The Madoff Scam: Meet The Liquidator

60 Minutes Meets The Man With The Daunting Task of Trying To Recover Madoff Victims' Cash

(CBS)  Wall Street in shreds, the watch dogs fast asleep, bonus-stuffed executives laughing all the way out of the busted banks - it's been some year. Oh, and we left out the Ponzi scheme of Ponzi schemes: Bernard Madoff's untidy little business that bilked thousands of people out of billions of dollars.

While the mastermind is doing 150 years in prison, the big question is: "Where did all the money go?"

Irving Picard, the court appointed trustee - the liquidator - is searching for the billions that disappeared, and trying to recover as much as possible from Madoff's remaining assets.

It is a daunting and thankless task, for while he is suing whoever he can on behalf of the victims, he's also suing many of the victims - those who he says benefited and should have known they were investing in a house of cards.

Mr. Picard and his chief counsel David Sheehan have been largely silent about the details of the recovery, until now.

"Last November, just before the whole thing collapsed, Bernard Madoff sent out statements to his clients. How much were they told they were worth?" correspondent Morley Safer asked.

"About 64.8 billion dollars," Irving Picard replied.

Asked if the statement were total lies, David Sheehan said, "Yes, absolutely."

The $64.8 billion that investors thought they had was just an illusion, designed by Madoff to keep investors investing.

Last December, the roof fell in.

Mr. Madoff has no say in the matter. If the victims want any money back, they'll have to go through Mr. Picard, the decider, and his bloodhound, Mr. Sheehan.

Asked how much real money went into the whole scheme, Sheehan told Safer, "I'd say about $36 billion. And about 18 of it went out before the collapse. And 18 of it is just missing. And that $18 billion is what we're trying to get back."

So for the past nine months, Picard and his team have been on a global treasure hunt. The first step: liquidating Madoff's boats, his art, even his season tickets to the New York Mets, plus Bernie's various homes, all sold or about to be sold with a U.S. Marshal as real estate pitchman.

"They didn't exactly hide their wealth, did they?" Safer asked.

"They did have the house in Palm Beach. They had a place in Montauk. They had to have, you know, an apartment here on Park Avenue in the city - all of which are the accoutrements of great wealth. But it wasn't an extraordinary lifestyle," Sheehan said.

According to the government, those homes, boats, art and more are worth over $50 million.

That's just a drop in an oversized bucket, nothing close to what investors lost. So Picard and his team continue to follow the money.

They started at Madoff's New York offices, now an impressive landscape of emptiness.

And close by, perhaps a work of art that sums up the entire story: "It was called the 'Soft Screw.' And it was about four, I guess four to six feet high. And it was sitting right here," Picard explained, describing a screw-like sculpture that used to be displayed in Madoff's office.

And sitting on top of the world was Madoff himself. "He was much like the Wizard of Oz, just hiding behind this wall. And no one could quite penetrate it but they sort of really liked the results," Sheehan said.

"As far as you've been able to find out, was he ever legitimate?" Safer asked.

"No, it was never legitimate," Sheehan said. "And I think Bernie, if he told the truth - which he's not capable of - he would then say, 'Yes. I started out as a crook, and I ended up as a crook.'"

[the_view_from_here]

You've got to feel sorry for the children of Mark and Andy who could not have known about this and are totally blameless. They have become accustomed to getting millions from their dad in support and living a life of luxury and privilege. I don't see them as any different than the children of CEO's of large companies whose fortunes have been stolen just as blatantly as Madoff's was. In fact, in the words of Honore de Balzac, "Behind every great fortune lies a great crime." Many, many fortunes were built on the backs of slaves. Why should they have to give up their ill-gotten gains when the rest of the top 1% gets to keep theirs?

[shelby261]

Richard, Ronni Sue and other "victims" I have a question. How come with all the media you have gotten I have yet to hear each of you say how much you have invested with Madoff and how much you have taken out through the years. that part of the story is under-reported. Additionally, the use of the word "victim" is disgusting and "survivor" is even worse. To even think that you could compare yourself to Elie Wiesel is just plain ridiculous.

[NotPartyControlled]

Mean while everyone looks the other way when it comes to those in the SEC guilty of going along with the Medoff family.

