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Claims Total Over 15,400 in Fraud by Madoff

cnbc.com

The final tally of claims from victims of Bernard L. Madoff’s vast Ponzi scheme comes to more than 15,400, substantially higher than the 8,800 claims that had been filed by the first of June.

The total was included in an interim report filed on Thursday in Federal Bankruptcy Court in Manhattan by Irving H. Picard, the trustee overseeing the liquidation of Mr. Madoff’s estate.

The report, which covers the first six months of the trustee’s tenure, also provided some limited details about his independent examination of the Madoff fraud, which continues to be investigated by federal prosecutors and securities regulators.

More than 230 subpoenas and 90 additional letters seeking information have been issued in the trustee’s investigation, which he said had “unearthed a labyrinth of international funds, institutions and entities of almost unparalleled complexity.”

So far, more than 60 “potential corporate assets and interests” have been identified in the United States and in 11 countries or territories, from Switzerland to the Cayman Islands, according to the report.

The investigation has also turned up cases in which money flowed from the Madoff accounts into companies in which neither Mr. Madoff nor his firm had any apparent ownership interest, the trustee reported.

“It is the trustee’s intention to recover any improperly transferred corporate assets from family members” and from any other third parties who got them, the report continued.

The final total of claims by Mr. Madoff’s victims, which had remained constant at about 8,800 for months, was pushed up in June by a last-minute flood of applications before a July 2 deadline.

The claims include 258 applications to the trustee’s hardship program, intended to speed reimbursement to victims who are unable to pay for basic living expenses or medical needs, are over 65 and facing a return to work, have declared personal bankruptcy or are unable to care for their dependents.

So far, 152 hardship applications have been approved. According to the report, the remaining requests cannot be processed until aging microfilm records for accounts opened before 1996 can be reconstructed.

The claims tally adds a new metric to the enormous fraud, which was already remarkable for the amount of paper profits wiped out ($64.8 billion), the amount of cash that flowed through the Ponzi scheme since its inception ($170 billion) and the number of years the fraud continued undetected (nearly 30, according to the government prosecutors).

On June 29, Mr. Madoff was sentenced to 150 years in prison for his crimes. His lawyer, Ira Lee Sorkin, said on Thursday that he had decided not to appeal the sentence.

There was bad news in the new trustee’s report for some creditors of the Madoff estate — specifically, the vendors, employees, taxing authorities and brokerage firms whose claims against the Madoff firm total more than $285 million.

In the pecking order of bankruptcy court, these creditors come after the customers covered by the Securities Investors Protection Corporation, the government-chartered industry fund that provides limited compensation to the clients of failed brokerage firms.

Given the scale of customer claims, the trustee warned these creditors that he “does not currently believe that there will be sufficient funds in the debtor’s estate” to pay the unsecured claims.

Nor will there be money left over to reimburse the investors protection corporation for its administrative expenses in the case, Mr. Picard reported. Through June 30, the trustee’s legal and administrative expenses totaled just under $46 million, according to the report.

Those expenses will be fully paid by the corporation without tapping any of the money available to pay customer claims. In addition, the corporation has advanced $168.4 million to the trustee to pay victims whose claims have been approved.

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