After months of skirting the question, the trustee for the Bernard Madoff estate, Irving Picard, has told Bloomberg News that he may indeed go after charities that profited from their investments with the Ponzi schemer.
The law requires him to file so-called clawback suits against investors that profited from the fraud at Bernard L. Madoff Investment Securities LLC, even if they weren’t aware of his $65 billion Ponzi scheme, Picard said yesterday. Charities aren’t exempt from such “avoidance actions,” he said.
Picard said that he would look at charities on a case by case basis, and would most likely go after those that should have known better, for example the foundation of Jeffry Picower, who made more than $6 billion on his Madoff investments and who is under some scrutiny now.
To date, Picard has only sued one charity, the foundation of Stanley Chais, who took $1 billion in Madoff profits.
Hadassah is the charity on which Bloomberg focused:
Jewish charity Hadassah, which builds hospitals in Israel, invested $40 million with Madoff and took out $130 million in profits, a person familiar with the matter said. Hadassah’s ex- chief financial officer, Sheryl Weinstein, who resigned in 1997, claimed in a book published last month that she was once Madoff’s lover.
Under Picard’s formula, $90 million of Hadassah’s fake profit may now technically be a clawback target. The charity’s spokesman, Steve Rabinowitz, said he couldn’t comment on how much was withdrawn during the past six years.
A total of about $12 billion was withdrawn by clients from Madoff’s firm in 2008, including about $6 billion in the 90 days before the Madoff bankruptcy, David Sheehan, a lawyer representing Picard, said in May. That money is a potential source for Madoff victims to recover some of their investments.
Off the record, Hadassah insiders have been telling us here that they are not too worried. But we shall see if this changes their tune.
Officials at the Robert Lappin foundation told the Boston Herald that it is not worried about clawbacks:
After all, the group is pretty much broke.
“There really isn’t much money to get, so I don’t think it would make sense to go after us,” said foundation chief Robert Lappin, whose namesake charity lost some $8 million investing with Madoff.