The bankruptcy trustee in charge of the Bernie Madoff case has sued Ruth Madoff in a civil complaint today, which may raise criminal questions about Mrs. Madoff to federal prosecutors. Among the recent developments, sources tell The Daily Beast:
- Ruth was arguing with the trustee even last night that this would leave her homeless.
- Regarding $45 million in apparently hidden funds connected to Ruth Madoff, “the U.S. Attorney is going to be furious,” says a source close to the investigation, referring to possible criminal charges.
- The trustee plans next to sue Peter and Shana Madoff, Bernie’s brother and niece, respectively.
The trustee's complaint outlined 111 separate transactions, including several multimillion dollar payments to Ruth in the weeks before and after the arrest of Bernard Madoff last December 11.
Trustee Irving Picard said the 68-year-old Ruth has been "living a life of splendor using the money of BLMIS (Bernard L. Madoff Investment Securities) customers. Regardless of whether or not Mrs. Madoff knew of the fraud her husband perpetrated...she received tens of millions of dollars from BLMIS...Mrs. Madoff had no good-faith basis to believe she was entitled."
Ruth Madoff's conduct included "fraudulent conveyances, breaches of fiduciary duties, conversions, and other wrongdoings."
The filing by Picard and his team from Baker Hostetler is part of an effort to uncover the web of international financing magic that Bernie Madoff—perhaps in concert with his wife and others—engaged in to keep his mammoth Ponzi scheme afloat and undetected over several decades.
Regarding possible criminal charges, “the U.S. Attorney is going to be furious,” says a source close to the investigation.
From the Picard complaint: “While Madoff’s crimes have left many investors impoverished and some charities decimated, Mrs. Madoff remains a person of substantial means. The inequity between Mrs. Madoff’s continuing financial advantages and the economic distress of Madoff’s customers compels the Trustee to bring this action. At this time, the Trustee has identified at least $44,822,355 that is subject to recapture from Mrs. Madoff.”
Even up until last night, as the trustee's office finalized the filing, sources tell The Daily Beast that Ruth was arguing with them that these actions would leave her homeless. Picard was unswayed. In the complaint, the trustee says Ruth Madoff got more than $3 million to pay her personal American Express bills over the last six years.
The trustee also outlined multimillion dollar payments made in Ruth Madoff’s name for a yacht, real-estate investments, and a company called PetCare RX. The complaint reveals she also owns nearly 45 percent of a company called Madoff Technologies, which made investments on her behalf as well as her sons, Mark and Andrew, her niece Shana, and Bernard Madoff’s brother Peter, all of whom, sources say, may soon be sued by the trustee.
Picard has sent lawyers around the world; they have uncovered money transfers in London, Gibraltar, Switzerland, and elsewhere, which his investigators believe represents efforts by the Madoffs to hide hundreds of millions of dollars, these sources say. There are more countries to come: Ireland is one scene of the trustee’s efforts to recover money the Madoffs moved through London. British sources have told The Daily Beast that Madoff gave his wife over $70 million from money laundered through London before he was arrested. Today's complaint says Ruth got $2 million through the Anglo-Irish Bank in London, less than three weeks before Bernie was arrested.
The Picard complaint also reads, “Regardless of whether or not Mrs. Madoff knew of the fraud her husband perpetrated at BLMIS, during the past two- and six-year statutory periods, she received tens of millions of dollars from BLMIS for which BLMIS received no corresponding benefit or value and to which Mrs. Madoff had no good-faith basis to believe she was entitled. The purpose of this action is to recover that money to the extent possible for the benefit of BLMIS and its defrauded customers.”
Picard notes that Ruth Madoff was listed as a "controller" of Madoff International Investment Securities, the British company used to move money.
When 71-year-old Bernard Madoff was sentenced to 150 years in prison June 29 by U.S. District Judge Denny Chin, part of the 11-count plea included a forfeiture agreement that cost Ruth the couples’ residences in Manhattan, Montauk, N.Y., Palm Beach, Fla., and the south of France, as well as their boats, private jet shares, and oodles of jewelry.
In response to the filing, Ruth Madoff's lawyer, Peter Chavkin, released a statement today, saying, “In the complaint filed today, the trustee does not allege that Ruth Madoff knew of or participated in her husband’s wrongdoing. To the contrary, the trustee is alleging that she should have to give up her remaining money even if she was completely unaware of her husband’s crimes… What makes this complaint particularly perplexing and totally unjustified however is the fact that Ruth already forfeited to the United States Attorney’s Office almost all of the assets named in this complaint—assets that the U.S. Attorney’s Office has publicly committed to distributing to the victims of Bernard Madoff’s Ponzi scheme. At the same time, after a thorough and comprehensive investigation, the U.S. Attorney’s Office determined that Ruth Madoff was entitled to keep property of $2.5 million because that property could not be linked to the fraud…We believe the trustee’s action is wrong as a matter of law and fairness."
As part of that deal, the Justice Department also agreed to give Ruth rights to $2.5 million and return her passport. Those moves were widely regarded in the press and in legal circles as signaling that Ruth, now 68, might escape criminal charges, despite the wishes of thousands of Madoff victims that she be prosecuted.
Well, Picard, the bankruptcy trustee, is not party to that deal and was free to sue her for her last nickel. And if those nickels are proven to include tens of millions of dollars in hidden funds, prosecutors will surely take notice. Regarding possible criminal charges, “the U.S. Attorney is going to be furious,” says a source close to the investigation.
Allan Dodds Frank is a business investigative correspondent who specializes in white collar crime. He also is President of the Overseas Press Club of America.
Lucinda Franks is a Pulitzer Prize-winning journalist and author who was on the staff of the New York Times and has written for the New Yorker and the New York Times Book Review and Magazine. Her latest book is My Father's Secret War, about her father, who was a spy for the OSS during World War II.