03/16/09 Greenwich Resident Walter "Feeder Fund" Noel's Family Had Better Prepare For A Clawbak Of Their Fairfield Greenwich Gains

Investors who made money through Madoff try to stop trustee laying his hands on it
Times Online

Investors are stashing profits that they made from Bernard Madoff’s $65 billion (£47 billion) Ponzi scheme as the trustee of the phoney funds gears up to claw back cash to compensate hard-up victims.

Lawyers report being besieged by investors seeking advice on how to protect their money from the clawback by Irving Picard, the trustee of the Madoff business. One lawyer in Manhattan, who declined to be named, said: “People are thinking about how to protect their returns. It’s something we’re getting a lot of questions about, as are other firms.”

Madoff pleaded guilty on Thursday to running the world’s largest investment fraud. He is being held in custody in New York awaiting sentencing on July 16. Madoff used cash given to him by new customers to distribute fraudulent returns to existing investors in a scam that he claims began in the early 1990s.

So far Mr Picard has recovered about $943 million from the fund management empire, an insignificant sum compared with the compensation claims expected to be lodged. The trustee is expected to try to retrieve cash withdrawn from the funds so that he can distribute it among victims. Investors are being advised, for example, to continue making normal pension fund payments because it would be difficult for Mr Picard to retrieve money placed in retirement accounts.

A lawyer said: “You certainly would be in trouble with the courts if you suddenly set up an offshore account and put money there, but if you’re following your normal practices, you should be fine.”

Mr Picard has made clear that he aims to pursue Madoff investors who withdrew profits from the fake funds in the 90 days before December 11, the day that Madoff confessed to his scam. Mr Picard is also expected to try to reclaim profits taken more than 90 days before the confession if investors withdrew more than they put into the fund.

Under New York bankruptcy law, the trustee can recover profits taken up to six years before Madoff revealed his scam and he can also claw back initial investments in the scheme.....

.....Lawyers said that it would be harder for Mr Picard to reclaim profits made by people who invested with Madoff through feeder funds, such as the hedge fund managers Fairfield Greenwich and Tremont Group. “He’d have to show that an improper payment was made by Madoff to the feeder and then he’d have to trace it through the fund back to the investor,” an attorney said.

Investors facing the clawback are uncertain whether to seek compensation from the Securities Investor Protection Corporation (SIPC), an official body that offers up to $500,000 in compensation to victims of fraud by investment brokers. By filing a claim for an SIPC payout, investors effectively give up their right to a jury trial in any claim that the Madoff trustee may bring against them in the future.

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