Irving Picard told a white collar crime conference that even to this day Bernie Madoff’s son claims the legitimate side of the family trading business was profitable. “It was not, trust me,” Picard told the crowd at Golden Gate University School of Law in San Francisco Friday.
Picard is the court-appointed bankruptcy trustee trying to recover $17.3 billion investors gave Bernie Madoff for years before his Ponzi scheme blew up in 2008.
The proprietary trading side of the Madoff business was doing legitimate trading, unlike the fund Bernie Madoff ran as a purported investment advisory business, according to Picard.
Picard said he discovered after taking over as trustee that when the markets switched from using fractions to decimals to designate trading prices the margins constricted and the Madoff trading business started to lose money.
So funds invested in the Ponzi scheme side of the business were used to prop up the legitimate trading side, according to Picard.
“And if you watched ’60 Minutes’ the other night you heard Madoff’s son say it [the proprietary trading operation] was profitable. It was not, trust me,” said Picard.
Madoff confessed to his family in December 2008 that his investment advisory business was a fraud and a Ponzi scheme. People who invested $17.3 billion over the years believed they had accumulated a total of $65 billion. It evaporated over night.
Madoff pleaded guilty and was sentenced to 150 years in prison.
Picard noted another oddity. He found that the investment side, behind locked doors on the 17th floor of Madoff’s offices, was a computer that was a mid-1990s relic, an AS400.
It was plugged in but had no link to the Internet, according to Picard. So investors would not get trade confirmations for five or six days but never questioned it. Picard found a cabinet full of old Wall Street Journals used to backdate trades based on old share prices listed in the paper to create fictitious profits.
The saga of the New York trustee in the Madoff case may be a little far afield of TrialInsider’s usual western states’ court coverage, but it’s hard to resist when the trustees for some of the biggest scammers in the country are in town to swap stories.
Golden Gate University’s first panel included Picard, Sheila M. Gowan, who is trustee in the Marc Dreier case. Dreier sold $700 million in bogus promissory notes in a $20 million Ponzi scheme. Ronald A. Peterson is trustee in the $3.65 billion Tom Petters’ Ponzi scheme in Minnesota. John Kozyak is sorting out the Scott Rothstein $1.6 billion Ponzi scheme. And Lawrence McMichael oversaw the unwinding of the massive financial fraud of the John Rigas family over Adelphia Communications.
The two-day conference called White Collar Crime and Business Bankruptcy has, to paraphrase Sam Spade, all the stuff that dreams – and nightmares – are made of.