Investor Claims Charity Tied to Madoff Funds

     (CN) – A Florida investor claims in court that one of the largest charities in the country is bankrolled with more than $2 billion in “fraudulent transfers” from the estate of Jeffry Picower, a longtime associate of swindler Bernie Madoff.
     The JPB Foundation, a non-profit organization that supports medical research and poverty relief, is facing a lawsuit alleging that it harbors tainted money from the estate of attorney Jeff Picower, who purportedly made billions of dollars in Madoff’s historic Ponzi scheme.
     Plaintiff Pamela Goldman, along with A&G Goldman Partnership, claims that Picower helped prop up Madoff’s fraudulent wealth-management fund and stole roughly 40 percent of the $18 billion that Madoff had amassed from investors over the years.
     Picower died in a pool outside his Palm Beach home in 2009 after suffering from what the coroner deemed to be cardiac distress.
     Since then, more than two billion dollars was funneled out of his estate, to the JPB Foundation, according to the lawsuit.
     Executed under the direction of the estate’s attorney, this massive transfer of funds was meant in part to give Picower’s estate and his widow Barbara the appearance of insolvency so that they could sidestep liability for claims filed by Madoff investors including the Goldman plaintiffs, the lawsuit alleges.
     According to the complaint, defendant April Freilich, Picower’s former assistant, is receiving a $577,000 “salary” as the director of the JPB Foundation.
     She allegedly was set to receive $10 million under Picower’s will.
     The trustee overseeing the Madoff bankruptcy linked Freilich to the Madoff fund’s fraudulent backdating of trades for Picower. According to the trustee’s allegations, Freilich would send a request to book capital gains in Picower’s account for certain time ranges, and the Madoff fund would respond with backdated financial statements to match those requests.
     When Courthouse News contacted the JPB Foundation for an interview, the foundation’s agent claimed it has no public-relations outlet and hung up mid-conversation.
     The Picower estate in 2010 had entered into a $7.2 billion settlement with the Madoff bankruptcy trustee and the Manhattan U.S. Attorney, who called it “the largest single forfeiture recovery in U.S. history.”
     The U.S. attorney proclaimed: “Today’s truly historic settlement with the estate of Jeffry Picower is a game-changer for Madoff’s victims. By returning every penny of the $7.2 billion her late husband received from [the Madoff fund] to help those who have suffered most, Barbara Picower has done the right thing.”
     But the Goldman plaintiffs argue that the estate should be held liable for damages beyond that sum, on the grounds that Jeffry Picower actively participated in the Ponzi scheme and was a “control person” responsible for securities fraud under the Exchange Act.
     Picower “controlled the viability of the Ponzi scheme,” acted as a counterparty for phony options trades in the Madoff fund and helped orchestrate fraudulent activity on Madoff’s balance sheets, the plaintiffs claim.
     Their allegations that Picower knew about the scheme are apparently supported by statements from Madoff himself.
     In a 2012 deposition during which he discussed investor restitution, Madoff said that Picower had been one of his biggest investors since the 1980s, and was “complicit” in the scheme.
     “The best thing I could for my clients was to – to get the money back from the people that were complicit in the crime, namely Picower, [Carl] Shapiro, [Norman] Levy,” Madoff purportedly stated in the deposition, describing his past interactions with federal prosecutors.
     According to the deposition transcript, Madoff said these parties were complicit “because they had violated tax laws based upon what I discussed with them and other things that I knew that they were doing with people in my firm, bookkeepers, who are all now under investigation.”
     Madoff, already imprisoned at the time of the deposition, said he was surprised to hear on the news that Picower had a $9 billion estate. He maintained throughout the deposition that he had first initiated “the whole cycle” of fraud because he took a huge loss on Picower’s behalf in a series of botched hedging deals thirty years ago.
     On Feb. 17, a bankruptcy judge in New York rejected a putative class action that the Goldman plaintiffs had filed against the estate in their bid to collect securities fraud damages.
     The judge determined that the Goldman plaintiffs’ claims were barred since they were duplicative of claims brought by the Madoff bankruptcy trustee. The judge pointed to the Picower estate’s $7.2 billion settlement with the trustee, which included an injunction that disallowed such derivative or duplicate claims.
     It was Pamela Goldman’s third failed attempt to pursue a federal class action in the matter, according to court documents. All of the actions were dismissed on the grounds that they repeated the already-settled claims of the bankruptcy trustee.
     The litigation has “caused enormous expense” to the trustee, the judge ruled.
     He stopped short of enjoining Goldman from continuing to sue the Picower defendants.
     “The [court’s] gatekeeping function has been expensive and time-consuming, but the court is confident that the Goldman Parties will not cause any further needless expenditure of resources or time. The Trustee or the Picower Parties, or both, may seek appropriate sanctions if they do,” he wrote.
     The fraudulent transfer case was filed in Palm Beach County court on Feb. 12, five days before the bankruptcy court decision. It was made public late last week, upon its assignment to a circuit division in West Palm Beach.
     The listed defendants are the JPB Foundation, Barbara Picower, April Freilich, Picower estate attorney William Zabel and foundation executive Gerald McNamara.
     Pamela Goldman’s counsel at the law firm of Beasley Kramer did not respond to a request for comment regarding whether the fraudulent transfer case will be dropped in light of the bankruptcy judge’s recent decision.
     A primary beneficiary of the JPB Foundation is the Picower Institute for Learning and Memory at the Massachusetts Institute of Technology.
     The Picower Institute studies neuroscience and brain disorders including Parkinson’s disease, an affliction from which Picower reportedly suffered. The institute received its name when the Picowers’ previous non-profit organization gave it a large grant in 2002, long before the Madoff Ponzi scheme came to light.
     Barbara Picower has professed that her husband never participated in the scheme, claiming she is “absolutely confident that … Jeffry was in no way complicit in Madoff’s fraud.”

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