WEBVTT - Madoff Fund Pays Out Distributor, Not Victims (Audio)

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<v Speaker 1>Over the course of four years, a firm hired by

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<v Speaker 1>the US to distribute four billion dollars to victims of

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<v Speaker 1>Bernard made Os ponzi scheme racked up thirty eight point

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<v Speaker 1>eight million dollars and billings. As for those victims, well,

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<v Speaker 1>they're still waiting for the first checks. That's what my

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<v Speaker 1>Bloomberg News college Eric Larson discovered through a Freedom of

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<v Speaker 1>Information Act request, and he is with us in our

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<v Speaker 1>New York studio to tell us more about it. Also

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<v Speaker 1>with us is John Beruscian. He's a white collar defense

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<v Speaker 1>attorney at Bowditch and Dewey. Thank you both for joining us. Eric,

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<v Speaker 1>just start off by telling us about this fund. It's

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<v Speaker 1>not the only source of compensation for the made off victims, right,

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<v Speaker 1>that's correct. The main source of compensation is that through

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<v Speaker 1>the court appointed trustee, Irving Picard, who has been working

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<v Speaker 1>on the case since two thousand nine. UH, they have

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<v Speaker 1>recovered over eleven billion dollars and distributed nine billion dollars

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<v Speaker 1>of that back to victims. But there's this other fund,

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<v Speaker 1>the d o J fund that they've they've had since

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<v Speaker 1>two thousand twelve. UH that was financed through some forfeiture

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<v Speaker 1>actions and they've been sitting on it ever since. And

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<v Speaker 1>tell me about your fourier request. What what exactly did

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<v Speaker 1>you learn from it? Well, really just that that figure

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<v Speaker 1>that they that the billing, the thirty eight point eight

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<v Speaker 1>million dollars. We had asked the d o J for

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<v Speaker 1>all documents showing how much they have agreed to pay

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<v Speaker 1>this firm for their work. They didn't provide any documents,

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<v Speaker 1>but they did give us that one figure. And Uh,

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<v Speaker 1>it was a surprise, I think to a lot of

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<v Speaker 1>victims because thousands of them have been hoping to tap

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<v Speaker 1>this fund for several years now and haven't been able to. John,

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<v Speaker 1>You've had a lot of experience with with forfeitures. Uh,

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<v Speaker 1>tell us what could be taking so long to distribute

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<v Speaker 1>all this money? Well, what strikes me initially is that

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<v Speaker 1>the massive scale of of the fraud to begin with

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<v Speaker 1>makes figuring out who is entitled to compensation and how

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<v Speaker 1>much extreme and extremely difficult process to begin with. Unfortunately,

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<v Speaker 1>as you can imagine, and as we have seen in

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<v Speaker 1>many kind of victim compensation funds, UH, many are riddled

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<v Speaker 1>with with fraudulent attempts to get money. So that's one

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<v Speaker 1>thing that that that needs to happen in any kind

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<v Speaker 1>of fund, is that we need to make sure that

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<v Speaker 1>the people who are actually getting the money are entitled

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<v Speaker 1>to it and that people are being compensated on some

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<v Speaker 1>kind of equal basis. Um. My understanding is that that

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<v Speaker 1>that the fund that Mr Breeden is overseeing is set

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<v Speaker 1>up to compensate not only victims who invested directly with

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<v Speaker 1>made Off, but who also invested through feeder funds into

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<v Speaker 1>the made Off funds, which I could see how that

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<v Speaker 1>could make things even even a little bit more difficult,

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<v Speaker 1>or maybe I'll lot more difficult because you have to

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<v Speaker 1>identify who those people are. You still have to identify

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<v Speaker 1>in determine how much they may or may not have recovered.

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<v Speaker 1>Are there potential subrogation issues within the situations where maybe

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<v Speaker 1>an insurance company paid out on an E and O

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<v Speaker 1>type claim? Uh that that there's a lot that needs

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<v Speaker 1>to be done by the same token. It's been five

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<v Speaker 1>years I think since since since they were given this money,

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<v Speaker 1>so that seems like a long time. Um in in

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<v Speaker 1>the money that breeding has been paid, which is um uh,

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<v Speaker 1>you know, I estimated, well my math is right about

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<v Speaker 1>one percent, maybe a little less of the total amount

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<v Speaker 1>of the fund is still a lot of money. Um,

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<v Speaker 1>I got to think that, you know, it would be

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<v Speaker 1>a pretty easy thing to audit. Eric, What have you

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<v Speaker 1>heard from the fund about this? They have, you reported,

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<v Speaker 1>missed a number of deadlines that they've they've put out

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<v Speaker 1>there for themselves along the way. What are they saying

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<v Speaker 1>about why this is taking so long? Well, in February

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<v Speaker 1>two thousand sixteen, they estimated that they would start sending

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<v Speaker 1>out checks by the end of the year. That didn't happen,

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<v Speaker 1>And now essentially they're saying the same thing this year.

