Monday 11 December 2017

Koch firm refusing to hand over $21m profit from Madoff scam

Bernie Madoff is serving a 150-year sentence
Bernie Madoff is serving a 150-year sentence

Erik Larson

Billionaire brothers Charles and David Koch have made plenty of good business decisions over the years. Placing millions of dollars with Ponzi-scheme mastermind Bernard Madoff may have been one of them.

Koch Industries invested an unknown sum with the conman's now-defunct securities firm years ago and walked away with $21.5m in profits before Madoff's arrest in 2008.

But since 2012 the company run by the conservative-activist brothers, who are today worth a combined $109bn, has refused legal demands to return the money.

Irving Picard, the trustee liquidating Madoff's firm, contends in a suit that the cash is fraudulent proceeds of the scam and should be shared among the thousands of victims.

Koch Industries, and dozens of other early investors named in 87 other lawsuits, argue the company can keep the profits because the money was sent overseas and is beyond US jurisdiction. At stake: a total of $2bn.

The battle is coming to a head in Manhattan bankruptcy court, where Judge Stuart Bernstein could rule within weeks on a key issue affecting Picard's suit. The defendants claimed a victory in 2014 when US District Judge Jed Rakoff said that money transferred overseas is generally out of Picard's reach.

In the Koch case, the $21.5m was sent in 2005 to a fund based in the British Virgin Islands, and then to a Koch entity in Britain.

Picard isn't accusing Koch and the other defendants of wrongdoing.

As in his many prior suits to recover cash, he contends the returns aren't legitimate because Madoff used money from new investors to cover the fake profits of older ones.

Sunday Indo Business

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