The estates of Michael and Andrew Madoff, heirs to the fortune of their father Bernie, will keep just under $4 million dollars after approximately $18 million is seized to pay a legal settlement with Irving Picard, the court-appointed trustee tasked with collecting the money lost by Madoff’s investors. Half of the money awarded in the settlement will go to the Madoff Victim Fund, which has paid out $9 billion to those Madoff cheated since it was created by the Department of Justice after Madoff’s conviction.
The estate of the senior Madoff’s younger son, Andrew, will retain about $2 million; that of Andrew’s older brother, Mark, will keep $1.75 million.
The two brothers managed business and regulation at Bernie Madoff’s private investment securities business. In 2008, they exposed their father’s scheme, after the senior Madoff confessed privately that his investment management enterprise was a classic Ponzi scheme.
Madoff reported false returns over multiple decades, using the money entrusted to him by new clients to pay the dividends he had promised to older ones. Like any Ponzi scheme, Madoff’s operation required a majority of participants to remain indefinitely committed to the scheme, because with no actual profit being made, Madoff was unable to consistently pay out the gains he had reported.
When the bottom dropped out of the economy in 2008, Madoff’s clients asked for $7 billion worth of dividends. Madoff only had a few hundred million dollars with which to pay them. With his scheme on the verge of collapse, Madoff presumably made the aforementioned confession to his sons, who in turn alerted federal authorities.
Several other Ponzi schemes have been enacted throughout history. Allen Stanford used such a scheme to steal $8 billion from his clients; Tom Petters’ swindled investors out of $3.7 billion. Still, no other Ponzi scheme has netted its proprietor a sum even close to that poached by Madoff.
Madoff, 79, is serving a 150-year prison sentence after pleading guilty in 2009 to 11 counts of various varieties of fraud, perjury, money laundering, and theft in connection with the scandal, which allegedly cost thousands of investors a collective $20 billion dollars they had entrusted to Madoff.
Neither of Madoff’s sons will see a dime of their inheritance. Mark Madoff hanged himself with a dog leash in his SoHo condo in December 2010. He allegedly wrote his wife the Madoff family “would be better off without ‘this’ hanging over them all, forever.” Presumably, Mark was referring to his father’s scandal.
Andrew Madoff died in September 2014 of mantle cell lymphoma, with which he was originally diagnosed in 2003. The cancer had been in remission for years before it resurfaced aggressively just prior to the youngest Madoff’s death. Mark Madoff once called his father’s scheme a “father-son betrayal of biblical proportions.”
Though the senior Madoff’s sons were instrumental in bringing his corruption to light, suspicion hounded them in the aftermath of their father’s conviction. Both Madoff brothers held top executive positions at Bernard L. Madoff Investment Securities, but claim to have been uninvolved in the scheme. Five of Madoff’s employees were convicted of aiding Madoff’s corruption, but neither of the mastermind’s sons was among them.
The ripple effect of a scheme like Madoff’s is incalculable. Of course, thousands upon thousands of investors lost fortunes. Their families lost inheritances; some, presumably, were reduced to poverty. Madoff’s sons spent their lives under the weight of others’ suspicion and their own shame. Andrew Madoff publicly repudiated his father; Mark Madoff ended his own life.
The $4 million dollars the Madoff estates will retain and the $9 billion dollars the Department of Justice has repaid to Bernie Madoff’s victims seem strange and insignificant consolation.