[guzelvis]

Impassioned plea for Bernie's early release made by wife. The funny details @ http://bit.ly/Pw8Ah

[richexplains]

60 Minutes is to be commended for pursuing this investigation, while the rest of the media has been silent. While the Picard/Sheehan investigation is pretty limp in terms of aggressiveness, they have confirmed several truths worthy of note:

1. "Asked how much real money went into the whole scheme, Sheehan told Safer, "I'd say about $36 billion. ...".

2. This fact is consistent with the total of the statements at the time of collapse quoted as ""About 64.8 billion dollars," Irving Picard replied. ", because most of the money came in after 2001 and most accts paid about 10-12%. Therefore 36B in at 10% grew to 65B. i.e. the "real losses" were 36B, not to mention that that money even in a conservative investment would return 5%, so you can probably add another 15B to the 36B as "real losses".

3. Where did the money go? Well the story identifies 3 culprits who walked out with net gains - i.e. after their accts were zeroed in Nov 2008 they had net returns as follows (from the article):
a. billionaire investor and philanthropist Jeffry Picower took out more than $5 billion in profits since 1995.
b. another billionaire, investor Stanley Chais, who withdrew over a billion dollars in profits
c. trustee and his counsel have filed 13 lawsuits seeking the return of nearly $15 billion from the biggest Madoff investors (presumably including the $6 billion from a and b)

In addition to the 15 billion above, Sheehan says: "about 18 of it went out before the collapse. And 18 of it is just missing. And that $18 billion is what we're trying to get back"

So, Sheehan and Picard are actively looking for $33B taken out of the Madoff scheme as profits.

i.e. people put in $36 billion, which was effectively stolen from them. Madoff has at most $1B of it. Picower has $5 billion, Chaise has $1B, and there is still another $29B that somebody has. Why? Because when the money was sent in, it had to go somewhere.

When the media gets serious about asking where, then we will have the real answers, instead of all this noise about the Madoffs, who were really just fronts who were paid $1B for their services in $50 Billion dollar robbery.

[T-Fed]

Two questions that went unanswered with this poor article - hat about the SEC, it didn't do its job and what are the consequences to that organization; second, what are the sleuths getting paid to track down assets and from where, i.e. tax payer monies?

[piercetheval]

...the Gov't should put Bernies balls on the auction block.
I bet they could get quite the $$$ for the pair [I'll bet they are made of BRASS]...and it would be a message/deterent to all other crooks of that ilk!!!

[tteller66]

his sons and relatives knew about his scheme. this scheme lasted as long as it did because the Jews who run wall street and DOJ turned a blind eye to this fraud.

[the_trustee]

For all of you who said the greedy should have known better - sorry you would have done the same thing. If you were given the winning numbers at a racetrack or to the lottery - would you bet on them. Yes. In this case, almost the entire majority of investors knew nothing. If it were cleared by the SEC, then the SEC, government and SIPC should be making good on their failure. This is a government failure, not General Motors or Wall Street, where the taxpayer bailed them out and now they are back to their old ways with big bonuses.
How the majority known, I would have taken the investment and put it into municipal bonds yielding 5-7% tax free. - almost as much as Madoff and still had my money.
We were not greedy or knowledgeable - just average investors, investing in something that had good yields and was cleared by the SEC.

[cjh5175]

Mr.Sheehans comments about the tax payers paying the bill is neither accurate or truthful. All brokerage houses pay $150.00 annually to insure their accounts against fraud (not the fluctuation in the market) This amount insures billions of dollars. Most Americans pay 10 times this amount to insure there cars. Mr. Sheehan also failed to mention what both he and Mr. Pickard are being paid for their efforts. The amount is obsene. Wise up America this can happen to you. Do not believe all you hear on the television or read in the papers it is generally baised and one sided. A handful of the investors made the kind of returns that have been claimed in the media. The majority are just like you, firemaen, policemen and hard working Americas. If you do invest make sure that your investment house carries insurance other that SIPC. Call and check Never be afraid to ask questions and make sure that you get satisfactory answers.

