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0 Madoff Trustee Settlement

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The trustee recovering money for Bernard Madoff’s burned investors, according to the AP, has reached a $7.2 billion settlement with the estate of a Florida businessman who had been the single largest beneficiary of the fraud.

A recovery of that size would mean that a sizeable number of Madoff’s victims could get at least half of their money back. A remarkable turnaround for people and institutions that thought two years ago that they had lost everything. We will have to wait and see how his settlement pans out.

Picower, who was 67 when he died, invested many years ago with Madoff. He withdrew about $7 billion in bogus profits from his account. That money was supposedly made on stock trades, but authorities said that in reality it was simply stolen from other investors.

Picower’s lawyers claimed he knew nothing about the scheme. Lawyers for Picower’s estate have been in negotiations with the trustee for some time. After Picower drowned, his will revealed that he had earmarked most of his fortune for charity, but his widow said in a statement that the family wished to return some of it to Madoff’s victims through “a fair and generous settlement.”

In an article from the Associate Press, Lawyers for jailed Texas financier R. Allen Stanford and two of his former executives on Thursday tried to shoot down claims by a fraud examiner that their clients took part in the massive Ponzi scheme that authorities say helped bilk investors out of $7 billion.

Stanford’s financial dealings were being examined during a court hearing in which a federal judge was to decide if Stanford and the two ex-executives of his now defunct companies will continue having their legal bills paid for by an insurance policy as they fight charges connected to the alleged Ponzi scheme.

The insurer, Lloyd’s of London, says the policy doesn’t pay on charges of money laundering, one of the many counts faced in a federal indictment by Stanford and Gilbert Lopez, the ex-chief accounting officer, and Mark Kuhrt, the ex-global controller. Stanford and the executives, who say they are not guilty, sued Lloyd’s to force it to honor the policy, which so far has paid more than $15 million in legal fees to them and a third executive in their criminal and civil cases.

Stanford and the former executives are accused of orchestrating a colossal pyramid scheme by advising clients from 113 countries to invest more than $7 billion in certificates of deposit at the Stanford International Bank on the Caribbean island of Antigua, promising huge returns. Stanford’s businesses were headquartered in Houston.

Berenblut, testifying for Lloyd’s, said Stanford took $1.7 billion in deposits made to his bank and used them for loans to himself. Prosecutors have accused Stanford of using this money to help pay for his lavish lifestyle. Berenblut also said his review of the bank’s records showed another $1.8 billion in loans were secretly made to related Stanford corporations.

Berenblut called the loans “one of the examples of financial manipulation” he found in reviewing Stanford’s records.

Berenblut, a certified fraud examiner and accountant, also said Stanford made a $63.5 million Caribbean land purchase in 2008 and later artificially inflated it to $3.2 billion to boost the bank’s revenues and hide the loans. Stanford has contended the land purchase was legitimate and he had planned to use it to build a super exclusive resort in Antigua.

However, another fraud examiner, Alan Westheimer, found fault with Berenblut’s conclusions.

Berenblut also testified Kuhrt and Lopez were aware that investment reports from the bank were made up and the work of reverse engineering.

“I believe Mr. Berenblut is incorrect in assuming there was any reverse engineering going on here,” Westheimer said.

Stanford’s attorneys on Thursday, while questioning Berenblut, suggested the loans actually went to support other business ventures or investments managed by the financier’s companies. Stanford’s attorneys also said he didn’t have direct involvement in preparing his company’s financial statements but was always open to having his records reviewed by regulatory authorities.

Kuhrt and Lopez have tried to put the blame for what happened at the bank on James Davis, Stanford’s former chief financial officer, who has pleaded guilty in the case and is cooperating with prosecutors.

The hearing before U.S. District Judge Nancy Atlas, which began Tuesday, is providing a preview of the upcoming criminal trials in the case. The hearing was to continue on Friday.

The insurer’s case mirrors the accusations made against Stanford and the two ex-executives by prosecutors in the criminal case in Houston and by the Securities and Exchange Commission in a lawsuit it filed in Dallas.

Stanford and the two executives are not testifying at the hearing. Stanford has been jailed since being indicted in June 2009 while Kuhrt and Lopez are free on bond.

Stanford’s trial, being handled by another Houston federal judge, is set to begin Jan. 24. The others will be tried after that. Besides money laundering, Stanford and his one-time colleagues have also been indicted on charges of wire and mail fraud.

A new lawsuit in U.S. District Court in Manhattan has been brought against Sterling Equities Associates, which owns the Mets, baseball team and also named Fred Wilpon, the Mets chief executive officer and principle owner for letting their workers put more than $16 million in 401k assets into accounts controlled by Bernard Madoff.

The complaint alleges that Sterling Equities and several of its top executives should have known that Madoff was carrying out a massive Ponzi scheme that cost thousands of investors billions of dollars.

0 Victims Speak Out

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Victims of a Ponzi scheme in Orange County were given the opportunity to speak during the sentencing phase for a man who was convicted on 693 felony counts for defrauding more than 125 seniors out of their life saving in a Ponzi scheme.

