Over the course of four years, a firm hired by the US to distribute four billion dollars to victims of Bernard made Os ponzi scheme racked up thirty eight point eight million dollars and billings. As for those victims, well, they're still waiting for the first checks. That's what my Bloomberg News college Eric Larson discovered through a Freedom of Information Act request, and he is with us in our New York studio to tell us more about it. Also
with us is John Beruscian. He's a white collar defense attorney at Bowditch and Dewey. Thank you both for joining us. Eric, just start off by telling us about this fund. It's not the only source of compensation for the made off victims, right, that's correct. The main source of compensation is that through the court appointed trustee, Irving Picard, who has been working on the case since two thousand nine. UH, they have recovered over eleven billion dollars and distributed nine billion dollars
of that back to victims. But there's this other fund, the d o J fund that they've they've had since two thousand twelve. UH that was financed through some forfeiture actions and they've been sitting on it ever since. And tell me about your fourier request. What what exactly did you learn from it? Well, really just that that figure that they that the billing, the thirty eight point eight million dollars. We had asked the d o J for all documents showing how much they have agreed to pay
this firm for their work. They didn't provide any documents, but they did give us that one figure. And Uh, it was a surprise, I think to a lot of victims because thousands of them have been hoping to tap this fund for several years now and haven't been able to. John, You've had a lot of experience with with forfeitures. Uh, tell us what could be taking so long to distribute
all this money? Well, what strikes me initially is that the massive scale of of the fraud to begin with makes figuring out who is entitled to compensation and how much extreme and extremely difficult process to begin with. Unfortunately, as you can imagine, and as we have seen in many kind of victim compensation funds, UH, many are riddled
with with fraudulent attempts to get money. So that's one thing that that that needs to happen in any kind of fund, is that we need to make sure that the people who are actually getting the money are entitled to it and that people are being compensated on some
kind of equal basis. Um. My understanding is that that that the fund that Mr Breeden is overseeing is set up to compensate not only victims who invested directly with made Off, but who also invested through feeder funds into the made Off funds, which I could see how that could make things even even a little bit more difficult, or maybe I'll lot more difficult because you have to identify who those people are. You still have to identify in determine how much they may or may not have recovered.
Are there potential subrogation issues within the situations where maybe an insurance company paid out on an E and O type claim? Uh that that there's a lot that needs to be done by the same token. It's been five years I think since since since they were given this money, so that seems like a long time. Um in in the money that breeding has been paid, which is um uh, you know, I estimated, well my math is right about one percent, maybe a little less of the total amount
of the fund is still a lot of money. Um, I got to think that, you know, it would be a pretty easy thing to audit. Eric, What have you heard from the fund about this? They have, you reported, missed a number of deadlines that they've they've put out there for themselves along the way. What are they saying about why this is taking so long? Well, in February two thousand sixteen, they estimated that they would start sending
out checks by the end of the year. That didn't happen, And now essentially they're saying the same thing this year. They're saying on their website sometime this year in two thousand seventeen, so, um, you know, back in two thousand thirteen, an earlier statement also sort of anticipated that it would be uh that the first checks could come out relatively soon. So it's been one misdeadline after after another. And unfortunately
they don't they didn't comment for a story. They don't seem to want to say anything beyond what they put on their website, which is updated a couple of times a year, and the last update was in in January and said that they were, you know, receiving tens of thousands of claims and that they were going through them, that they planned to make recommendations on approval or denial of the claims UH this year at least for the
initial set. So UM, you know, there might be there might have been some unforeseen delays UH, such as the ones Mr Brush just mentioned as far as determining which of these feeder fund investors are really really had investments, because that's a lot of paperwork and a lot of
legwork for verification UM. When on the other side, you know, Irving Picard, the trustee in the in the court case, specifically did not accept claims from feeder fund investors UM for that reason, citing saying citing the bankruptcy Code and saying that it would be virtually impossible to verify all these tens of thousands of claimants when they didn't actually have accounts with made off. So he just took a
different route. He said that if the feeder fund wants to file a claim in the bankruptcy court and they get any money back, then those feeder funds can then distribute that money out to their clients as they see fit. Can you just clarify something for me, who's making the decisions here, is that Richard Breeden is making them or
the Justice Department. What what are the various roles here? Well, the the ultimate authority to determine how this, uh, the money that that that has been forfeited gets distributed is with the the U. S. Attorney's Office, and um, the head of the Asset Forfeiture and Money Laundering Unit is
the one who has been delegated that authority. So what what the Breedon group would be doing is processing the paperwork, making and making a recommendation to the the U. S. Attorney's Office, the Attorney General's office, who would then, you know, ultimately make the decision. Um. So that's the other thing I would I would you know think about two is is you know what we're Breeden's marching orders from, uh
the Attorney General's office. And you know, I'm not trying to defend or or or lay blame at at anyone's feet. It's just because it has been a while, but but there is a lot that needs to happen. And I think I also want to point out to that Piccard is operating under a different set of rules. Um, He's essentially operating under the under you know, rules that relate to bankruptcy proceedings, So it's I don't know that it's
an entirely fair comparison. And my understanding too, is that the Piccard is Piccard and his firm of a whole lot more money, um, somewhere closer to a billion dollars, is what I what I've heard. I can't verify that certainly, but uh in in his attempts to try to secure compensation for the victims, Eric, we only have about fifteen seconds, but just quickly, Uh, what's the last time when we
expect payments might begin? Uh really don't have anything beyond what the Mr Breeding has said on his website, which would be any time this year. If we find out anything new, of course, we'll do a story on it and and we'll have you back on how came I to thank our guests on Barussian and Eric Larson talking about distributions to Bernie Madoff's victims,