Dozens of Bernard Madoff’s early investors are getting help from an unlikely source in a fight to keep their profits: the con man himself.
From his federal lockup in Butner, North Carolina, Madoff said at a recent deposition he was a legitimate securities broker for decades, until 1992. Before that, he said, he was mostly clean as a whistle. Madoff made a similar claim in his guilty plea eight years ago, but the issue hasn’t really mattered until now.
It’s become crucial to resolving some 80 lawsuits in which Irving Picard, the trustee appointed to handle the firm’s dissolution, is seeking about $100 million in profits from a group of customers who invested before 1992. The central issue is when the fraud started. If it began after 1992, those customers may get to keep their profit. If it started before, they lose out.
The cases pit the word of Wall Street’s most notorious liar against the claims of a trustee with mountains of evidence from a sweeping probe that found no evidence of trading for decades. There’s an added twist: Records gathered from recently restored microfilm have given customers hope that evidence of genuine transactions may exist.
The fight forces the lawyers to confront one of the biggest mysteries of Madoff’s scam. For Madoff, though, what matters is salvaging some shred of his reputation -- something he says he could have done had he taken his case to a jury.
‘Biggest Mistake’
“The biggest mistake I made was not going to trial,” Madoff said at his April 26 deposition, according to a transcript now in court papers. “I would have called in any number of expert witnesses” to prove he was once a savvy trader.
The prosecutors who sent Madoff to prison for 150 years presented evidence at a trial of his five top aides that almost no trading took place while the con man managed money. Picard has made the same claim in hundreds of lawsuits seeking to recover fake profits from Madoff investors.
So far, he has recovered more than $11.5 billion for investors who lost $17.5 billion in principal. He’s now seeking almost $500 million more in 213 lawsuits against former customers, including the group who says it invested while Madoff’s operation was legitimate.
Picard has used a straightforward method to calculate where customers stood financially: their deposits with Madoff minus money withdrawn. Those who were “net losers” got claims for repayment, while “net winners” were sued for the return of bogus profits. But some of those who invested before 1992 say the calculation should begin in 1992 because Madoff was actually trading and generating true profits until then. Because there’s been little conclusive evidence one way or the other, a judge ordered the deposition.