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<v Speaker 1>They're saying on their website sometime this year in two

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<v Speaker 1>thousand seventeen, so, um, you know, back in two thousand thirteen,

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<v Speaker 1>an earlier statement also sort of anticipated that it would

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<v Speaker 1>be uh that the first checks could come out relatively soon.

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<v Speaker 1>So it's been one misdeadline after after another. And unfortunately

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<v Speaker 1>they don't they didn't comment for a story. They don't

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<v Speaker 1>seem to want to say anything beyond what they put

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<v Speaker 1>on their website, which is updated a couple of times

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<v Speaker 1>a year, and the last update was in in January

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<v Speaker 1>and said that they were, you know, receiving tens of

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<v Speaker 1>thousands of claims and that they were going through them,

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<v Speaker 1>that they planned to make recommendations on approval or denial

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<v Speaker 1>of the claims UH this year at least for the

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<v Speaker 1>initial set. So UM, you know, there might be there

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<v Speaker 1>might have been some unforeseen delays UH, such as the

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<v Speaker 1>ones Mr Brush just mentioned as far as determining which

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<v Speaker 1>of these feeder fund investors are really really had investments,

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<v Speaker 1>because that's a lot of paperwork and a lot of

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<v Speaker 1>legwork for verification UM. When on the other side, you know,

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<v Speaker 1>Irving Picard, the trustee in the in the court case,

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<v Speaker 1>specifically did not accept claims from feeder fund investors UM

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<v Speaker 1>for that reason, citing saying citing the bankruptcy Code and

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<v Speaker 1>saying that it would be virtually impossible to verify all

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<v Speaker 1>these tens of thousands of claimants when they didn't actually

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<v Speaker 1>have accounts with made off. So he just took a

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<v Speaker 1>different route. He said that if the feeder fund wants

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<v Speaker 1>to file a claim in the bankruptcy court and they

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<v Speaker 1>get any money back, then those feeder funds can then

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<v Speaker 1>distribute that money out to their clients as they see fit.

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<v Speaker 1>Can you just clarify something for me, who's making the

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<v Speaker 1>decisions here, is that Richard Breeden is making them or

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<v Speaker 1>the Justice Department. What what are the various roles here? Well,

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<v Speaker 1>the the ultimate authority to determine how this, uh, the

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<v Speaker 1>money that that that has been forfeited gets distributed is

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<v Speaker 1>with the the U. S. Attorney's Office, and um, the

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<v Speaker 1>head of the Asset Forfeiture and Money Laundering Unit is

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<v Speaker 1>the one who has been delegated that authority. So what

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<v Speaker 1>what the Breedon group would be doing is processing the paperwork,

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<v Speaker 1>making and making a recommendation to the the U. S.

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<v Speaker 1>Attorney's Office, the Attorney General's office, who would then, you know,

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<v Speaker 1>ultimately make the decision. Um. So that's the other thing

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<v Speaker 1>I would I would you know think about two is

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<v Speaker 1>is you know what we're Breeden's marching orders from, uh

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<v Speaker 1>the Attorney General's office. And you know, I'm not trying

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<v Speaker 1>to defend or or or lay blame at at anyone's feet.

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<v Speaker 1>It's just because it has been a while, but but

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<v Speaker 1>there is a lot that needs to happen. And I

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<v Speaker 1>think I also want to point out to that Piccard

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<v Speaker 1>is operating under a different set of rules. Um, He's

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<v Speaker 1>essentially operating under the under you know, rules that relate

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<v Speaker 1>to bankruptcy proceedings, So it's I don't know that it's

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<v Speaker 1>an entirely fair comparison. And my understanding too, is that

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<v Speaker 1>the Piccard is Piccard and his firm of a whole

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<v Speaker 1>lot more money, um, somewhere closer to a billion dollars,

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<v Speaker 1>is what I what I've heard. I can't verify that certainly,

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<v Speaker 1>but uh in in his attempts to try to secure

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<v Speaker 1>compensation for the victims, Eric, we only have about fifteen seconds,

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<v Speaker 1>but just quickly, Uh, what's the last time when we

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<v Speaker 1>expect payments might begin? Uh really don't have anything beyond

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<v Speaker 1>what the Mr Breeding has said on his website, which

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<v Speaker 1>would be any time this year. If we find out

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<v Speaker 1>anything new, of course, we'll do a story on it

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<v Speaker 1>and and we'll have you back on how came I

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<v Speaker 1>to thank our guests on Barussian and Eric Larson talking

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<v Speaker 1>about distributions to Bernie Madoff's victims,