For all the big-time investors and government investigators he tricked, Bernard Madoff said he thinks there was one client who was onto his $65 billion Ponzi scheme for years, according to a book about Madoff to be released today.
That person was former Palm Beacher Jeffry Picower.
Picower steadfastly denied he knew about the scheme. He was found dead of natural causes at his Palm Beach estate in October 2009.
New York Times reporter Diana Henriques' book The Wizard of Lies; Bernie Madoff and the Death of Trust, ($30; Times Books) notes that Picower, one of Madoff's oldest clients, dipped more deeply and steadily into his Madoff wealth than any other.
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Over time, Picower invested $620 million with Madoff. Based on Madoff's fictitious returns, Picower's account balances ran into the billions of dollars.
As Henriques points out, Madoff's credibility when it comes to Picower or any other topic is forever ruined.
The website ProPublica first detailed the Picower account withdrawals in 2009. What is new in the book is Madoff's own account of his interaction with Picower and his claim that Picower had to know the profits were fiction. "How could he not?" Madoff asked.
Between 2000 and 2003, the Picowers withdrew $3.4 billion, the book says.
In a jailhouse interview after he was sentenced to 150 years for the fraud, Madoff told Henriques that his relationship with Picower was tense. But Picower had become an investor too big to fire, he said. He never could have covered Picower's manufactured holdings.
"He kept Picower close," Henriques said via e-mail Monday. "He couldn't afford to let him go."
But why did Madoff believe Picower knew? Madoff said that in September 2003, he paid only a fraction of one of Picower's withdrawal requests, with no apparent complaints. On Monday, Picower's attorney, William Zabel, said Madoff's assertion about the shorted withdrawal wasn't true.
After Picower's death, his estate forfeited $7.2 billion to the government and the Madoff trustee, the largest single forfeiture in U.S. judicial history.
"Jeffry Picower was neither complicit in nor did he know of Madoff's Ponzi scheme," Zabel said. "Madoff is pointing the finger at someone who never was charged with wrongdoing, no longer is living and can't defend himself. His widow, Barbara, generously entered into a global settlement, well beyond what the law required, to give back every cent of the money received from Madoff."
A passage in a statement released by the government the day of the settlement quoted trustee Irving Picard.
"In the spring of 2009, the records available led us to allege that Mr. Picower might have or should have known of Mr. Madoff's fraud. With the benefit of additional records, I have determined that there is no basis to pursue the complaint against Mr. Picower, and we have arrived at a business solution instead."
"What we think he meant," Zabel said, "was that there was no illegal conduct by Mr. Picower or knowledge of the Ponzi scheme."