[therealstory]

Let me respectfully correct you ...the biggest ponzi scheme ever is the social security system. Think about it, I put money in, the gov. says they'll hold it for me and return my money after I'm 65 - without any interest! Now the govt spent all my money and to keep it going they need new workers to pay into the system which is going bankrupt. Trillions of our dollars taken from us because we are not responsible enough to save for our own retirement. This is the biggest ponzi scam EVER! And not one person has gone to jail. Those people had a choice to invest with Madoff, I have no choice with social security, the gov. just takes my money, won't be able to repay it and with no interest. Imagine if I would have had at least 2% over 50 years. I'm sooo MAD!!!

[tmittelstaed]

The SS system is a ponzi scheme but the claim that the government takes your money and won't repay it is rubbish. It is entirely dependent on how long you live and when you start tapping into SS.

Take for example a stay-at-home mother who worked part time jobs when she as younger and worked a bit before she had kids and has a total work history of perhaps 14 years or so with a total of $8500 into the SS system in 2010. Her benefits at age 67 in 27 years from now will be around 500 a month.

Let's say she drops 8500 today into an investment account running at 7% rate of return. 27 years from now she will have around 55,000 (depending on the compounding date)

Now, if she extracts 500 a month from that 55,000 starting at age 67 then by age 77 she will have depleted that account to nothing.

If she instead went with social security, she could live to 100 years old and still be getting that 500 a month check.

Of course, you are going to claim that inflation will eat up the return and so it will - but inflation will eat equally both returns. And if the government causes inflation by printing money then all of the older people will exercise their enormous political muscle and have SS adjust the payout upwards to compensate.

[jerguy]

What percent are the people checking on the Madoff money charging to to look into the missing money and what percent do they plan to return to the share holders??

[thurston2001]

I would guess that about 90% of the greedy pigs that work on wall street are quilty of breaking the law and should be in prison, but in America if you steel $1000 you go to jail, if you steel millions you get a bonus. There is nothing great about America!

[Sarina0968]

How come no one makes mention of the A/P department, its policies and procedures pertaining to expense reimbursements? What about the company's internal auditors? Things like "private jet rentals, ski vacations, country club dues and especially a company credit card that included charges from shopping sprees in Paris to movie rentals, should have been marked as "exceptions" for further review.
Either these things were questioned and the response was "do it anyway", no one knew to question or was afraid to question. Asset protection and keeping a company CFO/Controller out of jail are the main priorities of A/P Professionals. All none business related expenses that were reimbursed should be paid back!

[tmittelstaed]

I clerked in an A/P department when I was a young pup in my early 20's. Periodically we had remote sales representatives expense things that in my opinion were unwarrented. For example one time one guy expensed 5 grand of oak office furniture for his home office. Standing orders from CFO and my own supervisor in these instances were if at any time I saw something I thought was unwarranted, I was to go to the employees manager and have them personally sign off on the expense so there would be documentation that a waiver had been granted to company policy on expenses for that purchase. I got a lot of these signoffs and most times the managers did agree with me that the expenses were rediculous - but because the employees were bringing money in the door the managers let them get away with this kind of nonsense. If we had ever got audited by the stockholders, those managers would have undoubtedly been in hot water - but the stockholders who had money invested in that company never questioned company expenses. And in the case of the oak office furniture, since the depreciation was 3 years, as long as the employee worked for the company for at least that long, if the IRS ever came after him on his personal returns he could have always claimed that the furniture was owned by his employer, and just given him the furniture when they parted ways.

I also saw unwarranted expenses generated by the CEO, but never once in the 3 years I worked there did the chairman of the board ever set foot inside that company, and as it was obviously pointless to ask the CEO to approve his own expenses, I never bothered flagging those.

Incidentally, that company failed and was purchased by a competitor - I went to work for the competitor for a while, and if anything, the waste increased.

The fact of the matter is that if a company's stockholders do not care to take the time to exercise their rights as owners to look over the shoulder of the company at it's expense details, then the company is basically given free rein to waste as much money as it wants. And most stockholders don't do this unless the company is losing money.

I'm sure the Madoff A/P people were fully aware of the fraud, I'm also sure that they were fully aware that there was nothing they could do about it, and I'm also sure that they carefully documented all expenses and that the trustee will have no problem untangling the mountain of paper.

