Philanthropy faces Madoff suit

Trustee says Picower should have seen fraud

By Tom Hays
Associated Press / May 13, 2009
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NEW YORK - The trustee overseeing the liquidation of Bernard Madoff's assets has sued one of the nation's leading educational philanthropies, even though the organization claims it was wiped out by the disgraced financier's massive fraud.

The complaint filed yesterday in Manhattan bankruptcy court alleges the Picower Foundation and several related entities made nearly $7 billion by investing with Madoff. At least $5.1 billion of that came out of the pockets of victims of a giant Ponzi scheme, and should be returned, it said.

Trustee Irving Picard alleged that foundation founders Jeffry Picower and his wife, Barbara - friends of Madoff for decades - "knew or should have known that they were benefiting from fraudulent activity or, at a minimum, failed to exercise reasonable due diligence."

An attorney for the couple, William Zabel, said his clients were never aware anything was amiss. "They were totally shocked by his fraud and were in no way complicit in it," he said.

The Palm Beach, Fla.-based foundation had given millions to the Massachusetts Institute of Technology, Human Rights First, and the New York Public Library. It also funded diabetes research at Harvard Medical School.

The trustee's complaint says Madoff managed accounts that earned astronomical returns over 13 years. One purported to earn 950 percent in 1999.

Madoff, 70, pleaded guilty in March to charges that his investment operation was a multibillion-dollar scam.

In another complaint filed yesterday, the trustee said an overseas hedge fund, Harley International Ltd., knew or should have known that its $1 billion in returns were fraudulent.

Also yesterday, The New York Times reported that about $12 billion was pulled out of accounts at Madoff's firm last year, citing people briefed on the financier's records. Most of that sum was withdrawn by various "feeder funds," the paper said, including funds already the targets of lawsuits by the trustee.