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January 8, 2009 4:12 PM

Madoff Roundup: $173 Million in Checks, Prison Requests, and Angry Oligarchs

Posted by Brian Baxter

While assistant U.S. attorney Marc Litt might be ticked that Bernie Madoff mailed more than $1 million in jewelry and watches to family and friends in late December, at least he doesn't have to worry about trigger-happy Russian oligarchs coming after him.

Yes loyal readers, the Bernie Madoff world continues to turn, with each day bringing more bizarre news than the last.

The latest turn centers around efforts by federal prosecutors in Manhattan to nix the terms of Madoff's bail nixed because of his million-dollar mailings. In a letter to U.S. magistrate judge Ronald Ellis released Thursday afternoon, prosecutors say they have discovered 100 checks totalling nearly $173 million signed by Madoff in a desk in his office.

Litt claims that the checks are made out to close friends and family of the disgraced investment manager. The alleged discovery dovetails nicely with prosecutors allegations that Madoff planned to distribute between $200 million and $300 million to friends, family, and employees before being arrested in December.

The revelations surely aren't helping Madoff's lawyers at Dickstein Shapiro, who are arguing that their client knows nothing of the mailings and couldn't be further from a flight risk.

Speaking of flight risks, we found this story in yesterday's New York Times about Austrian banker Sonja Kohn fairly gripping. Kohn is the founder of Vienna-based Bank Medici. According to The Times, the high-profile, red wig-wearing Kohn has gone into hiding, worried about her safety given that a large chunk of the $2.1 billion she invested with Madoff belongs to Russian oligarchs.

"With Russian oligarchs as clients," an anonymous Viennese banker who knows Kohn tells the newspaper, "she might have reason to be afraid."

Others are taking less of a John Le Carré inspired approach to recouping lost assets.

Noted philanthropists Carl and Ruth Shapiro, who made their fortune from women's apparel line Kay Windsor (sold to Vanity Fair in 1971), have retained Shearman & Sterling litigation partner Steven Molo and bankruptcy and restructuring partner James Garrity, Jr., to evaluate their legal options.

Molo tells us he was retained "fairly recently" by the Shapiro family, which runs the well-regarded Boston-based charity The Carl and Ruth Shapiro Family Foundation. It's been reported that the Shapiros first invested with Madoff over 40 years ago, sinking as much as $545 million into Madoff's funds, including $145 million from their foundation.

According to a story in the Boston Globe, they continued investing until the bitter end, giving Madoff $250 million of their own personal money just 10 days before the investment manager was arrested on December 11. The government agency created to help customers of failed brokerage firms recover assets--the Securities Investor Protection Corporation--can only offer reimbursements of $500,000 per claim.

Molo brings some well-deserved gravity to the entire Madoff affair.

"It's just an incredibly sad situation," he says (Molo's also juggling engagements for Deutsche Bank against Donald Trump and Solow Realty against Marc Dreier). "So many people were just wiped out because they trusted this guy."

The Times reported on Thursday that one well-known investor who did lose money to Madoff likely won't be pursuing legal action. That would be fugitive financier Marc Rich, who fled to Switzerland in 1983 to escape tax evasion charges before receiving a widely-condemned pardon from President Clinton on the last day of his administration in January 2001.

A spokeswoman for Rich in Switzerland told The Times that the former commodities trader had lost between $10 million and $15 million that he had invested with Madoff through GMAC chairman and money manager J. Ezra Merkin.

While the thought of Rich returning stateside to press a claim against Madoff brings a smile to our face, it's about as likely to happen as President Bush making one of his last acts in office a Madoff pardon. (The same Rich spokeswoman called his losses "insignificant.")

Of course, given the various twists and turns in the Madoff matter so far, there's always tomorrow.

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