Trustee Seeks Billions for Madoff Investors

Diana B. Henriques|The New York Times

Jeffry M. Picower, a longtime investor in Bernard L. Madoff’s fraud scheme who died in his Palm Beach swimming pool last month, left an estate with assets far in excess of $1 billion — and that could be a spot of good news for Mr. Madoff’s victims.

Although Mr. Picower’s will, which is expected to be filed on Tuesday, leaves the bulk of the estate to charity, that amount depends on how much his family pays to settle legal claims brought by the trustee gathering assets for Mr. Madoff’s victims.

Bernie Madoff
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But the estate is clearly large enough to add at least several billion dollars to the $1.4 billion that the trustee has gathered so far. The trustee, Irving H. Picard, estimates that the cash losses in the enormous Ponzi scheme total at least $21 billion.

Mr. Picard has demanded the return of $7 billion he says Mr. Picower and his wife withdrew from their Madoff accounts over several decades. Lawyers for the Picowers say they withdrew $2.4 billion during the six-year recovery period allowed for the trustee’s claims under New York State law and contend that should be the limit of Mr. Picard’s claim.

William D. Zabel, a lawyer for the family, declined to comment Monday night on the settlement talks, except to note that the figures under discussion obviously range from $2.4 billion to $7 billion. Any settlement in that range would at least double the amount available to Mr. Picard to cover victim losses.

Mr. Zabel said “a fair and generous settlement with the Madoff trustee” should still leave “hundreds of millions of dollars” to establish a new charitable foundation envisioned in the will and to pay more than $240 million in cash bequests.

Those cash bequests reveal a new personal footnote to the cloudy history of the Madoff fraud — a link between Mr. Picower and the earliest known fund-raisers for Mr. Madoff.

One of the beneficiaries under the will is Mr. Picower’s niece — who is also the daughter of Michael Bienes, a former employee of the accounting firm owned by Ruth Madoff’s father, Saul Alpern.

With his partner Frank Avellino, Mr. Bienes helped steer hundreds of millions of dollars from individual investors to Mr. Madoff before their partnership was shut down by securities regulators in 1992. Mr. Bienes and Mr. Avellino settled the regulatory lawsuit without admitting or denying any wrongdoing.

According to a family source, Mr. Picower’s sister was once married to Mr. Bienes, but the two men “have long been estranged.” The daughter of Mr. Bienes remained with her mother and Mr. Picower regularly contributed toward her care. The will provides $200,000 to be left in trust to sustain that support.

The other cash bequests detailed in the will include a total of $225 million for Mr. Picower’s widow, Barbara, and his adult daughter, Gabrielle; $10 million for April C. Freilich, his longtime assistant; and $1 million each for the New York Public Library, the Harlem Children’s Zone and the Nurse-Family Partnership.

The will, which will be publicly available at the probate court in New York on Tuesday, provides that the remainder of Mr. Picower’s estate will be contributed to a new charitable foundation that would direct at least half of its grants to medical research.

The will specifies that the foundation, in its first year, must distribute $1 million each to four scientists conducting research on Parkinson’s disease, from which Mr. Picower suffered. It is also required to make a first-year grant of $25 million to the Picower Institute for Learning and Memory at the Massachusetts Institute of Technology, which had been underwritten in 2002 by an earlier charity established by the couple in 1989.

That charity, the Picower Foundation, had all its assets invested with Mr. Madoff and closed when his fraud was uncovered in December.

The will was signed on Oct. 15. Ten days later, Mr. Picower suffered a heart attack and drowned at his oceanfront mansion in Palm Beach, Fla. He died amid a tangle of litigation arising from his disputed role in the Ponzi scheme operated by Mr. Madoff.

Initially, the Picowers were notable as victims of fraud, but in May, Mr. Picard sued the Picowers in federal court to recover all the money they had withdrawn from their Madoff accounts over the years. The lawsuit contended that the Picower accounts with the Madoff firm were “riddled with blatant and obvious fraud” that a finance professional like Mr. Picower should have detected immediately.

The Picowers emphatically denied any knowledge of the Ponzi scheme, and a family lawyer has said they, along with other investors and regulators, were deceived by Mr. Madoff.

In a statement released last night, Mrs. Picower said her husband “was determined that we would put Madoff behind us, reclaim our good name and reverse the damage Madoff’s fraud had, not only upon our lives, but upon the many deserving institutions and people we were blessed to support.”

The new foundation will allow his “charitable legacy” to continue after a settlement is reached with the trustee, she said.