A landmark $7.2 billion settlement with Palm Beach philanthropist Barbara Picower will only help a fraction of the thousands of victims of Bernard Madoff's epic fraud.
To remedy that, a lawyer on Thursday will ask a bankruptcy judge to overturn a key term of the settlement proposal.
As part of the deal announced last month, the trustee who is recovering money for Madoff's victims wants to make sure the disgraced financier's former clients can't file lawsuits against Picower to recover additional money.
New York City attorney Helen Davis Chaitman, who has sued Picower in federal court in West Palm Beach on behalf of Madoff victims, will ask U.S. Bankruptcy Judge Burton Lifland to reject that part of the settlement.
"I don't want to derail the deal," said Chaitman. But, she said, trustee Irving Picard can't take away people's rights to sue Picower, who negotiated the settlement for the estate of her late husband, Jeffry.
"Picower stole their money," she said of the billionaire who drowned in the pool of his Palm Beach mansion in 2009.
In court papers, Picard disputes Chaitman's claim, arguing that it would allow some victims to recover money twice - once through him and again by filing individual lawsuits.
"Potential claimants would be able to eviscerate the equitable distribution scheme that lies at the core of . . . the bankruptcy code to their own individual benefit," Picard claims.
However, Chaitman said there wouldn't be double recovery. She said she is representing the roughly 14,000 people who have been told by Picard that they will get nothing.
Picard has approved 2,300 of the 16,000 claims he received from Madoff victims. He has rejected requests from those who took more out of their accounts than they put in. He has also rejected claims from those who invested with Madoff through feeder funds.
"No one is fighting for these people," Chaitman said. She estimates that the people she represents are owed $44 billion compared to the roughly $20 billion lost by those Picard has classified as victims.