NY Madoff trustee wants to start paying victims

AP News
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Posted: May 04, 2011 6:15 PM

The trustee appointed to unravel disgraced Wall Street financier Bernard Madoff's massive fraud sought approval on Wednesday to distribute recovered funds for the first time to the victims.

Trustee Irving Picard told a Manhattan bankruptcy court he is planning a $2.6 billion allocation, including an initial payout of $272 million. It was unclear when the court would rule.

Madoff, 73, is serving a 150-year prison sentence in Butner, N.C., after admitting that his investment advisory service was a giant Ponzi scheme, using money from new investors to pay returns to existing clients while financing a lavish lifestyle for him and cheating rich people, charities, celebrities and institutional investors.

More than $7.6 billion of the estimated $17.3 billion in principal lost by clients filing claims has been recovered, Picard said.

More funds are expected to come from pending lawsuits _ known as clawbacks _ against big investors who made a killing in phantom profits by taking out more money from their Madoff accounts than they were entitled to based on what they put in.

One of the pending lawsuits names New York Mets owner Fred Wilpon, team president Saul Katz and chief operating officer Jeff Wilpon, the owner's son. It seeks return of at least $1 billion it says were phony profits, plus penalties for what it calls the defendants' willful blindness to steady double-digit returns that defied down markets _ allegations they deny.

Picard said Wednesday that the initial $272 million distribution would pay an average of $222,551 on claims involving 1,224 Madoff accounts.