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Picower: Charges of Complicity With Madoff “Baseless”

Left: Picower portrait in Massachusetts Institute of Technology's Picower Institute. Right: Getty Images illustration of Bernard Madoff.
The man who Bernard Madoff’s Ponzi scheme may have enriched the most responded in court filings today to allegations that he was complicit in the fraud. In a statement, a lawyer for Jeffry Picower called the charges by Madoff trustee Irving Picard "baseless," "inflammatory" and "riddled with significant factual errors."

"In the Trustee’s zeal to clawback money for other victims, he fails to recognize that the Picowers are honorable people who were deceived by the same fraud that for many years eluded thousands of other investors, financial professionals and regulators that had access to Madoff’s files," said Picower lawyer William Zabel.

A ProPublica report in June detailed the allegations in the trustee’s complaint and what is publicly known of Picower, a media-shy investor who has worked both as a certified public accountant and lawyer. The 68-page motion to dismiss filed in U.S. Bankruptcy Court in the Southern District of New York directly rebuts only a few of the factual charges detailed in the ProPublica story. The bulk of the brief is filled with challenges to the legal merits of Picard’s case.

Picower does not dispute in the brief that between 1995 and 2008 he and his family withdrew $5.1 billion more than they invested with Madoff. While Picard’s complaint states that the Picowers benefited from their association with Madoff for more than 20 years, the brief puts the time span at more than 30 years.

The motion to dismiss gives no explanation for the quarterly withdrawal patterns Picard revealed in an exhibit to his complaint. Nor does it explain why the Picowers’ withdrawals peaked in 2003, when they removed a combined $1 billion from their Madoff accounts.

The brief does posit that "[t]here is no rational reason why Madoff would have compensated Mr. Picower" for withdrawing money from the Ponzi scheme, thereby potentially undermining its growth. It also questions why Picower would have left more than half a billion dollars in the scheme if he knew a turn in the economy would be the Ponzi’s undoing.

One of the allegations detailed by ProPublica involved the elevated returns Picower allegedly received on his investments with Madoff. The motion to dismiss provides examples of non-Madoff investors who also received high returns during that time period, as evidence that the Madoff results were within the realm of possibility. Specifically, Picard alleged that one Picower account, Decisions #2, "purported to earn over 950% in 1999." The Picower motion states that the account only earned 37.6% in 1999.

In another instance, the trustee claimed that two other accounts earned more than 100% over a four-year period. The Picower motion alleges that neither account earned 100% in any of those years. Neither the trustee nor Picower provide evidence that could be used to check their respective claims.

Perhaps the most serious allegation by the trustee was that Picower or his associates engaged in backdating when they ordered up "returns." Picard cites faxes and notes between Madoff’s office and Picower representatives as proof of these claims. The motion to dismiss dispatches with these charges in a few sentences.

"As with the Trustee’s other unsupported fraud allegations, he pleads no facts to support his rank speculation that the Defendants believed those trades to be fictitious and concluded, based on those trades, that Madoff was running a Ponzi scheme. No facts have been alleged to support the Trustee’s groundless conclusions, and the Court need not, and should not, accept them as true."

Research Director Lisa Schwartz contributed to this report.

Picower's motion to dismiss.

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