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Madoff’s Wife Withdrew $15.5 Million, State Claims
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(February 11, 2009 - Wednesday) - By Christopher Condon
http://www.bloomberg.com/apps/news?pid=20601103&sid=adJ0_ImwFMcs&refer=news
Feb. 11 (Bloomberg) -- Bernard Madoff’s wife withdrew $15.5 million from a brokerage account at a firm co-owned by her husband late last year, including $10 million on the eve of his arrest, Massachusetts securities regulators said.
Ruth Madoff, 67, removed $5.5 million on Nov. 25 and the rest on Dec. 10 from New York-based Cohmad Securities Corp., according to a complaint filed today by Secretary of the Commonwealth William Galvin. Bernard Madoff was arrested Dec. 11 for allegedly operating a $50 billion Ponzi scheme.
Galvin, the state’s top securities regulator, said evidence of the withdrawals supports his claim that Cohmad and Bernard L. Madoff Investment Securities LLC are “so intertwined that they could be viewed as a common enterprise.” He is seeking to revoke Cohmad’s state securities registration for failing to fully cooperate with his investigation about its relationship with Madoff.
“We cannot tolerate licensed securities dealers who refuse to assist in the detection and prosecution of fraud,” Galvin said in a statement today.
Ira Sorkin, an attorney for both Bernard and Ruth Madoff didn’t immediately return a call for comment on Galvin’s complaint. Ruth Madoff, a former board member at the Queens College Foundation in New York, hasn’t been charged in the case.
Bernard Madoff, 70, was arrested in New York after allegedly confessing that he and his firm used new money to pay old investors in a Ponzi scheme. He faces as much as 20 years in prison if convicted of securities fraud.
Deadline Extended
U.S. prosecutors today obtained a 30-day extension of a deadline to indict Madoff. The government was required either to return a grand jury indictment or present evidence to a judge by today showing why Madoff was arrested. Instead, Sorkin said in an interview he agreed to reschedule the hearing for March 13.
A complete list of assets held by Madoff and his wife was provided in December in a confidential tally to the U.S. Securities and Exchange Commission. John Heine, a spokesman for the SEC, declined to comment on whether the withdrawn money was on the list of assets.
Irving Picard, the trustee liquidating Madoff’s firm, has recovered about $946.4 million in cash and securities for customers of the bankrupt firm. Kevin McCue, spokesman for Picard’s law firm, Baker Hostetler LLP in New York, declined to comment.
Difficult ‘Recovery’
Revelation of the withdrawals was “interesting from the standpoint of the criminal prosecutions but not likely to have any meaningful impact on the aggregate amount of recovery available for Madoff’s victims,” Philip Bentley, an attorney for New York law firm Kramer Levin Naftalis & Frankel LLP, said in an interview. Bentley represents investors with claims against Madoff.
Government prosecutors tried to have Madoff jailed in January for violating a court-ordered asset freeze by attempting to dispose of $1 million in valuables.
Madoff mailed $1 million in watches and jewelry, including Tiffany and Cartier watches and a diamond necklace, to relatives in December. A federal court judge in Manhattan allowed Madoff to remain under house arrest in his Upper East Side apartment.
Yusill Scribner, a spokeswoman for Acting U.S. Attorney Lev Dassin in Manhattan, declined comment.
In 2006, Ruth Madoff took steps to protect a property in Florida from seizure under the state’s homestead laws, CBS News reported on Jan. 30. A 2006 homestead application was denied by the Palm Beach Property Appraiser’s office, CBS said. She reapplied last September and was granted an exemption on Jan. 12, CBS said.
Cohmad
Cohmad, based in New York, was founded by Madoff and Maurice Cohn, chairman and chief executive officer of the company, using portions of each man’s name to form the firm’s title. Galvin’s statement identified Madoff’s brother Peter Madoff as another owner and Cohn’s brother Milton Cohn as a director.
Cohmad is named in Galvin’s complaint as a “feeder fund” to Madoff’s investment firm. Cohmad earned more than $67 million over eight years sending investors’ money to Madoff, the complaint said. Galvin called the two firms “deeply intertwined.”
Documents showing Ruth Madoff’s withdrawals from a Cohmad account were attached as exhibits to the complaint.
Cohmad and its principals either failed to respond to subpoenas or failed to provide complete answers to state investigators’ questions, Galvin said in his statement.
His securities division wants to account for all Massachusetts investors that put money in Madoff’s firm through Cohmad.
$67 Million
Madoff Investments made monthly payments to Cohmad over eight years “that appear to add up to $67 million,” the complaint said. The payments made up more than 84 percent of Cohmad’s total income, the complaint said.
The figure doesn’t include commission payments to Robert Jaffe, a co-owner of and vice president of Cohmad and head of its Boston office.
Jaffe is the son-in-law of Carl Shapiro, 95, a Boston philanthropist who allegedly lost $430 million in personal funds and assets from his family’s foundation that was invested with Madoff. Massachusetts officials said last month that Jaffe, 64, is considered a witness and isn’t under criminal investigation.
Jaffe appeared at the securities division office in Boston on Feb. 4 and “declined to answer any questions regarding his business, Cohmad’s business or his connection to Madoff Investments,” invoking his Fifth Amendment rights, the statement by Galvin’s office said.
‘Victim’ of Madoff
Jaffe’s attorney, Stanley S. Arkin of Arkin Kaplan LLP in New York, said his client wasn’t given enough time to prepare for questioning by Massachusetts investigators, so he advised Jaffe to invoke his constitutional right not to testify.
Jaffe “was a victim of Madoff’s fraud and had no knowledge of the scheme,” Arkin said in an e-mailed statement.
Payments from Madoff through Cohmad included $526,000 for Sonja Kohn, 60, chairwoman and founding partner of Bank Medici AG in Vienna. The private bank invested $3.2 billion in client assets with Madoff. According to Galvin’s complaint, Kohn referred clients to Madoff.
Carolin Treichl, a spokeswoman for Bank Medici, said she wasn’t able to comment immediately.
Bank Medici managed Luxembourg-based Herald (Lux) US Absolute Return Fund, which made investments with Madoff. Luxembourg’s financial regulator today said it will seek to liquidate the fund, which had $225.7 million as of Oct. 31, according to Bloomberg data.
To contact the reporter on this story: Christopher Condon in Boston at Ccondon4@bloomberg.net.
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