As a man who cherishes his privacy, the attention Jeffry Picower received on Thursday must have made him wince. On the same day that Forbes revealed he had earned a coveted spot in the magazine’s list of the 400 wealthiest Americans, a new court filing added $2.1 billion to the $5.1 billion he is alleged to have earned from his participation in Bernard Madoff’s Ponzi scheme.
Forbes, which listed Picower at No. 371, placed his net worth at $1 billion, although the magazine acknowledged that the former lawyer and accountant is "likely worth billions more." Irving Picard, the court-appointed trustee charged with recovering cash from Madoff’s scheme, wants to claw back Picower’s Ponzi profits. Picard contends that Picower is one of a select group that benefited from the Ponzi scheme and knew or should have known that they were participating in a fraud.
The trustee’s latest filing states categorically what ProPublica first reported in June ― Picower made more money than anyone else from the Madoff Ponzi. Picower was "the biggest beneficiary of Madoff’s scheme, having withdrawn either directly or through the entities he controlled more than $7.2 billion of other investors’ money," the filing said.
If Forbes had included all of Picower’s alleged Ponzi profits in this year’s total, it would have had to bump him up to the 32nd richest American. Instead, the media-shy investor is making his first appearance on the Forbes list. One reason for this may be that calculating Picower’s net worth has proven extremely difficult. In 2002, Forbes itself put Picower’s wealth at a little more than $300 million. That same year, according to court filings, Picower’s quarterly withdrawals from Madoff alone totaled $895 million.
The trustee’s latest judicial move is a response to a July 31 filing by Picower which urged the court to dismiss the Trustee’s complaint. (See, our "Picower: Charges of Complicity with Madoff 'Baseless."") In that filing, Picower argued that he himself was a victim of Madoff’s crime. He asserted that it would have been illogical for Madoff to have "compensated" Picower with such exorbitant sums because that would have undermined the scheme. Picower also noted that he still had half a billion dollars invested with Madoff when the now-convicted fraudster first confessed.
Although the trustee’s brief is heavy on legal citations, it nonetheless marshals plenty of outrage at Picower’s arguments. "Given that Picower withdrew more of other investors’ money than any other customer" of Madoff, "Picower’s repeated references to himself as a 'victim' ring hollow," the brief states. "Picower’s premise that making billions of dollars from a Ponzi scheme is a badge of innocence is dubious at best."
The trustee notes that Picower’s largest withdrawals were quarterly, allowing Madoff to plan ahead for them. The trustee also adds a new detail to the story. As early as 2003, Madoff was having trouble paying Picower the full amount the investor was demanding every quarter. Madoff’s "failure to pay Picower sums that purportedly were in his accounts or otherwise available to him is further evidence that Picower knew or should have known of Madoff’s fraud," states the brief. "This evidence becomes more compelling given Picower’s apparent lack of complaint about his inability to access billions of dollars reported" on Madoff's account statements.
Picard summarizes his objection to the motion to dismiss with a flourish: "Picower’s motion is a concoction of irrelevant counter-facts, arguments that ignore both the allegations in the Complaint and the relevant legal standards, and factual challenges that are not properly before the Court on a motion to dismiss."
Not surprisingly, a statement from Picower's lawyer William Zabel takes issue with Picard’s latest brief: "Trustee continues to make false and outrageous claims about Mr. Picower based on a misreading of the purported 'facts.' When the true facts are known, the Court will see that Mr. Picower was deceived by Bernard L. Madoff like the SEC and thousands of other investors, as many as half of whom took out more money than they put in."
In the statement, Zabel also leaves open the possibility that a settlement can be reached.
"The Picowers in good faith have initiated discussions with the Trustee to reach a settlement in order to avoid years of extensive litigation," Zabel said.
A hearing on the motion to dismiss before Judge Burton R. Lifland of U.S. Bankruptcy Court for the Southern District of New York has been scheduled for Oct. 27.