Divorced attorney can't recoup Madoff fraud losses

Reuters News
|
Posted: Apr 03, 2012 2:53 PM
Divorced attorney can't recoup Madoff fraud losses

By Dan Wiessner

(Reuters) - New York's top court has thrown out a Manhattan lawyer's bid to undo his divorce settlement and force his former wife to share in losses tied to Bernard Madoff's Ponzi scheme. Steven Simkin, a partner at Paul, Weiss, Rifkind, Wharton & Garrison, was saddled with losses when a $5.4 million retirement account he retained as part of a 2006 divorce settlement tanked because of the Madoff fraud.

Simkin claimed that the inclusion of the account in the settlement was the result of a "mutual mistake" that rendered the pact void.

A unanimous Court of Appeals on Tuesday disagreed. "Given the extensive and carefully negotiated nature of the settlement agreement, we do not believe that this presents one of those exceptional situations warranting reformation or rescission of a divorce settlement after all martial assets have been distributed," Judge Victoria Graffeo wrote in a 6-0 ruling. Simkin, a partner in Paul, Weiss' real estate department, a lawyer and the executive director of labor relations for the City University of New York, separated from his wife, Laura Blank, in 2002 after three decades of marriage.

In a divorce settlement finalized in 2006, Simkin agreed to pay Blank $6.25 million. Blank also retained the couple's Manhattan apartment, a car and various bank accounts.

Simkin kept the family home in the New York City suburb of Scarsdale, three cars and a number of accounts, including the one the couple held with Madoff. Blank received $2.7 million from the account, which was valued at $5.4 million, as part of the deal. In 2009, after Madoff's scheme came to light, Simkin sued Blank. He argued that he should not be stuck with all of the losses from the Madoff account, which "never actually existed." "This situation, however sympathetic, is more akin to a marital asset that unexpectedly loses value after dissolution of the marriage," Graffeo wrote for the Court of Appeals. "The asset had value at the time of the settlement but the purported value did not remain consistent." Allan Arffa of Paul, Weiss, represented Simkin. He did not return a call for comment.

Blank's attorney, Richard Emery of Emery Celli Brinckerhoff & Abady, also did not return a call seeking comment.

Madoff, 73, is serving a 150-year prison sentence.

The case is Steven Simkin v. Laura Blank, New York State Court of Appeals No. 48.

(Editing by Noeleen Walder and Steve Orlofsky)