Suicide Won’t End Madoff Lawsuits

In the days leading to his death on Saturday, Mark Madoff was feeling increasingly despondent about his worsening legal situation, say people familiar with the matter, particularly a suit filed by the trustee recovering assets for victims of his father’s Ponzi scheme.
But Mark Madoff’s suicide won’t put an end to the legal challenges.

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“The litigation will take its course and the death of Mark Madoff will not impact that fact,” the court-appointed trustee’s lawyer, David Sheehan, said in an email Sunday.

A medical examiner confirmed on Sunday that Mark Madoff, 46, had killed himself in his Manhattan apartment by hanging himself with a dog leash. The suicide came two years to the day after his father, Bernard Madoff, was arrested following his confession about his massive fraud to Mark and his younger brother Andrew, who had spent their entire professional lives working for their father.

While no criminal charges have been filed against either Mark Madoff or his brother, Andrew, the ongoing probe by federal prosecutors hung over the two, who also came under escalating scrutiny from the bankruptcy trustee, Irving Picard.

Last week, three of Mark Madoff’s children were sued by Mr. Picard, a development that “particularly disturbed” Mr. Madoff, according to a person who spoke with him in recent days.

Mark Madoff was also sued as a director of Bernard Madoff’s London operation, adding to a suit Mr. Picard filed against family members including Mark Madoff on Oct. 2, 2009, seeking to recover about $200 million in compensation and other payments to them that Mr. Picard said were tainted by Bernard Madoff’s Ponzi scheme.

In recent conversations, Mark Madoff sounded “pretty distraught” in discussing the latest developments, the person who spoke with him recently said. “Some of us were worried about him, though we never expected this.”

Earlier, Mark Madoff had complained to friends about his inability to find a job in the financial services industry, the only business he had ever worked in.

“Despite what people think, I need to work,” he told another friend, a Wall Street trader, in late 2009. “How am I going to support my family?” He noted that the legal bills never seemed to end and that he needed a job to keep up with them.

He also struggled with the uncertainty about where the legal proceedings might go, including reports that criminal investigators were looking into family members, including him, a person familiar with his thinking said. After Mr. Picard’s lawsuit last year, Mark Madoff agreed to limit his spending and document purchases over $500 to the bankruptcy trustee.

The Wall Street trader told Mark Madoff that people had doubts about hiring Mr. Madoff because of his closeness to his father. Bernard Madoff hired his son in 1986, but always kept him in the trading side of the business, which was generally separate from the fraudulent investment business.

Mark Madoff told the trader that he didn’t know about his father’s fraud. The friend said he believed him, recalling a time years ago that Mark had told him Bernard Madoff even controlled how the chairs in the conference room were arranged under the table.

People who knew Mark Madoff said that aside from sharing an interest in fly fishing with his brother, working on Wall Street was his center of gravity.

Many mornings before Bernard Madoff’s arrest, Mark Madoff would arrive at his trading desk before 7 a.m. On the Friday before he died, he was still following Wall Street news, sending to friends and ex-colleagues around 5 p.m. a Reuters blog item about Goldman Sachs and Sen. Carl Levin.

“He was among the best in understanding market structure,” said John Giesea, chief executive of the Security Traders Association, where Mark Madoff once served as a governor and president of the trade group’s New York affiliate.

In recent months, as his job search on Wall Street stalled, Mark Madoff started developing iPad applications as a way to keep busy, friends said.

Mark Madoff told his friend the trader that he was happy to hear about two of Mr. Madoff’s former employees who had found new jobs on Wall Street. “He wanted people to move on and get on their feet,” this person said.

But he also worried about his children, whether they’d face a life of harassment because they were Madoffs, the trader noted.

“He was devastated,” this friend said, noting that when he first met Mark Madoff, he used to talk about the importance of “integrity and candor” in the world of trading. “On Wall Street, your reputation is everything,” he recalls Mark Madoff telling him.

In a statement on Saturday, Mark Madoff’s lawyer, Martin Flumenbaum, called his suicide “a terrible and unnecessary tragedy. Mark was an innocent victim of his father’s monstrous crime who succumbed to two years of unrelenting pressure from false accusations and innuendo.”

Mr. Picard said on Saturday: “This is a tragic development, and my sympathy goes out to Mark Madoff’s family.”

That Mr. Picard intends to pursue the suits—there are at least six that name Mark Madoff as a defendant—is not surprising. Among the hundreds of suits he has filed to recover assets for victims are suits against estates.

Legal experts are unsure what impact Mark Madoff’s death will have on the lawsuits. But because they are focused on the family’s estate, they are expected to proceed as planned.

Mr. Picard accused Mark Madoff in the October 2009 lawsuit of receiving at least $66.9 million improperly through Bernard Madoff’s investment company. His lawyer has called the suit baseless and has sought to have it dismissed.

The lawsuit alleged that Mark Madoff knew or should have known that his father’s investment business was a fraud.

Mr. Picard said that if Mark Madoff and other family members at the firm whom he also sued “had been doing their jobs—honestly and faithfully—the Madoff Ponzi scheme might never have succeeded, or continued for so long.” Other family members also say through representatives they had no knowledge of the fraud.

According to Mr. Picard, Mark Madoff received “astronomical compensation”—$29.3 million from 2001 to 2008, including bonuses of $4.8 million in 2006 and more than $9 million in 2007.

He said Mark Madoff deposited a total of $745,482 into seven customer accounts he held and his family held with the investment advisory business, but redeemed $18.1 million.

At a hearing in October 2010 on the defendants’ motion to dismiss the suit, Mr. Flumenbaum said the sons had been “incredibly victimized by their father’s sociopathic fraud.”

“The time has come for the sins of the father not to be visited on the children,” he said.

The bankruptcy judge, Burton Lifland, hasn’t ruled.

At the hearing he said: “This is a real close family unit, so rogue activity, if it did take place, should be easily discoverable, shouldn’t it? One would think.”
WSJ