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Madoff Victims Get $7.2 Billion from Jeffery Picower's Widow

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By Tanya Roth, Esq. on December 20, 2010 5:50 AM

It may not have been Christmas magic, but the sudden addition of $7.2 billion to the fund to reimburse the victims of Bernard Madoff is almost a miracle.

Certainly, it is the biggest forfeiture in U.S. history and will help to ease some of the pain that Madoff created with his historic Ponzi scheme. Bernie Madoff is now serving out his 150-year sentence in a medium security federal prison.

Where did the money come from? The widow of one of Madoff's major investors, Jeffery Picower, has agreed to turn over the proceeds of his investments over 35 years with Madoff, reports CNNMoney. Barbara Picower said in a prepared statement that "this settlement honors what Jeffery would have wanted, which is to return this money so that it can go directly to the victims of Madoff."

However, Picower disputes that her husband in anyway knew that when he withdrew his money from the Madoff fund he was profiting from a fraud. Irving Picard, the court-appointed trustee in the Madoff case thinks otherwise, reports CNN. In court papers, Picard had alleged that Jeffery Picower knew or should have known the rates of return on his investment were "highly implausible" and could only be the result of a fraud.

Despite this, as Barbara Picower asserts, neither the trustee nor the U.S. attorney has charged Picower with any crime. When a defendant is found guilty of fraud, he or she can be made to return the illegal profits they have gained through a process call disgorgement. In this case, 400 investors like Picower, who withdrew more than they invested from Madoff, have been sued for the return of the money by the trustee. Many of the investors, again like Picower, say they had no idea the fund was a Ponzi scheme and that they were profiting from illegally gained funds.

The trustee will allow sued investors to apply for a hardship program if they are not in a financial position to return money earned from the Madoff fund. According to CNN, Picard will review each trustee situation on a case-by-case basis.

The return of $7.2 billion by Picower, when combined with $2.6 billion earlier recovered in stolen assets, adds up to almost half of the $20 billion lost from Bernie Madoff's crimes.

Barbara Picower has said she hopes the settlement will ease the suffering of the Madoff victims.

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