It’s eight years and counting for the victims of Bernie Madoff.
In that time since Bernard Madoff was arrested for his multi-billion-dollar Ponzi scheme, victims have yet to receive one red cent from the company the Justice Department hired to take care of the $4 billion recovered from the landmark case.
RCB Fund Services LLC is reportedly still working to complete reviews and recommendations for the 63,580 claims covering nearly $68 billion losses. The firm said it was the size and intricacy of the claims that prevented it from making its first payout last year.
A January update posted on the Madoff Victim Fund (MCF) website claims payouts may occur sometime this year:
We were unable to initiate our first payout in 2016 as we had hoped because of the volume and complexity of claims. However, we now expect that the initial distribution will take place sometime in 2017 and will be larger than we had anticipated.
Upon receipt and review of any responses to the Determination Notices, we will be closer to determining the final amount of all claims, which is required before we can determine the actual payout percentage on eligible losses.
RCB Fund Services was given $2.4 billion from the estate of the late Jeffry Picowder, one of Madoff’s largest clients. It was provided with another $1.7 billion following a 2014 agreement with JPMorgan Chase, which was allegedly overlooking Madoff’s Ponzi scheme.
Madoff victims have not received a dime, but Richard Breeden and his company have been paid $38.8 million, according to a Freedom of Information Act (FOIA) filing submitted by Bloomberg News.
Meanwhile, Irving Picard, who is managing the liquidation of Madoff’s company, has paid out close to $10 billion since 2009.
Not everyone is pleased with the sluggish repayments.
Daphne Brogdon, a Food Network personality whose family lost $5 million in the scam, is not pleased:
It’s very frustrating that people are making money off us like this, using money that was recovered for victims. They’re eating away at whatever percentage we could possibly get.
Many experts aren’t placing the blame on Breeden but on the “notoriously slow” Justice Department. Jon Barooshian, a Boston-based defense lawyer at Bowditch & Dewey, told Bloomberg:
I’m surprised it’s taking so long, but I don’t know if the fault will fall at Richard Breeden’s feet. It might be more of an internal DOJ issue.
RCB Fund Services has not issued a statement pertaining to reports.
Breeden was appointed by the Department of Justice in 2012 as special master for finding and repaying victims of Madoff’s scam. The former chairman of the Securities and Exchange Commission (SEC) was hired soon after distributing roughly $728 million to approximately 8,500 Adelphia Communications victims, which he called “the largest single distribution of forfeited assets to victims in Department of Justice history.” Breeden also worked in similar capacities following the end of Enron and Worldcom.
Madoff surrendered himself to authorities in December 2008. A year later, the former NASDAQ chairman was sentenced to 150 years in prison. The 79-year-old resides at the Federal Correctional Institute in Butner, North Carolina.
At the time the story broke, many had asked why the SEC didn’t intervene and politicians demanded more government regulations. Interestingly enough, it was the free market that spotted Madoff’s scheme before anyone else did. It was the SEC that ignored the matter.
In the world of hedge funds, investors seek out firms to comb through these massive funds to ensure their money is protected and invested properly. These are known as due-diligence firms. Years before Madoff’s arrest, Aksia LLC was hired and the advisor discovered multiple red flags and eventually warned all of its clients to avoid parking their money in Madoff’s hedge funds. Aksia had even sent a letter to the SEC in 2005 outlining the problems with his hedge fund.
This was a perfect illustration of how the SEC, and government in general, can’t protect investors as well as the good old free market system.