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Madoff Trustee Battles Israeli Charity Over $4.7 Mln
By Erik Larson
July 24 (Bloomberg) -- A charity for homeless and runaway Israeli children that lost money in Bernard Madoff’s fraud told a U.S. judge that the trustee liquidating the con man’s business wrongfully rejected its $4.72 million claim in the case.
New York-based ELEM/Youth in Distress Israel Inc. said its claim in the investment-advisory firm’s bankruptcy should equal the group’s final account balance of $4.72 million, instead of the $26,365 allowed by the trustee, Irving Picard, according to an objection yesterday in U.S. Bankruptcy Court in Manhattan.
From 2001 to 2007, the charity invested $1.54 million and withdrew $1.52 million, it said. Picard said the claim is the difference between those amounts, and that the group’s proposed claim is based on fake profit from Madoff’s $65 billion Ponzi scheme -- the biggest in U.S. history.
“The final BMIS statement is the best evidence of the amount owed to ELEM based on BMIS’s books and records,†the charity said. “The ELEM claim should be allowed in full.â€
Hundreds of victims of the scam have filed objections and hired lawyers to challenge Picard’s calculation of their claims. They argue federal law requires such claims be based on their expected account balances, regardless of the fraud at New York- based Bernard L. Madoff Investment Securities LLC.
False Profits
Picard, a lawyer with Baker & Hostetler LLP, has said that allowing claims based on final account balances would hurt Madoff’s newer investors and benefit those who racked up fake profits for decades.
The 27-year-old charity, with programs in 25 Israeli cities, seeks to treat 25,000 youths who neither work nor go to school, and frequently end up in the juvenile court system in the country, according to its Web site. The group was founded by an Israeli family court judge in 1982, it said.
Madoff, 71, pleaded guilty in March and was sentenced on June 29 to 150 years in prison for using money from new clients to pay earlier investors in the biggest U.S. Ponzi scheme. Prosecutors said the money manager told clients they had as much as $65 billion invested with him.
Picard’s spokesman, Kevin McCue, didn’t immediately respond to an e-mail seeking comment.
To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net
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