days after attorneys for the owners of the Mets assailed the credibility of the trustee overseeing the Bernie Madoff bankruptcy case and filed a motion to dismiss his $1 billion lawsuit against them, a lawyer representing 500 Madoff victims called for the trustee, Irving Picard, to resign.
In a court filing Wednesday, Helen Davis Chaitman cited Picard for breaching his fiduciary responsibility and withholding vital information, and said he should be replaced by an independent investigator.
"This is the largest financial crime in history," said Chaitman, a Madoff victim herself. "Picard has been dishonest with the court and should step aside as trustee because nobody can trust anything he says."
The filing seeks to set aside Picard's $220 million settlement with the estate of Norman Levy because Picard failed to disclose that Levy, whom Chaitman called Madoff's "co-conspirator," provided $100 billion in financing to Madoff.
Chaitman said the Securities and Exchange Commission, already under siege after the Daily News revealed that the watchdog agency's top lawyer was a Madoff benefactor, "should make a demand to have Picard removed and call in a special prosecutor to find out what happened."
Rep. Darrell Issa (R-Calif.), the chairman of the House Oversight and Government Reform Committee, asked Picard to provide documents related to the account once held by the family of former SEC general counsel David Becker. A spokeswoman said the committee expects to receive the documents by Thursday.
Rep. Peter King (R-New York), said he believes Picard has "abused his authority" in his attempts to force a large settlement from Mets owners Fred Wilpon and Saul Katz.
"I think there is an awful lot of merit in what Wilpon and Katz are saying," said King, who has co-sponsored legislation introduced by New Jersey Republican Scott Garrett that would address some of the issues addressed by Madoff victims. "Picard has overreached. He has portrayed himself as an impartial official when in fact he is a lawyer, a plaintiff's lawyer."
Rep. Gary Ackerman (D-New York), who famously chewed out SEC officials at a House Financial Service Committee hearing on Madoff in 2009, said Picard had waged a public relations war against the Mets owners and other clawback litigation defendants.
"Picard had the whole court to himself for a while, but there is a whole other side that is now starting to come out," he said. "My view is that everyone who invested with Madoff was a victim and it seems to me that not everyone was treated as fairly as we would like to see. The clawback victims feel like they have been brutalized twice."
Chaitman's filing also said that Levy's children had a margin loan of $2 billion with Madoff at the time his scam imploded in December of 2008 - another critical fact that Picard neglected to mention to the court in making his settlement, she said.
Amanda Remus, spokeswoman for Picard, said his counsel has reviewed the reply brief and believes it is without merit and will respond in court at the appropriate time.
Picard, who is charged with reclaiming as much money as he can, is seeking to get the money through so-called "clawback" lawsuits against investors who profited from Madoff's $65 billion Ponzi scheme.
Near the top of the clawback list are the Mets' owners and their partners at Sterling Equities, whose lawyers also say that Picard has either overlooked or misrepresented key facts in the case.
An attorney familiar with the litigation said Chaitman's claims echo what the Mets owners said in their motion to dismiss, which was filed late Sunday.
"The withholding of key information, the failure to disclose facts plays into what they've been saying about the allegations against Sterling Partners," the lawyer said.
According to the motion to dismiss, Picard withheld key deposition testimony from the defendants and misrepresented it in his lawsuit, causing the Mets' owners massive damage to their reputations and businesses.
"You're in an unusual situation," the attorney said. "Picard did discovery, then filed a complaint, so he had the evidence he wanted. He had the depositions. The Sterling Partners demanded that information and he began to stonewall."
Picard based much of his $1 billion clawback claim against the Mets on the basis of depositions by two investing associates of the club that Picard said sounded alarms about Madoff's operation.
The Mets owners' attorneys obtained copies of the depositions by Peter Stamos and Ashok Chachra and contend that Picard distorted their essence - that the statements back up the Wilpon/Katz contention that they knew nothing of Madoff's malfeasance.
"He claimed to have had a good faith basis for his allegations - to the court and to the Sterling Partners," the lawyer said of Picard. "They (Wilpon and Katz) believe that is not true."
After Wilpon and Katz asked to see the evidence Picard and his attorney, David Sheehan, based their claims on, the trustee sent a letter to Karen Wagner, an attorney representing Wilpon and Katz, telling her to stop trying to obtain the evidence through third parties.
"It's clear he didn't want us to have those depositions," the lawyer said.
Chaitman told the Daily News that her filing reflects the same issue: "Picard has exclusive access to the facts and uses them for (his own purposes)," she said.
Rep. King agreed. "To portray the Wilpon family as evil or part of the conspiracy is making too much of a public relations case when we are talking about specific issues of law."