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Madoff's Assets Filed But Secret

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By DAVID SCHEER and ALLAN DODDS FRANK

Bloomberg News

Published: January 1, 2009

A list of Bernard Madoff's assets filed Wednesday with the U.S. Securities and Exchange Commission will not be made public, said the regulator, which accused him in a lawsuit this month of directing a $50 billion fraud.

A federal judge ordered Madoff to provide the SEC an accounting of all investments, loans, lines of credit, business interests, brokerage accounts and other holdings. The court has not authorized its public disclosure, said SEC enforcement official Andrew Calamari, who confirmed receipt of the list.

"I think one of the fears here is that much of this money may be in offshore funds," Columbia Law School professor John Coffee told Bloomberg Television, adding that the SEC wants to keep the assets secret to protect them. There is the danger that foreign regulators and foreign creditors may seek to seize that money if the names and sources are made public.

Madoff, 70, was charged last month by federal prosecutors for allegedly directing a Ponzi scheme through his New York investment firm. Defense attorney Ira Sorkin has said Madoff's company is cooperating with the government. His client met with prosecutors earlier this month, according to people familiar with the case.

Shortly before he was arrested, Madoff told employees that he had $200 million to $300 million left, according to an FBI complaint. Sorkin declined to comment today on the amount of Madoff's remaining assets.

Madoff's personal wealth is said to be substantial. He had mansions in the Hamptons and Palm Beach, a penthouse in Manhattan and a handful of luxury yachts. His firm operated proprietary stock trading desks in New York and London that were supposedly investing the family's vast fortune.

Those assets would likely cover a fraction of the billions of dollars that investors entrusted to Madoff.

Law firms representing Madoff's clients said they were nonetheless still eager to see what might be available to repay victims. "Like everyone else, we expect it to be made public," said attorney Matthew Gluck, a partner at Milberg LLP. Gluck added that if the SEC refuses to disclose the documents, his law firm would consider other steps to obtain the information.

Madoffs firm collapsed after he was arrested Dec. 11. He told his sons that he directed the Ponzi scheme, in which old investors are paid off with money from new ones, according to a lawyer for the brothers. The firm is liquidating under the Securities Investor Protection Corp., whose funds cover securities and cash claims of as much as $500,000 per customer, including as much as $100,000 in cash.

The Dec. 18 court order that Madoff disclose his assets required the list be given directly to the regulator, Calamari said. It does not authorize public release of materials related to the SEC's ongoing investigation, he said. The effort seeks to preserve and recover money for investors and hold wrongdoers accountable.

The catalog of Madoff's assets may be attractive to angry investors as they sue to recoup lost money. Madoff's investment advisory business may have had more than 4,000 customers, people familiar with investigation said recently.

Losses disclosed by some clients may have been inflated by purported gains in their accounts with Madoff. Yeshiva University, which previously valued its holdings with Madoff at $110 million, said Tuesday that its net investment was about $14.5 million before inflation by fictitious profits.

Madoff may very well have given money to other people or other entities, said Fred Longer, a lawyer suing hedge fund operator Tremont Group Holdings Inc. over Madoff-related losses. He said the SEC list will be useful primarily to investors suing Madoff directly. Those are the rabbit trails, Longer said. They will need to trace all of them to find the cash, and it will take a lot of forensic efforts.

Congress is set to hold hearings next week on the Madoff scandal. Witnesses scheduled to appear before the House Financial Services Committee on Jan. 5 include David Kotz, the SEC's inspector general, and Harry Markopolos, a former investment firm employee who flagged suspicions about the alleged Ponzi scheme.

Information from The Associated Press was used in this report.

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