Early Madoff Investor’s Estate Settles Suit for $32 Million
(Bloomberg) -- The trustee unwinding Bernard Madoff’s Ponzi scheme reached a $32 million settlement with Cohmad Securities Corp., a now-defunct brokerage that once shared a Manhattan office building with the con man and whose principals were among his earliest investors.
The deal includes the estate of founder Maurice "Sonny" Cohn and his widow and daughter, who both had roles at the firm. The settlement represents more than 100 percent of the Cohn family’s personal withdrawals from Madoff’s investment advisory business in the six years before it collapsed, trustee Irving Picard said Friday in a statement.
Cohn and Madoff founded Cohmad, with the firm’s moniker fashioned out of the first three letters of their last names. About 20 percent of Madoff’s victims were referred to him by Cohn, the trustee said. Cohn died in May 2015.
“We negotiated and reached this agreement despite the fact that Cohmad has been insolvent and non-operational, and a key principal, Sonny Cohn, is now deceased,” Kathryn Zunno, one of Picard’s lead attorneys on the case, said in the statement.
A hearing to approve the settlement is scheduled Nov. 30 in Manhattan federal bankruptcy court. Picard has so far recovered about $11.5 billion for thousands of victims who lost a combined $17.5 billion in principal in the scam, which was uncovered in December 2008.
The settlement is the second in less than two weeks for Picard. On Oct. 28, the estate of Beverly Hills money manager Stanley Chais, one of Madoff’s oldest friends and an early investor who died in 2010, agreed to pay $277 million to the con man’s victims as part of a global accord with Picard. Chais’s family had fought to avoid paying victims.
Shortly after Madoff’s fraud was exposed, Picard sued Cohn and his firm claiming they were part of the con man’s network and took more money out of the Ponzi scheme than they put in. The trustee claimed that as much as 90 percent of Cohmad’s income came from referring clients to Madoff.
“By resolving the trustee’s claims, we hope to help those who, like my family, were deceived by Madoff, and begin the process of putting his betrayal behind us," Marcia Cohn said in a statement. "I know that my late father, who was honest, charitable and well-respected in his community, would be satisfied with the agreement we have reached with the trustee.”
Cohmad’s primary business for more than two decades was recruiting wealthy clients into Madoff’s fraud, according to Picard. The ties between Cohmad’s and Madoff’s companies "were so pervasive that they acted in many respects as interconnected arms of the same enterprise," the trustee said in his complaint.
Steven Paradise, a lawyer for the Cohns, didn’t immediately return a call for comment.
Madoff pleaded guilty and is serving a 150-year prison sentence. At the time of his arrest in December 2008, his statements reflected 4,900 accounts with stated balances of about $65 billion, the vast majority of which was fake profit from trades in securities that didn’t exist.