Trustee sues Madoff family for $198m

October 04, 2009 01:06:39 PM

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The court-appointed trustee tracking down Bernard Madoff's missing billions sued the disgraced financier's sons, brother and niece Friday, accusing them of enabling the huge fraud.

Named in the 198.7-million-dollar suit are Madoff's brother Peter, sons Mark and Andrew, and niece Shana, who all worked for the former Nasdaq chairman at Bernard L. Madoff Investment Securities (BLMIS).

The trustee, Irving Picard, accused the family members in the civil lawsuit filed in a New York federal bankruptcy court of being "completely derelict" in their duties.

"As a result, they either failed to detect or failed to stop the fraud, thereby enabling and facilitating the Ponzi scheme at BLMIS," Picard said in a statement.

"Simply put, if the family members had been doing their jobs -- honestly and faithfully -- the Madoff Ponzi scheme might never have succeeded, or continued for so long."

Picard is responsible for finding where billions of dollars of investors' money vanished in a decades-long Ponzi -- or pyramid -- scheme, so that victims can be compensated.

The family members have said they knew nothing of Madoff's activities. The Wall Street swindler earlier this year received the maximum 150-year prison sentence for his crimes.

Picard alleged that "BLMIS was operated as if it were the family piggy bank."

The accused relatives of Madoff, he said, "took huge sums of money out of BLMIS to fund personal business ventures and personal expenses such as homes, cars, and boats."

Investors' money was spent on everything from multi-million-dollar vacation homes to restaurant bills, he said.

Peter Madoff was chief compliance officer at the company, while Madoff's sons Mark and Andrew were joint heads of trading at their father's firm. Shana Madoff worked as a lawyer.

On Sunday, Picard said the net was widening in the search for the missing money and that some supposed victims may be targeted for profits they made during the scheme.

"We've found that there have been quite a few people who have gotten out more than they put in," Picard said.

Just before his arrest in December last year, Madoff sent clients a statement claiming his fund was worth about 64.8 billion dollars.

Picard estimated the fund in reality contained 36 billion dollars. Half of this was disbursed before the collapse, while the other 18 billion dollars disappeared, he said.

So far, Picard has snared just 1.5 billion dollars, including revenues from such easy targets as luxury residences in Manhattan, Long Island and Florida kept by Madoff and his wife Ruth.

Now he is concentrating on Madoff's inner circle.

"Whether or not they have a criminal problem we will pursue them as far as we can pursue them," Picard warned. "If that leads to bankrupting them -- then that's what will happen."