By Daniel Gill
That’s a strong figure. But how strong exactly when compared to other big Ponzi scheme recoveries? Bloomberg Law looked at clawbacks from a handful of notorious scams to find out.
Robert Allen Stanford, principal of Stanford Financial Group, was convicted in 2012 on fraud and other charges stemming from a $7 billion Ponzi scheme over 20 years that helped fund an opulent lifestyle. He’s serving 110 years.
Prosecutors said the now-former billionaire styled himself an international banker and fleeced investors in a scheme built around certificates of deposit tied to a private Caribbean bank, an affiliate company, that in the end offered a return that was “too good to be true.”
Ralph Janvey is the court-appointed receiver for Stanford and his companies. By liquidating assets and pursuing litigation, he’s recovered about $418 million as of October 2017, papers he filed in the case show.
Janvey is still pursing hundreds of millions of dollars for the benefit of creditors.
He’s distributed about $135.4 million, or 2 percent, to creditors holding around $6.9 billion in claims. The receiver, his lawyers and accountants and other professionals working to chase down the money have been paid around $140 million.
Thomas Petters, a prominent Minneapolis businessman with interests in a number of companies, was convicted in 2009 on fraud, conspiracy and other charges for running a $3.7 billion Ponzi scheme. He’s serving 50 years.
Petters solicited investments to purchase and resell electronic goods to large big-box retailers. But that was a mirage. False orders and other documents were created in the scheme, prosecutors said.
Douglass Kelley, the receiver, told Bloomberg Law that Petters used 150 different corporations to carry out money laundering and fraudulent schemes.
Kelley became the Chapter 11 trustee for certain Petters’ companies that he put into bankruptcy.
Petters’ scheme was valued at $3.7 billion, according to the Justice Department. But Kelley said claims have been asserted for about $1.9 billion, and he has recovered about $541 million. Some $253 million, or about 13 percent of claims, have gone to creditors so far.
Professionals have been paid $120 million. Much of these fees are for forensic accountants who have had to pore through the records of 150 corporations tied into the schemes, Kelley said.
Kelley and his lawyers are still pursuing hundreds of millions of dollars in 35 open cases, he said.
Scott Rothstein rapidly rose from obscurity to become one of South Florida’s highest-profile lawyers. He built a 70-lawyer firm, Rothstein Rosenfeldt Adler P.A., and was known for significant political, civic, and charitable contributions. He was also a scammer.
Rothstein, who fled to Morocco with bags of cash before returning to the U.S. to face prosecution, pleaded guilty to conspiracy and fraud in connection with a $1.2 billion Ponzi scheme and was sentenced in 2010 to 50 years in prison. Much of the money he made over several years was from a scheme selling “settlements” of lawsuits that didn’t exist, prosecutors said.
His firm was put into bankruptcy and Herbert Stettin was appointed to serve as Chapter 11 trustee. Michael Goldberg became the liquidating trustee after the Chapter 11 plan was confirmed. Goldberg was also the restitution receiver appointed in the criminal case.
The recovery to creditors was part of a “collateral source recovery” structure, Paul Singerman and Isaac Marcushamer, attorneys for Stettin and then Goldberg in Rothstein Rosenfeldt Adler’s bankruptcy, told Bloomberg Law. This was to ensure that creditors who may have been compensated in the criminal restitution or by a direct lawsuit wouldn’t receive a duplicative recovery.
In the law firm’s bankruptcy case, 100 percent of allowed claims were distributed to the general unsecured creditors, as well as certain subordinated creditors, in the amount of about $227 million, Singerman and Marcushamer said.
Professionals in the case have been awarded fees of approximately $48.7 million, Marcushamer told Bloomberg Law in an email.
Operating from his New York firm, Bernard L. Madoff Investment Securities LLC, Bernie Madoff admitted that he’d turned his wealth management activities into what the Justice Department called “one of history’s largest and most devastating frauds.”
He pleaded guilty in 2009 to 11 felonies, including securities fraud and money laundering. He was sentenced to 150 years for defrauding investors that included pension funds, charitable groups, celebrities, and other individuals.
Picard, the Baker Hostetler attorney who’s the receiver and trustee, has been successful since. He’s recovered more than $12.8 billion, according to statements on a website he and his attorneys created, and is chasing another $4 billion in ongoing litigation and appeals.
In an interview on Bloomberg Television, Picard’s attorney David J. Sheehan said that “we’ve got a good chance of hitting 100 percent here,” depending on the outcome of litigation.
Recovery has come at a steep price, however. The court has allowed fees to Picard and professionals totaling more than $1.09 billion, although the firms haven’t been paid that amount yet.
Unlike the other cases, money for fees in the Madoff case doesn’t come from recovered amounts. Instead, the trustee and the professionals are funded by the Securities Investor Protection Corporation.
SIPC oversees the liquidation of member broker-dealers that close when they go bankrupt or wind up in other financial trouble and customer assets are missing. SIPC finances the payment of administrative expenses in Madoff by advancing funds to the trustee.
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