In what could be the latest chapter of a battle over who gets their hands on the remainder of Bernard Madoff's money, the Securities and Exchange Commission said today it had reached a partial agreement with the accused Ponzi schemer.
The SEC, bankruptcy lawyers and attorneys for individual victims have all begun efforts to track down and stake a claim of what's left of the $50 billion that the alleged fraudster reportedly told investigators was lost in his scheme.
Today, Madoff agreed to a proposed judgment with the SEC where he could eventually pay a civil fine and return money to people who had invested with him.
Madoff agreed not to contest the allegations against him by the SEC for the purpose of the SEC recovery of any assets and return of those assets to investors in a proposal submitted to a federal judge.
He did so without compromising his rights in the ongoing criminal case against him in federal court in New York or admitting to any of the allegations against him filed in the criminal complaint when he was arrested on Dec. 12, SEC officials said.
Those allegations included the charge that he "informed two senior employees that his investment advisory business was a fraud..(and) told these employees that he was "finished," that he had "absolutely nothing," that "it's all just one big lie," and that it was "basically, a giant Ponzi scheme," according to the SEC filing.
The SEC proposal for a "partial judgment and a permanent injunction" seeks a court order that makes permanent the freezing of Madoff's assets and right to recovery that were ordered by the court in a preliminary restraining order granted Dec. 18. The injunction component is really a technicality at this juncture. It enjoins Madoff from any future violation of federal anti-fraud statutes. The provision would come into play if he were found not guilty in his criminal trial, or upon his release from prison if he were found guilty.
The SEC action is one of the three major actions involving Madoff.
As news of Madoff's agreement hit today, the SEC also announced that its Director of the Division of Enforcement, Linda Thomsen, is leaving the agency after 14 years to work in the private sector.
Last October, SEC Inspector General H. David Kotz issued a report recommending disciplinary action against Thomsen, following Kotz' finding that the SEC gave "preferential treatment" to Wall Street executive John Mack during an insider trading investigation three years ago because Mack was about to become CEO of the Morgan Stanley investment banking firm.
Today, the SEC had nothing but praise for her.
"Linda's achievements have been nothing short of extraordinary, even heroic, in an era of unprecedented challenges in our securities markets," SEC Chairman Mary Shapiro said in a statement.
Madoff faces a criminal case in Federal court involving the defrauding of investors of an amount of up to $50 billion. He is also dealing with the bankruptcy of his firm in Federal bankruptcy court.
The agreement states that the allegations of fraud cannot be contested by Madoff and that possible penalties will be decided "at a later time," presumably after his Federal criminal trial is resolved.
The proposed SEC action must be signed off on by a Federal judge.