Irving Picard at Center of Post-Madoff Storm

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J.B. Reed / The New York Times

Attorney Irving Picard briefs the claims paying team involved in the Bernie Madoff case.

An earlier version of this story contained erroneous information regarding the procedures by which the Securities Investor Protection Corporation (SIPC) will compensate Irving Picard. The article stated that bankruptcy attorneys working on behalf of SIPC, including Mr. Picard, receive a percentage of recovered funds. SIPC payments to attorneys are not directly linked to a percentage of monies recovered, nor are such payments drawn from recovered funds.

Bernie Madoff bankruptcy trustee, Irving H. Picard, may be the hardest working man in the collections business — and maybe one day the richest.

Picard, the New York-based lawyer who could have easily doubled for actor Frederic March in film Inherit the Wind, is at the turbulent center of the post-Madoff world, a world that includes multi-billion dollar feeder fund lawsuits, multi-million dollar deals with international banks, and, less grand, the issuing of multi-hundred thousand dollar checks to the nearly 7,000 direct account holders caught up in Madoff's massive Ponzi scheme.

Picard, in his late 60s, is a rare bird in the quiet world of bankruptcy trustees, a blend of a traditional Chapter 7 bankruptcy panel trustee (of which there are 1,200 in the U.S.) and Securities Investment Protection Act (SIPA) trustee.

A SIPA trustee handles bankruptcies when the Securities Investor Protection Corp. (SIPC) steps in to take charge of fallen brokerage houses. Picard is considered the superstar of SIPA trustees, having handled the largest cases SIPC has managed, and other large non-SIPC cases, such as portions of airline TWA's bankruptcy. He has participated in at least 38 major bankruptcy decisions. According to Stephen Harbeck, president of the Securities Investors Protection Corporation, Picard has served as trustee in more brokerage firm liquidations than anyone else in the U.S.

A SIPA trustee's job, not unlike a Chapter 7 trustee, is to recover property, assess claims and liquidate any other assets of a bankrupt firm for the benefit of the estate and its creditors. Consequently, Picard is using his authority to collect from customers who received preferences, non-existent principal, and/or payouts of fictitious profits to the detriment of other defrauded customers whose money was consumed by Madoff's global Ponzi scheme.

When it comes to paying Picard, the recovered funds will not be touched. Instead, SIPC will pay all fees and administrative costs related to the case from monies it receives from its member institutions, an account with some $1.6 billion in it.

But Picard still stands to put a pretty penny in his pocket. SIPA trustees like Picard and their staffs get hourly fees and expenses paid for, as well as discretionary amounts based on a number of factors.

Normally, Chapter 7 bankruptcy trustees personally receive 3% of anything over $1 million they recover for victims. In SIPA cases, however, the amount is not based strictly on a percentage of monies recovered since often there is no money remaining in accounts.

Lawyers familiar with the case estimate the legal costs of the Madoff case — which could run on for two years or more — could exceed $30 million. Picard's fees, they say, will likely be less than that, though it's impossible to know precisely how much less. So far, Picard has collected $1.2 billion in recovered funds, so even if his fee were half the normal bankruptcy trustee fee he would still pocket $15 million.

And the money is rolling in.

This week, the Spanish bank Banco Santandar agreed to hand over $235 million; it had been liable to pay up to $275 million, the total amount its Optimal funds subsidiary had withdrawn in the 90 days leading up to the December 11, 2008, collapse of Madoff's decades-long crime. Santander, the most exposed of the European banks involved with Madoff, with $3 billion lost, is still facing a class-action lawsuit.

So far Picard has collected $1.2 billion from banks, personal property, and funds around the world. Monies found in Madoff's accounts were just over $900 million, a far cry from the estimated $20 billion or so that Madoff swindled from investors.

In the last 30 days, Picard has filed six major lawsuits, many against Madoff's largest feeder funds. The combined suits ask for the return of over $10 billion in fraudulent profits. Picard's complaints allege the people running the funds "knew or should have known" Madoff was a fake, simply based on the exorbitant, non-stop returns they received. Suits have been filed against Walter Noel's Fairfield-Greenwich Group, which withdrew $3.2 billion since 1995, Jeffrey Picower's funds, totaling $6.7 billion withdrawn, and against Stanley Chais, whose funds took out over $1 billion since 1995.

Last month, Picard also completed the auctioning off of Madoff's market maker business for $25 million to Castor Pollux Securities LLC of Medfield, Massachusetts, which paid $1 million at closing and up to $24.5 million in deferred compensation through December 2013.

To date, SIPC and Picard have committed $116 million to satisfy claims from 237 Madoff victims, each receiving up to the limit of $500,000. Picard has even created a "Hardship Case" program, in an effort to help those that have been completely wiped out by their Madoff investments.

"This is the kind of case any bankruptcy trustee would love to have," said Robert C. Furr, president, National Association of Bankruptcy Trustees. "It's a high profile case, you can make a lot of money, but you have to be able to hold on; it takes a long time, maybe four or five years before [the bankruptcy trustee] gets paid."

Robert Chew is a former investor with Madoff via a feeder fund. He lives in Colorado.