Speaker 1: Over the course of four years, a firm hired by
Speaker 1: the US to distribute four billion dollars to victims of
Speaker 1: Bernard made Os ponzi scheme racked up thirty eight point
Speaker 1: eight million dollars and billings. As for those victims, well,
Speaker 1: they're still waiting for the first checks. That's what my
Speaker 1: Bloomberg News college Eric Larson discovered through a Freedom of
Speaker 1: Information Act request, and he is with us in our
Speaker 1: New York studio to tell us more about it. Also
Speaker 1: with us is John Beruscian. He's a white collar defense
Speaker 1: attorney at Bowditch and Dewey. Thank you both for joining us. Eric,
Speaker 1: just start off by telling us about this fund. It's
Speaker 1: not the only source of compensation for the made off victims, right,
Speaker 1: that's correct. The main source of compensation is that through
Speaker 1: the court appointed trustee, Irving Picard, who has been working
Speaker 1: on the case since two thousand nine. UH, they have
Speaker 1: recovered over eleven billion dollars and distributed nine billion dollars
Speaker 1: of that back to victims. But there's this other fund,
Speaker 1: the d o J fund that they've they've had since
Speaker 1: two thousand twelve. UH that was financed through some forfeiture
Speaker 1: actions and they've been sitting on it ever since. And
Speaker 1: tell me about your fourier request. What what exactly did
Speaker 1: you learn from it? Well, really just that that figure
Speaker 1: that they that the billing, the thirty eight point eight
Speaker 1: million dollars. We had asked the d o J for
Speaker 1: all documents showing how much they have agreed to pay
Speaker 1: this firm for their work. They didn't provide any documents,
Speaker 1: but they did give us that one figure. And Uh,
Speaker 1: it was a surprise, I think to a lot of
Speaker 1: victims because thousands of them have been hoping to tap
Speaker 1: this fund for several years now and haven't been able to. John,
Speaker 1: You've had a lot of experience with with forfeitures. Uh,
Speaker 1: tell us what could be taking so long to distribute
Speaker 1: all this money? Well, what strikes me initially is that
Speaker 1: the massive scale of of the fraud to begin with
Speaker 1: makes figuring out who is entitled to compensation and how
Speaker 1: much extreme and extremely difficult process to begin with. Unfortunately,
Speaker 1: as you can imagine, and as we have seen in
Speaker 1: many kind of victim compensation funds, UH, many are riddled
Speaker 1: with with fraudulent attempts to get money. So that's one
Speaker 1: thing that that that needs to happen in any kind
Speaker 1: of fund, is that we need to make sure that
Speaker 1: the people who are actually getting the money are entitled
Speaker 1: to it and that people are being compensated on some
Speaker 1: kind of equal basis. Um. My understanding is that that
Speaker 1: that the fund that Mr Breeden is overseeing is set
Speaker 1: up to compensate not only victims who invested directly with
Speaker 1: made Off, but who also invested through feeder funds into
Speaker 1: the made Off funds, which I could see how that
Speaker 1: could make things even even a little bit more difficult,
Speaker 1: or maybe I'll lot more difficult because you have to
Speaker 1: identify who those people are. You still have to identify
Speaker 1: in determine how much they may or may not have recovered.
Speaker 1: Are there potential subrogation issues within the situations where maybe
Speaker 1: an insurance company paid out on an E and O
Speaker 1: type claim? Uh that that there's a lot that needs
Speaker 1: to be done by the same token. It's been five
Speaker 1: years I think since since since they were given this money,
Speaker 1: so that seems like a long time. Um in in
Speaker 1: the money that breeding has been paid, which is um uh,
Speaker 1: you know, I estimated, well my math is right about
Speaker 1: one percent, maybe a little less of the total amount
Speaker 1: of the fund is still a lot of money. Um,
Speaker 1: I got to think that, you know, it would be
Speaker 1: a pretty easy thing to audit. Eric, What have you
Speaker 1: heard from the fund about this? They have, you reported,
Speaker 1: missed a number of deadlines that they've they've put out
Speaker 1: there for themselves along the way. What are they saying
Speaker 1: about why this is taking so long? Well, in February
Speaker 1: two thousand sixteen, they estimated that they would start sending
Speaker 1: out checks by the end of the year. That didn't happen,
Speaker 1: And now essentially they're saying the same thing this year.