Jeffrey Gordon Butler, who was convicted in June of stealing more than $11 million from elderly investors through the illegal sale of unqualified promissory notes or stocks and filing false tax returns on his ill-gained profits, said Farrah Emami, a spokeswoman for the Orange County district attorney’s office.

Butler, 51, was found guilty by a jury on charges of making untrue statements in selling securities and unqualified securities, theft from elderly people, using a scheme to defraud in the sale of a security, filing false tax returns from 2001 to 2004 and failing to report income of more than $5.5 million, resulting in an unpaid tax liability of more than $530,000.

He faces a maximum sentence of more than 300 years in state prison.

0 $1 Billion Investment Fraud

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A Florida attorney was arrested Tuesday on federal racketeering and fraud charges alleging he operated a $1 billion investment scheme involving phony legal settlements.

Scott Rothstein, Esq. was charged with wire fraud, money laundering, and mail and wire fraud conspiracy. The combined prison term for conviction could total 100 years.

It is believe that Rothstein sought to fee his arrest. The Court refused him bail because he had wired $16 million to a Morocco bank account and was carrying $500,000 in cash when he flew to Morocco. He eventually returned on that trip.

Federal agents have seized Rothstein’s boats, including an 87-foot yacht, as well as 20 luxury cars and numerous other assets, including his share of the Miami Beach mansion formerly owned by fashion designer Gianni Versace. Prosecutors are also going after 21 homes and other properties linked to Rothstein in Florida, New York and along Rhode Island’s Narragansett Bay.

Rothstein has been disbarred by the Florida Supreme Court. Several investors have already filed lawsuits seeking their money back, including one case demanding more than $100 million in damages.

0 $20 Million Ponzi Scheme

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Pennsylvania federal authorities said that Sean Healy pleaded guilty to two counts of wire fraud and one count of unlawful monetary transaction.

Prosecutor said the 39 uear old man said he promised to buy securities for investors but instead spent the money on waterfront mansion in Florida, jewelry and exotic sports cart.

He is now facing up to 50 years in prison.

His lawyer says that the man may only be responsible for $10 million to $15 million in losses. It seems like everyday these scheme are getting revealed.

I found this really interest article from the New Times the other day. The article states that there is a motion pending in Federal Bankruptcy Court in Manhattan that contends that Bernard Madoff long term investors cannot accurately calculate their loses unthil they know whether any of their orginal profits were legitimate. And to determine that, the motion continues, they must know when the Ponzi scheme began.

The Madoff bankruptcy trustee is calculating investor losses as the difference between the cash paid into an account and the cash taken out.

But if some of an investor

Victims of the Bernard Madoff ponzi scheme have been approved for $524.25 million of payments according to the trustee who is trying to recover Madoff’s assets.

The sum is about one-eighth of the $4.44 billion of the allowed claims that the court appointed trustee has identified. Holders of about 2,335 accounts at Madoff’s firm suffered about $21.2 billion of losses.

The Securities Investor Protection Corp, a federally chartered agency that supervises the liquidation of brokerages, has made the $534.25 million of distributions on about 1,558 claims, relating to the 1,368 customer accounts.

Federal law limits SIPC protection to $500,000.

Benny Lee Jodah, a Texas businessman pleaded guilty Thursday to two charges related to his bilking of $50 million from investors in a Ponzi scheme. He pleased guilty to one count each of money laundering and sales and delivery afer sales of unregistered securities, in federal court.

Jodan faces up to 20 years in prison on the money laundering count and five years on the securities cout. Each count carries a $250,000.00 fine. He must also pay $48.4 million in restitution.

Its alleged that he devised a scheme to swindled investors by promising them 10% returnon investments in Excel Lease Fund Inc. between 2005 to April 2009. In April, the US Securities and Exchange Commission filed a civil fraud complaint against Judah, which lead to the court freezing his assets and placing his business operations in receivership.

The IRS announced unprecedented tax relief for victims of Ponzi schemes, syaing many of those affected could deduct up to 95% of their losses, immediately. The move represents a significant relaxation of longstanding limits on tax relief for victims of investment scams.

In broad terms, the IRS said Ponzi scheme victim who aren’t suing to recover their losses can generally deduct up to 95% of their qualified losses – minus any potential recoveries from insurance or the Securities Investor Production Corporation (or SIPC) – in the year the fraud is discovered. Those pursuing third party recoveries can deduct 70% of relevant investments, after potential recoveries.

The SIPC, is an organization designed to help investors at failed brokerage firms.

The IRS said victims wouldn’t be subject to limits that apply to personal casualty or theft losses and could carry back net operating losses five years to offset taxes paid, or forward 20 years. Under prior rules, many investors had to subtract $100 and 10% of their adjusted gross income from their loss deductions, and could carry back losses only three years, or forward 20 years.

In another change, the IRS said investors can include their principal, as well as any so-called phantom income they have received over the years, in their theft-loss deductions. Previously, the IRS allowed some Ponzi scheme victims to deduct only their principal as a theft loss, not phantom income.

However these changes still leave open some questions like what happens if you participated in a Ponzi scheme through a IRA account or indirectly through feeder funds.

At the end of the day with all these changes and Congress trying to find ways to help victims who were swindled by Bernard Madhoff, its best to consult any attorney to figure out where you stand and how all the changes in the law can affect you.