U.S. News

Lawsuit claims Picower profits from Madoff $5 billion

NEW YORK (Reuters) - Investor Jeffry Picower, whose charitable foundation closed after the Madoff scandal erupted, profited to the minimum of $5 billion from the scheme, a lawsuit by the trustee liquidating the Madoff firm said.

The lawsuit on Tuesday by Irving Picard, who is spearheading a global search to return money to thousands of defrauded customers, is similar to others in claiming Picower and his wife Barbara “knew or should have known” they were profiting from fraud.

The rates of return they received from investments with New York financier Bernard Madoff were implausibly high, according to the lawsuit in U.S. Bankruptcy Court in Manhattan.

Picard claimed that in several cases Picower’s purported annual rates of return were more than 100 percent, with some annual returns as high as 500 percent or even 950 percent.

“These anomalous and astronomical rates of return -- both positive and negative -- were neither credible nor consistent with legitimate trading activity, and should have caused any reasonable investor to inquire further,” the complaint said.

So far the trustee has recovered about $1 billion to pay back customers but he has vowed to target funds and money managers to recover as much as possible from the worldwide $65 billion fraud.

The former nonexecutive chairman of Nasdaq was arrested in December and pleaded guilty in March to heading Wall Street’s biggest investment fraud. Madoff, 71, is jailed awaiting sentencing on June 16 and is likely to spend the rest of his life in prison.

In December, the Picower Foundation, a philanthropic fund that supported programs ranging from medical research to education, said it was shutting down because of losses from investments with Madoff.

William Zabel, a lawyer for the Palm Beach, Florida-based Picowers could not be reached for comment on Wednesday but The New York Times quoted Zabel as denying the allegations in the trustee’s complaint.

“Mr. and Mrs. Picower considered themselves friends of the Madoffs for over 35 years. They were totally shocked by his fraud and were in no way complicit in it.”

The case is Picard v Jeffry M Picower 09-01197 in U.S. Bankruptcy Court for the Southern District of New York (Manhattan)

Reporting by Santosh Nadgir and Grant McCool; Editing by Maureen Bavdek