Five long-suffering directors of Bernard Madoff’s London operation have been cleared of groundless accusations levelled at them by the company’s liquidators after the High Court found that they were as much victims of the Machiavellian Ponzi scheme fraudster as private investors who lost billions.
The liquidators of Madoff Securities International Limited (MSIL) had sought recovery of hundreds of millions of pounds from the directors – including two of Madoff’s sons, one of whom has since died from cancer – as well as a well-connected Australian businesswoman who had unwittingly introduced billions of dollars’ worth of investment into what turned out to be a Ponzi scheme.
It was submitted that the businesswoman should account for more than $27 million she had been paid through MSIL. The directors faced claims that they had unlawfully distributed the company’s capital and breached their duties by authorising payment of enormous sums which ultimately furthered the fraud or were used to buy a yacht and a car for Madoff and otherwise feed his luxury lifestyle.
However, in dismissing the liquidators’ claims, the Court noted that Madoff – who is serving a 150-year prison sentence in America and has been ordered to forfeit $170 billion – had appeared to all as a man of unquestioned probity, high reputation and status. None of the defendants – some of whom had themselves lost their savings in the fraud and all of whose lives had been ‘turned upside down’ – had either known of or suspected Madoff of fraud, nor was it suggested that they should have done.
Noting that Madoff had blighted the lives and tainted the good names of each of the defendants ‘merely by association’, the Court paid tribute to the dignity and restraint with which they had defended themselves against the liquidators’ ‘unfounded claim’ which included allegations of dishonesty and had threatened all of them with financial ruin and public humiliation.
The liquidators had launched proceedings ‘without forewarning’ – some of the defendants only found out that they were being sued by reading the newspapers – and the action had been ‘pursued aggressively and relentlessly over several years, on occasion with an unfair degree of hyperbole’. The businesswoman had been the subject of ‘poisonous press releases’ and accused of taking ‘secret kickbacks’ when there was nothing secret about the payments that she had received in reasonable payment for her services. Madoff’s sons and their families had also been placed under immense strain and the Court concluded that the honesty and integrity of all the defendants had been vindicated.