New York economist Irwin Kellner says Bernard Madoff defrauded him of at least $2.3 million in what may be history's largest Ponzi scheme. He's sued the disgraced financier — but left room to add up to 100 yet-to-be-named co-defendants.
Illinois investor Pasha Anwar says he, too, was a victim. He's suing Fairfield Greenwich Group, one of several feeder funds that channeled clients' investments to Madoff.
New York retiree Phyllis Molchatsky says she lost her $1.7 million life savings to the alleged scam. She's suing the Securities and Exchange Commission, the agency that regulated Madoff's business.
Chilean firm Inversiones Mar Octava Limitada says it was defrauded of $300,000. The company is suing Banco Santander, the Spanish bank that invested billions of dollars in clients' funds with Madoff. Other defendants include divisions of HSBC and accounting firm PricewaterhouseCoopers.
And a Philadelphia-area pension fund for hospital and health care workers says it lost about $700,000 in the alleged fraud. It's suing the fund adviser that placed the investment with Madoff.
As the alleged losses in the scandal mount, rising toward the $50 billion estimate Madoff gave the FBI, victims are focusing their recovery efforts less on the accused fraud architect than on the institutions, individuals and others that had dealings with him. The legal strategy reflects the reality that Madoff's assets almost certainly won't cover the losses, and it signals a search for related deep pockets that might.
"Victims are scrambling as they try to figure out whom they can sue," says Michael St. Patrick Baxter, a Covington & Burling law firm partner in Washington, D.C., and chairman of the American Bar Association's business bankruptcy committee.
"Their exit strategy is basically to sue somebody who has the wherewithal to make them whole," Baxter says. "And that might be the fund that got them involved, or it might be the financial adviser who looked at the investment and recommended it."
With billions of dollars riding on the outcome, plaintiff lawyers predict the growing array of lawsuits and alternative targets will ultimately reimburse victims for at least some of the expected repayment shortfall. Federal prosecutors, meanwhile, are separately pressing a criminal prosecution of the disgraced financier.
Madoff earlier this week agreed to voluntarily transfer his businesses, related Manhattan real estate, personal property in the offices and corporate entertainment tickets to Irving Picard, the court trustee appointed to seek assets for distribution to victims of the alleged fraud.
But a Monday court filing shows his attorneys contend that the $7 million apartment where he's under house arrest, $45 million in municipal bonds and $17 million in a Wachovia bank account all belong to his wife, Ruth, "are unrelated to the alleged Madoff fraud" and should not be seized.
During an initial Feb. 20 meeting with Madoff investment clients, Picard said he'd received approximately 2,350 customer claims, totaling roughly $1 billion. The number of claims is expected to at least double by a July 2 filing deadline, said David Sheehan, a lawyer assisting Picard.
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