Madoff Trustee Strikes $98M Investor Settlement

Madoff settlementOne of Bernard Madoff's investors agreed to return nearly $98 million to the imprisoned Ponzi scheme operator's victims under a new settlement.

Source: Source: Dow Jones | Published on August 28, 2013

Irving Picard, the trustee tracking down funds to return to cheated investors, on Monday filed papers asking the U.S. Bankruptcy Court in Manhattan to approve the settlement, with investor Maxam Absolute Return Fund LP.

Mr. Picard sued Maxam in December 2010 to recover the $97.8 million the Darien, Conn., investment fund received in the two years prior to the collapse of Bernard L. Madoff Investment Securities LLC. The settlement calls for Maxam to return the full amount to Mr. Picard.

In return for the settlement payment, Maxam would be freed from litigation and would receive a $276.69 million claim. The amount of the claim includes the $215.29 million that Maxam lost as a result of Mr. Madoff's fraud, which cheated investors out of more than $17 billion.

Maxam is managed by Maxam Capital Management LLC, whose founder, Sandra L. Manzke, was also named in the suit. The settlement releases Maxam Capital and Ms. Manzke, as well as several other related entities and individuals, all of whom had disputed Mr. Picard's lawsuit.

Mr. Picard is urging the bankruptcy court to approve the settlement at a Sept. 17 hearing.

"The agreement resolves all claims among the parties and avoids the cost and delay of what could otherwise be lengthy and contentious litigation," he said in court papers.

The deal also includes a pledge from Mr. Picard to drop a separate lawsuit against Ms. Manzke related to her role as the founder and former chief executive of the second-biggest Madoff feeder fund, Tremont Group Holdings Inc. According to Mr. Picard, Tremont and a host of other related individuals and entities knew or should have known about the fraud.

Ms. Manzke disputed the allegations in the Tremont lawsuit, which Mr. Picard dropped against all other defendants earlier this year. A lawyer for Ms. Manzke couldn't immediately be reached for comment Tuesday.

Since his appointment in December 2008, Mr. Picard has been winding down Mr. Madoff's investment firm and chasing down the funds that Mr. Madoff stole from investors. Of the $9.35 billion Mr. Picard has recovered so far, he has returned $ 4.76 billion through payouts that began in October 2011.

While a bankruptcy judge is overseeing the wind-down of Mr. Madoff's investment firm, it didn't seek Chapter 11 protection. As a brokerage, its liquidation is instead governed by the Securities Investor Protection Act.

Mr. Madoff is now serving a 150-year prison sentence in Butner, N.C., after pleading guilty to running the biggest Ponzi scheme of all time.