Some of Bernie Madoff's victims could get back up to half what they invested with him after the widow of a close pal of the Ponzi schemer agreed to give the feds $7.2 billion.
"Today is a good day for a group of people who have had little cause for optimism," said Janice Fedarcyk, the FBI's New York chief. "People who two years ago faced the devastating prospect of losing everything now stand to recover about half their investment."
The trustee in charge of compensating Madoff victims struck the mammoth deal - the largest forfeiture in U.S. history - with the estate of Florida magnate Jeffry Picower, believed to be the largest beneficiary of the scam.
Picower earned billions investing with Madoff and steering clients to him before he had a heart attack in his pool and drowned more than a year ago.
Court-appointed bankruptcy trustee Irving Picard sued Picower, saying he could have or should have known he was earning dirty dividends.
His widow, Barbara, who was left $200 million in his will, insisted her philanthropist husband was not part of Madoff's criminal enterprise.
"We will return every penny received from almost 35 years of investing with Bernard Madoff," Barbara Picower said. "I believe the Madoff Ponzi scheme was deplorable, and I am deeply saddened by the tragic impact it continues to have on the lives of its victims."
Victim organizer Ronnie Sue Ambrosino said she was glad Picower's estate has to pay up, but said many individual investors will never see a dime.
Picard has ruled that only clients who lost some of their principal investment should be compensated. Those who took out more money than they put in - even if they never got the phony profits Madoff put on their balance sheets - are out of luck.
"Innocent victims had no knowledge of the fraud and are not benefitting from the money that Picard is getting back," Ambrosino said.
The $7.2 billion payout will be added to $2.6 billion the government has already recovered. The total is about half the $20 billion in investment cash Madoff took from customers.
"Today is a significant day for the Madoff customers," said Picard, the court-appointed trustee, who joined Manhattan federal prosecutors in negotiating with Picower's estate. Manhattan U.S. Attorney Preet Bharara said the settlement "provides a significant measure of hope for the many victims of Bernard Madoff's horrific crimes."
A federal judge approved the deal yesterday. It will be formalized in U.S. Bankruptcy Court in January. Victims will start seeing some of the money in the first three months of 2011.With News Wire Services.