Trustee Sues Ruth Madoff for $44.8M

July 30, 2009

The trustee winding down imprisoned swindler Bernard Madoff’s former firm sued his wife Wednesday, seeking at least $44.8 million for investors bilked in Wall Street’s biggest investment fraud.

Court-appointed trustee Irving Picard said in court papers that of that amount, Ruth Madoff received at least $23.7 million directly or indirectly from Bernard L. Madoff Investment Securities LLC (BLMIS). He said she received an additional $21.1 million during the six years up to her husband’s arrest last December.

“For decades, Mrs Madoff lived a life of splendor using the money of BLMIS’s customers,” the trustee said in the filing in U.S. Bankruptcy Court in New York. “Regardless of whether or not Mrs Madoff knew of the fraud her husband perpetrated … she received tens of millions of dollars from BLMIS.”

Married to Madoff for 49 years, she was a controller of Madoff Securities International in London and worked on accounts at the New York firm, the lawsuit said.

New York lawyer Picard did not accuse Ruth Madoff of knowing about the multibillion-dollar fraud in which thousands of investors worldwide were swindled or of taking part in it. But his lawsuit details 111 transactions which Picard says were fraudulent and recoverable under bankruptcy code.

For example, she received money from an investment vehicle, Madoff Technologies, for her and sons Andrew and Mark, brother-in-law Peter and her niece Shana Madoff, among others.

Although she was never a BLMIS employee, “millions of dollars belonging to BLMIS and its customers found their way into her personal accounts and investments without any legitimate business purpose.”


In a statement, a lawyer for Ruth Madoff described the complaint as “particularly perplexing and totally unjustified” because she has already forfeited almost all of her assets in an agreement with U.S. prosecutors.

The agreement in June allowed her to keep $2.5 million in cash, but it did not preclude the trustee from suing her.

“We believe the Trustee’s action is wrong as a matter of law and fairness,” lawyer Peter Chavkin said in the statement.

Bernard Madoff, 71, pleaded guilty in March and is serving a 150-year sentence in a prison in Butner, North Carolina, for a fraud U.S. prosecutors estimated at as much as $65 billion over at least two decades.

About $13.2 billion has been traced, according to court documents. So far, the trustee has recovered about $1.2 billion under the auspices of the Securities Investor Protection Corp.

Wednesday’s lawsuit by Picard said at least $44.8 million “was subject to recapture” from Ruth Madoff.

It described how the worldwide Ponzi scheme by the former investment adviser and trader left investors impoverished and charities ruined. Madoff ran a classic Ponzi scheme in which early investors were paid with the money of new clients.

“The inequity between Mrs. Madoff’s continuing financial advantages and the economic distress of Madoff’s customers compels the Trustee to bring this action,” the complaint said.

On the day of her husband’s sentencing a month ago, Ruth Madoff said she was sympathetic to those left in financial ruin. Some of the defrauded investors have publicly stated their suspicions about the disgraced financier’s wife. (Reporting by Grant McCool, editing by Gerald E. McCormick and Matthew Lewis)

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