[John_Sheehan]

Sir, The math (by which I mean the time Madoff sustained his ponzi scheme without periodic infusions of cash) doesn't work. This suggests that someone made regular infusions to Madoff's funds in order to keep the scheme going. Who did this? Why? How? Who allowed it and facilitated its cover-up in the SEC? The bottom line is that the Madoff ponzi scheme was actually a conduit for some other purpose. When you identify the purpose (possibly intelligence financing), you will find the root of Madoff's scheme, its purpose, and who was behind it. You can bet that the USG will not undertake this kind of investigation and may even search and avoid it (because it already knows). Look into this possibility. This is all the time I intend to spend on this subject. -

[Madoff_Coalition]

Mr. Sheehan

I would like to speak with you regarding the thoughts you expressed in your comment. I am the Coordinator of the Madoff Coalition for Investor Protection (formerly bernardmadoffvictims.org coalition).
We have changed our name to reflect our new mission statement, which is to educate and support all American investors. We feel investors need to understand that the laws are not being followed and they are not truly protected by SIPC. This is clearly exemplified by David Sheehan's erroneous comment about taxpayers footing the bill in order to pay victims according the the SIPA law (actually, broker/dealers would foot the bill, as per a federally mandated ruling).
If you like to discuss further, please contact me at [e-mail].
Thank you,
Ronnie Sue Ambrosino

[unsettled]

Poor investigation to not even mention 'clawbacks' for the millions in capitol gains taxes the IRS should be paying back.

[truthtobetold]

This episode of 60 minutes just shows how this nation has been taken over by schemers, thieves, liars, and murderers. Congratulations. Lets continue singing 'God bless America'. Until your average joe with his 9-5 job gets any balls, justice will continue to be overlooked for the profits of psychopaths.

[seekinghonesty]

The victims should not be called "victims." They were enablers. They wanted to earn stellar returns for a perceived level of risk and should have known better. It was pretty obvious. At the very least, they should have diversified. It is ridiculous that some are suing to get "phantom profits." Don't these greedy lawyers have any common sense? The investors are lucky to get their principal back.

Baloney! If the SEC had done their auditing duties, Madoff would have been uncovered as fraud 25 years ago! Greedy? Not. Average investors were looking for stable (not stellar) returns, and as ANY investor, relying on SEC audits to verify legitimacy.

[the_trustee]

Most comments are about Madoff. What people and the new, especially the reporters and new anchors do not understand is that Madoff is in the past. He has destroyed many people from the young, the about to retire to the elderly. The IRS has determined people can take net operating loss deductions or phanton income deductions BUT not the Trustee - the awesome, Mr Picard. He is now facing court with charges by Madoff Victims lawyers regarding Picards money in/money out calculation. He has also put in place expedited payments and a Hardship Program. Neither in my personal experience is anything more than a smokescreen. The reporters are imbued with him- about how he is collecting money to restore to the victims but he (the trustee) has received 28 million from SIPC and possibly another 14 million from SIPC to conduct his investigation. In 10 months he has processed less than 1700 claims out of 16,000. There are many elderly who are "dying" in nursing homes because their SIPC or hardship application are being slow-tracked. That insurance money is rightfully theirs and the TRUSTEE is protecting the insurance company from having to release insurance funds - SIPC money is not being released.
Who is the culprit now? No matter how much the trustee collects, little will come back to those who had not big money invested. Why keep going after more. The elderly, who need the SIPC money NOW, may not be around when the trustee finally gets to their claim.Possibly charges will be filed against the trustee for letting the elderly die a miserable end of years because of his system.
Our nations top investigative reporters should be asking the trustee what his methods and mechanisms are to help people - not just a look around the defunct Madoff office and how the trustee plans to get more money back "for the victims" - HA!!! as I quote Al Pacino.

Agreed! There will always be "Madoffs" out there. SIPC was supposed to protect us.. baloney! SEC audits stated everything was fine at Madoff Securities. If it was audited, it should be insured. Fully and to the limit, lest the integrity of the SEC and the US government be nil.

[tmittelstaed]

It makes no difference to the trustee because if the elderly die, the amount owing to them is still an asset, it is just an unrealized asset, and can be willed to descendents - and when the trustee finally does get the money, they will still have to pay it out to whoever got the estate.

[bubbadubba]

They have already hidden their assets.
Those types of people know how to play the game and always come out just fine.