Did Bernie Madoff Get a Billion-Dollar Kickback?

Louis Lanzano / AP Photo A lawyer for Madoff victims tells The Daily Beast’s Allan Dodds Frank that she believes the Ponzi king had a sweetheart deal with his biggest investor. Inside the mysterious $5 billion profit.

Jeffry Picower, a seldom-seen philanthropist, investor and confidant of Bernard Madoff, stands accused by the Madoff bankruptcy trustee of extracting $5.1 billion from Madoff’s enterprises during the last two decades. Now a lawyer representing 100 Madoff victims suggests it was no accident that Picower was one of the few Madoff customers who made a substantial profit.

Helen Davis Chaitman, a lawyer with Phillips Nizer and a Madoff loser herself, tells The Daily Beast she believes Picower was splitting the profits with Madoff and laundering them through his various trust accounts.

Picower may have deposited $1.6 billion with Madoff, while withdrawing as “profit” more than $6.7 billion, for a net profit of $5.1 billion “of other peoples’ money.”

“Bernie Madoff stole from his family, friends, and employees. Why do you think he would allow Jeffry Picower to get away with $5 billion?” asks Chaitman. “Bernie Madoff is not a generous guy. I assume most of that $5 billion came back to Madoff in one form or another.”

Picower and his wife Barbara live in lavish multimillion dollar estates in Palm Beach, Fla., and Fairfield, Conn., which still accounts for only a fraction of their wealth. The couple has known Madoff for at least three decades and for the last 20 years or so, the Picowers have cut a wide, deep and not especially well-publicized swath through the private word of charitable giving through several foundations.

At one time, their main vehicle, the Picower Foundation, claimed assets of nearly $1 billion, all invested with Madoff. When Bernie was arrested December 11, the Picowers were portrayed as the biggest single victims of Madoff’s treachery, yet they remained curiously quiet even as an estimated 400 charitable organizations that had benefited from Picower donations suffered.

Last month, bankruptcy trustee Irving Picard sued the Picowers and 16 related entitites in a 40-page complaint, with an attachment of a 17-page exhibit of money transfers moving through nearly two-dozen Picower bank accounts. Picard said “Jeffry Picower was a beneficiary of this Ponzi scheme for more than 20 years,” and Picower “knew or should have known” Madoff was a fraud. Picard said over the years Picower may have deposited $1.6 billion with Madoff, while withdrawing as “profit” more than $6.7 billion, for a net profit of $5.1 billion “of other peoples’ money.”

Chaitman predicts that Picard—and other investigators—will discover that Madoff may have raked off as much as half of the $5 billion cash surplus allegedly collected by Picower.

Ironically, Picard, in his role as the lawyer for the Securities Investor Protection Corp., often faces Chaitman as an adversary. The Picower complaint, Chaitman says, is a worthy use of Picard’s time.