Madoff Investors to Get Over $1 Billion in Added Recoveries
Published in the Wall Street Journal November 18, 2015
By Jacqueline Palanka
Two judges on Wednesday approved a $1 billion-plus payout to victims of Bernard Madoff’s massive Ponzi scheme, including those who invested with New York money manager J. Ezra Merkin.
Those who invested with Mr. Madoff directly will share $1.18 billion.
Those who invested with Mr. Merkin, who funneled investors’ cash to Mr. Madoff, will share $235 million in a separate payout.
Mr. Madoff, who is serving a 150-year prison sentence, bilked investors out of more than $17 billion in a Ponzi scheme that collapsed in 2008, and his firm is liquidating.
Funds administered by Mr. Merkin went into receivership in 2009 amid accusations that the former chairman of GMAC Financial Services didn’t tell investors he had sunk hundreds of millions of dollars in Mr. Madoff’s firm, which Mr. Merkin denied.
U.S. Bankruptcy Court Judge Stuart M. Bernstein is overseeing the liquidation of Mr. Madoff’s firm, Bernard L. Madoff Investment Securities LLC. With his approval Wednesday of the request to distribute $1.18 billion by the end of the year, Mr. Madoff’s investors’ recoveries in the case will top $9 billion.
Separately Wednesday, court papers show Justice Richard B. Lowe III of New York Supreme Court authorized a $235 million distribution to investors in Mr. Merkin’s Ariel Fund Ltd. and Gabriel Capital LP.
Enabling the payout, the 10th to date, was a multimillion-dollar settlement reached earlier this year with Mr. Madoff’s investment firm over competing claims.
The deal obligated Ariel and Gabriel to contribute about $35 million to Mr. Madoff’s investors, but the funds were to receive a much larger sum—more than $140 million—from the proceeds of the liquidation of Mr. Madoff’s firm.
The latest payout will bring total investor recoveries in the Ariel and Gabriel receivership to date to above $1.4 billion, or $300 million more than the funds were thought to be worth when they began winding down.
Past payouts have been funded by sales of the funds’ other, diverse investment holdings as well as recoveries from litigation.
Ariel and Gabriel investors have also benefited from a $410 million settlement with Mr. Merkin and New York’s attorney general to resolve the allegations that Mr. Merkin secretly invested with Mr. Madoff.
“We had to manage litigation, and we did…and then combined those results with excellently managing the funds,” said receiver Bart Schwartz.
Ariel and Gabriel’s remaining holdings are worth approximately $600 million, according to receivership officials. The officials now hope to bring total investor recoveries up to $2 billion—a difficult feat that, while not obviously achievable at the outset of the case, officials have been anticipating for a while.
“Six months in, we felt very confident that we would get a very good result,” said Robert P. Rittereiser, who is assisting Mr. Schwartz with the receivership.