UPDATE 4-Madoff trustee recoups biggest settlement yet

* Adds billions to Madoff investors’ recovery pot

* Prosecutor calls it largest forfeiture in U.S. history

* Most significant settlement yet for Madoff firm trustee
(Rewrites to add details of settlement, lawsuits)

By Grant McCool

NEW YORK, Dec 17 (BestGrowthStock) – The man assigned to recover
money for Madoff’s victims won his biggest settlement yet — an
agreement by the estate of longtime Madoff friend Jeffry
Picower to give back $7.2 billion in profits from the epic
fraud.

The settlement significantly boosts the recovery pot to
close to $10 billion, capping a weeks-long flurry of
settlements and lawsuits around the Dec. 11 second anniversary
of Bernard Madoff’s arrest and confession to orchestrating what
is considered the biggest financial fraud in history.

Picower died of a heart attack in Florida in October 2009
at the age of 67 — five months after the court-appointed
trustee, Irving Picard, claimed Picower’s rates of return were
implausibly high from his investments and control of some
Madoff accounts since the late 1970s.

“This is the largest forfeiture recovery in U.S. history,”
Manhattan U.S. Attorney Preet Bharara said at a press
conference with Picard, the Federal Bureau of Investigation and
the Internal Revenue Service to announce the settlement by
Picower’s wife, Barbara.

Bharara said she “has agreed to forfeit $7.2 billion …, a
figure that represents every last dollar of the Picowers’
profit from Bernie Madoff’s fraud.”

Picard said that as soon as practicable after the
settlement is approved by a U.S. Bankruptcy Court judge in New
York, he would ask the court to begin an initial distribution
of funds to customers. The approval is expected next month.

The family of the accountant and lawyer turned billionaire
philanthropist said that Picower at the time of his death had
been working toward reaching a settlement. His wills over the
years directed most of his wealth to charity, the family
lawyer, William Zabel, said.

Madoff, 72, is serving a 150-year prison sentence after
pleading guilty in March 2009 to orchestrating the massive
scheme. U.S. prosecutors estimated the international investment
fraud took in about $65 billion over at least two decades.

The trustee has put the amount investors lost at about $20
billion and this month ramped up his global search for money,
adding to lawsuits he has filed over the last two years against
individuals, Madoff family members, funds and banks.

One defendant was Mark Madoff, the eldest son of Bernard
Madoff, who committed suicide on Saturday’s anniversary of his
father’s arrest. Mark Madoff and his brother Andrew ran the
brokerage at the firm. They denied prior knowledge of the
fraud.

Picard sued several major banks in recent weeks to bring
the total sought for the victims to about $50 billion.

The banks include UBS AG (UBSN.VX: ) (UBS.N: ), HSBC (HSBA.L: ),
JPMorgan Chase & Co (JPM.N: ), Citigroup Inc’s Citibank (C.N: ),
Natixis (CNAT.PA: ), Fortis Prime Fund Solutions Bank (Ireland)
Ltd, ABN AMRO Bank NV, Banco Bilbao Vizcaya Argentaria
[BBVA.MC], Nomura (8604.T: ) and Merrill Lynch, owned by Bank of
America (BAC.N: ) since Jan. 1, 2009. Some of the banks have
vowed to fight the lawsuits.

One lawsuit targeted Austrian banker Sonja Kohn, founder of
Bank Medici, and scores of her associates or related funds and
banks for $19.6 billion, including Italy’s UniCredit (CRID.MI: )
and its unit, Bank Austria.

Barbara Picower said in a statement through her lawyer that
she was “absolutely confident that my husband Jeffry was in no
way complicit in Madoff’s fraud and want to underscore the fact
that neither the Trustee nor the U.S. Attorney has charged him
with any illegal conduct.”

She called the Madoff Ponzi scheme deplorable. “I am deeply
saddened by the tragic impact it continues to have on the lives
of its victims. It is my hope that this settlement will ease
that suffering.”

A Ponzi scheme is one in which early investors are paid
with the money of new clients.

Until Friday, Picard had secured about $2.6 billion in
settlements and asset sales since the collapse of Bernard L.
Madoff Investment Securities LLC. (For a factbox, click
[ID:nN11140139])

The money recovered is to be distributed to investors under
the auspices of the U.S. Department of Justice and the
Securities Investor Protection Corporation, an agency
established by Congress to help investors of failed
brokerages.

“The importance of this settlement cannot be overstated, as
it shows significant progress in our efforts to assemble the
largest customer fund possible,” Picard said in a statement.

Thousands of investors who lost money to Madoff are
challenging the trustee in court over his method of calculating
the so-called “net winners” — clients who took out more than
they deposited. Some of them lost their life savings, but
Picard is still suing them in so-called clawback lawsuits,
because according to his calculations, they made more over the
years than they lost.

Madoff victims complain that Picard is undervaluing their
losses, and an appeal of his methods is pending.

The case is Picard v. Jeffry M. Picower, U.S. Bankruptcy
Court for the Southern District of New York No. 09-01197
(Additional reporting by Basil Katz; Editing by Gerald E.
McCormick, Lisa Von Ahn and Richard Chang)

UPDATE 4-Madoff trustee recoups biggest settlement yet