Hundreds of S. Florida Madoff victims to get most of their money

Sara Turner Commercial Business June 24, 2011 0

About 1,200 victims of Bernard Madoff’s Ponzi scheme will now be able to recoup most — if not all — of their original investment, according to attorneys and investors.

That could be good news for hundreds of the 2,200 — or more — South Floridians taken in by Madoff’s Ponzi scheme. Not all of the local Madoff investors will see payouts because they haven’t been officially authorized to receive them by the court overseeing the Madoff restitution case.

Some hedge fund firms are now willing to buy Madoff investors’ future restitution payments for as much as 74 cents on the dollar.

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Fort Lauderdale attorney Robert Plafsky was recently offered 74 percent of his family’s original $10 million investment that was lost when Madoff pleaded guilty to charges he ran the nation’s largest Ponzi scheme — less the $500,000 already paid to the family.

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For now, though, Plafsky is waiting to see if the family will get the remaining $9.5 million. “It is too early to tell,” he said.

U.S. Judge Burton Lifland has scheduled a July 12 hearing in New York to release the first payment of funds recovered from Madoff’s Ponzi scheme. Irving Picard, the court-appointed trustee representing Madoff’s victims, is asking for $272 million for 1,227 Madoff victims’ accounts, including one held by Plafsky’s family.

Picard has recouped more money than analysts expected from Madoff’s former associates and federal officials’ auctions, seizures and sales of his property and holdings. About $25 million has been collected from auctions and sales of seized Madoff property. The auctions — including one last month in Miami Beach that netted $500,000 from items seized from his Palm Beach mansion — have generated more than appraisers’ estimates. Some have attributed this to the allure of the Madoff name — with some people wanting at least a trinket from his properties.

But it’s unclear how quickly the restitution payments will be made, how they will be divided among the victims and how the lawsuits will be settled. Many think it will take years.

“I can’t say what I am going to do in the next few years,” said Plafsky. “My parents are elderly.”

Picard has more than 1,000 lawsuits worldwide pending that could recover up to $114 billion. Already, he has collected about $10 billion, but the courts have yet to determine how and when it will be distributed.

Some hedge fund firms have viewed the Madoff victim payouts as a good investment and offered to buy those investor claims for up to 74 cents on the dollar. That’s more than twice what hedge fund firms were offering Madoff investors for their claims about a year ago. The firms are now willing to bet Picard will regain nearly all of the money needed to compensate 1,227 accounts with claims allowed by the courts. They speculate there also may be money for thousands of other ripped-off investors.

“Our view is there is going to be a pretty good recovery,” said Robert Koltai, founder and president of Hain Capital Group in New Jersey that offered to buy Plafsky’s family’s claim.

Plafsky’s family is considered one of the lucky Madoff investors: Only about an eighth of 16,500 initial claims to Picard have been approved for a payout.

About 991 of the allowed claims have been fully compensated for their initial investment, said Amanda Remus, spokeswoman for Picard. The Securities Investment Protection Corp. paid them advances of up to $500,000. The SIPC, funded by the brokerage industry, was created by the U.S. Congress decades ago to aid investors at bankrupt or financially troubled companies. The agency also paid $500,000 to each of the 1,227 other Madoff accounts — including the Plafsky’s family. Picard has said they are owed even more and will get more funding after the July federal hearing.

Left out of any compensation so far are the nearly 11,000 claims that involve people investing with Madoff through a third party and 2,705 claims from investors who got back more money than what they initially gave Madoff to invest. Some of the latter have been asked to give money back, including state Rep. Franklin Sands, D-Weston, who is one of many Madoff investors protesting in court.

But, Sands said, “I am thrilled some people will get their money back.” So many South Florida investors, including seniors, were taken in by Madoff and are now suffering, Sands said.

Ronnie Sue Ambrosino, a former Delray Beach resident now living in Arizona, said the SIPC advance paid only a fraction of what her last financial statement from Madoff indicated she had. But Picard said those records couldn’t be relied on. Picard also determined she could not claim all of her initial investment because she had already gotten some money from Madoff. The SIPC agreed.

“Many people have not reached that level to where she is,” said Steven Harbeck, president and CEO of the SIPC.

But Ambrosino said she still feels betrayed. “The new crook we must fight is SIPC,” she said in an e-mail. “SIPC has lied in its promise and has lied in its coverage. Madoff committed the crime but SIPC is perpetuating it.”

Some legislators, including U.S. Rep. Ileana Ros-Lehtinen, R-Miami, have voiced concerns about how Picard is deciding who are “victims” of Madoff and who don’t deserve compensation.

But Picard told the media in March: “Bernard Madoff made no investments on behalf of his customers. The statements he sent to his customers were complete fabrications and gains shown on those statements were phantom.”

‘

Plafsky said Picard has used excellent accounting sleuthing to find missing money. Part of the credit should also go to Madoff. “It’s my understanding that Madoff had a complete and accurate record of the investors’ money coming in,” Plafsky said.

Picard is asking for $19.6 billion from Austrian banker Sonja Kohn, Bank Medici and 54 others who have been implicated in helping Madoff carry out his fraud. The Swiss bank, Union Bancaire Privee, ponied up $500 million in December and another Swiss bank, UBS, is being sued for $2.5 billion. Picard is also seeking at least $19 billion from JPMorgan Chase. Even the New York Mets have been asked to turn over $1 billion.

Picard has collected the biggest payout — $5 billion — from the estate of the Jeffry Picower, a late Palm Beach billionaire and former Madoff major investor, and has taken in $2.6 billion from other Madoff associates. How it is going to be distributed is being deliberated in court. Also tied up in court: More than $2 billion the Picower estate gave to Uncle Sam for disbursements to victims. Adele Fox, 88, of Tamarac, is among the victims fighting in court for a share of the Picower money instead of trustee Picard determining who will get the money.

The collections have persuaded investors to more than double their offers of buying victims’ claims, New Jersey portfolio manager Koltai said. “Before it was more like 30 cents on the dollar,” he said. Now his top offer is 74 cents for the largest claims.

The only downside: It will probably take years before the lawsuits are settled and all the money is collected.

“It’s not anywhere close to being done,” Koltai said.

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