Speaker 1: They're saying on their website sometime this year in two
Speaker 1: thousand seventeen, so, um, you know, back in two thousand thirteen,
Speaker 1: an earlier statement also sort of anticipated that it would
Speaker 1: be uh that the first checks could come out relatively soon.
Speaker 1: So it's been one misdeadline after after another. And unfortunately
Speaker 1: they don't they didn't comment for a story. They don't
Speaker 1: seem to want to say anything beyond what they put
Speaker 1: on their website, which is updated a couple of times
Speaker 1: a year, and the last update was in in January
Speaker 1: and said that they were, you know, receiving tens of
Speaker 1: thousands of claims and that they were going through them,
Speaker 1: that they planned to make recommendations on approval or denial
Speaker 1: of the claims UH this year at least for the
Speaker 1: initial set. So UM, you know, there might be there
Speaker 1: might have been some unforeseen delays UH, such as the
Speaker 1: ones Mr Brush just mentioned as far as determining which
Speaker 1: of these feeder fund investors are really really had investments,
Speaker 1: because that's a lot of paperwork and a lot of
Speaker 1: legwork for verification UM. When on the other side, you know,
Speaker 1: Irving Picard, the trustee in the in the court case,
Speaker 1: specifically did not accept claims from feeder fund investors UM
Speaker 1: for that reason, citing saying citing the bankruptcy Code and
Speaker 1: saying that it would be virtually impossible to verify all
Speaker 1: these tens of thousands of claimants when they didn't actually
Speaker 1: have accounts with made off. So he just took a
Speaker 1: different route. He said that if the feeder fund wants
Speaker 1: to file a claim in the bankruptcy court and they
Speaker 1: get any money back, then those feeder funds can then
Speaker 1: distribute that money out to their clients as they see fit.
Speaker 1: Can you just clarify something for me, who's making the
Speaker 1: decisions here, is that Richard Breeden is making them or
Speaker 1: the Justice Department. What what are the various roles here? Well,
Speaker 1: the the ultimate authority to determine how this, uh, the
Speaker 1: money that that that has been forfeited gets distributed is
Speaker 1: with the the U. S. Attorney's Office, and um, the
Speaker 1: head of the Asset Forfeiture and Money Laundering Unit is
Speaker 1: the one who has been delegated that authority. So what
Speaker 1: what the Breedon group would be doing is processing the paperwork,
Speaker 1: making and making a recommendation to the the U. S.
Speaker 1: Attorney's Office, the Attorney General's office, who would then, you know,
Speaker 1: ultimately make the decision. Um. So that's the other thing
Speaker 1: I would I would you know think about two is
Speaker 1: is you know what we're Breeden's marching orders from, uh
Speaker 1: the Attorney General's office. And you know, I'm not trying
Speaker 1: to defend or or or lay blame at at anyone's feet.
Speaker 1: It's just because it has been a while, but but
Speaker 1: there is a lot that needs to happen. And I
Speaker 1: think I also want to point out to that Piccard
Speaker 1: is operating under a different set of rules. Um, He's
Speaker 1: essentially operating under the under you know, rules that relate
Speaker 1: to bankruptcy proceedings, So it's I don't know that it's
Speaker 1: an entirely fair comparison. And my understanding too, is that
Speaker 1: the Piccard is Piccard and his firm of a whole
Speaker 1: lot more money, um, somewhere closer to a billion dollars,
Speaker 1: is what I what I've heard. I can't verify that certainly,
Speaker 1: but uh in in his attempts to try to secure
Speaker 1: compensation for the victims, Eric, we only have about fifteen seconds,
Speaker 1: but just quickly, Uh, what's the last time when we
Speaker 1: expect payments might begin? Uh really don't have anything beyond
Speaker 1: what the Mr Breeding has said on his website, which
Speaker 1: would be any time this year. If we find out
Speaker 1: anything new, of course, we'll do a story on it
Speaker 1: and and we'll have you back on how came I
Speaker 1: to thank our guests on Barussian and Eric Larson talking
Speaker 1: about distributions to Bernie Madoff's victims,