The U.S. Justice Department’s delay in distributing $4 billion in forfeited cash to Bernard Madoff’s victims has caught the attention of at least one member of Congress, a Florida Republican whose state was hit hard by the biggest Ponzi scheme in the nation’s history.
Rep. Vern Buchanan, whose district includes retiree-friendly Sarasota, said he’d consider uniting Florida’s entire congressional delegation to put pressure on the Justice Department if money doesn’t start reaching victims by the end of this year.
“We’re going to hold their feet to the fire,” Buchanan, a member of the House Ways and Means Committee, said in an interview Wednesday. ”It’s a lot of money tied up and our goal is to do whatever we can to get it flowing.”
Buchanan wrote to U.S. Attorney General Jeff Sessions on May 31 following a Bloomberg News report that the administrator of the Madoff Victim Fund, Richard Breeden, had racked up $38.8 million in billings through the end of 2016 without paying anything to victims. The fund was set up in 2012.
The investors haven’t been at a complete loss. A separate fund overseen in bankruptcy court by the trustee of Madoff’s firm, Irving Picard, has distributed more than $9 billion to victims since 2009 using a different process that doesn’t accept claims from anyone who didn’t invest directly with Madoff.
Breeden, whose firm is being paid out of the victim fund, blamed the delay at the Justice Department on a flood of tens of thousands of claims from across the globe, and difficulty verifying them. He previously said payouts would start by the end of 2016.
“It’s been way too long,” Buchanan said. “The victims haven’t gotten a dime” from the Justice Department.
Dawn Dearden, a spokeswoman for the Justice Department in New York, declined to comment on Buchanan’s remarks.
The Justice Department will start making payments by the end of 2017, Assistant Attorney General Stephen Boyd said in a Sept. 18 letter to Buchanan, a copy of which was provided to Bloomberg News.
“These distributions will represent the largest return of forfeited funds to victims in the history of the Department’s asset forfeiture program,” Boyd said in the letter.
The holdup could have been avoided if Breeden had used Picard’s method, said Jon Barooshian, a former Massachusetts prosecutor who has dealt with forfeiture issues. Breeden could have struck deals with so-called feeder funds that placed their money with Madoff requiring them to repay their customers in exchange for approving their claims, he said.
“Having to consider victims who invested through intermediary feeder funds rather than the intermediaries as the ‘victim’ itself has been one of my criticisms all along,” said Barooshian, who isn’t involved in the Madoff case. “Picard’s approach is simpler and it clearly gets money to the victims sooner.”
Buchanan is optimistic, despite the delay.
“I want to be hopeful that this is the first step,” said Buchanan, co-chair of Florida’s bipartisan 29-member delegation. “If not, we’ll look at additional pressure we can bring, myself and maybe other leaders in Congress. For now, I’ll give them the benefit of the doubt.”
Florida was second to New York in the number of people who were ripped off by Madoff. Buchanan took office in 2007, a year before Madoff’s arrest wiped out $17.5 billion in principal from his clients.
Madoff, 79, pleaded guilty to fraud in 2009 and is serving a 150-year sentence.
Breeden said in a June update on his website that the Justice Department had approved more than 35,000 petitions claiming total losses of more than $6.5 billion. The agency says its fund will eventually help thousands of people who may have been locked out of the trustee’s recovery process because they didn’t invest directly with Madoff.
Breeden denied about 24,000 petitions earlier this year, according to his website. The initial wave of claims he received totaled $78 billion in losses, he said. Breeden is taking claims from investors in feeder funds, while the mechanism overseen in court doesn’t. In the court process, feeder funds must file claims and then distribute recoveries to their own customers, many of whom didn’t know their money was placed with Madoff.
The compensation fund was created after the U.S. seized $2.4 billion from the estate of one of his biggest investors, the late Jeffry Picower. The fund grew by $1.7 billion following a 2014 forfeiture deal with Madoff’s bank, JPMorgan Chase & Co., which was accused of turning a blind eye to the scam.