Opinion
Adversary No. 08–1789 (BRL).
2012-06-20
SECURITIES INVESTOR PROTECTION CORPORATION, Plaintiff, v. BERNARD L. MADOFF INVESTMENT SECURITIES LLC, Defendant. In re Bernard L. Madoff, Debtor.
Baker & Hostetler LLP, By: David J. Sheehan, Deborah H. Renner, Tracy L. Cole, Keith R. Murphy, Marc Skapof, Amy E. Vanderwal, Matthew J. Moody, George Klidonas, New York, NY, for Irving H. Picard, Trustee for the Substantively Consolidated SIPA Liquidation of Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff. Beasley Hauser Kramer & Galardi, P.A., West Palm Beach, FL, Blackner, Stone & Associates, P.A., Palm Beach, FL, Herrick, Feinstein LLP, By: Joshua J. Angel, Frederick E. Schmidt, Jr., New York, NY, for A & G Goldman Partnership and Pamela Goldman, individually and on behalf of a similarly situated class.
Baker & Hostetler LLP, By: David J. Sheehan, Deborah H. Renner, Tracy L. Cole, Keith R. Murphy, Marc Skapof, Amy E. Vanderwal, Matthew J. Moody, George Klidonas, New York, NY, for Irving H. Picard, Trustee for the Substantively Consolidated SIPA Liquidation of Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff. Beasley Hauser Kramer & Galardi, P.A., West Palm Beach, FL, Blackner, Stone & Associates, P.A., Palm Beach, FL, Herrick, Feinstein LLP, By: Joshua J. Angel, Frederick E. Schmidt, Jr., New York, NY, for A & G Goldman Partnership and Pamela Goldman, individually and on behalf of a similarly situated class.
BENCH MEMORANDUM DECISION AND ORDER DENYING MOTION OF PICOWER CLASS ACTION PLAINTIFFS FOR A DETERMINATION THAT THE COMMENCEMENT OF SECURITIES CLASS ACTION LAWSUITS AGAINST NON–DEBTOR PARTIES IS NOT PROHIBITED BY A PERMANENT INJUNCTION ISSUED BY THIS COURT OR VIOLATIVE OF THE AUTOMATIC STAY
BURTON R. LIFLAND, Bankruptcy Judge.
Before the Court are the motions of A & G Goldman Partnership (“A & G Goldman”) and Pamela Goldman (together, the “Class Action Plaintiffs” or “Movants”) , dated December 13, 2011 (the “Motions”). The Motions seek a determination that neither the injunction (the “Picower Injunction”) issued by this Court as part of its order (the “Settlement Order”), dated January 13, 2011, nor the automatic stay provisions of section 362 of title 11 of the United States Code (the “Code”), bar, prohibit, restrict or prevent Class Action Plaintiffs from commencing and prosecuting a securities law class action (the “Class Action”) against the estate of Jeffry Picowerand related defendants (the “Picower Defendants”) in the United States District Court for the Southern District of Florida. For the reasons set forth below and at oral argument, the Motions are hereby DENIED.
See Motion of Picower Class Action Plaintiffs for a Determination that the Commencement of Securities Class Action Lawsuits Against Non–Debtor Parties is not Prohibited by a Permanent Injunction Issued by this Court or Violate of the Automatic Stay filed on behalf of A & G Goldman Partnership (“A & G Goldman Motion”) (Dkt. No. 4580).
See Motion of Picower Class Action Plaintiffs for a Determination that the Commencement of Securities Class Action Lawsuits Against Non–Debtor Parties is not Prohibited by a Permanent Injunction Issued by this Court or Violate of the Automatic Stay filed on behalf of Pamela Goldman (“Pamela Goldman Motion”) (Dkt. No. 4581).
A & G Goldman submitted a BLMIS customer claim, which was denied by the Trustee because A & G Goldman was a net winner that had withdrawn more funds than it deposited. Pamela Goldman submitted BLMIS customer claims, which the Trustee allowed and which have been fully satisfied through SIPC advances and an interim distribution from the fund of customer property.
A & G Goldman seeks to certify a class “who ha[s] not received and are not eligible to receive any payments directly or indirectly from SIPC or from the BLMIS estate on behalf of SIPC.” See A & G Goldman Motion, Ex. A (“A & G Goldman Draft Compl.”), ¶ 62. Pamela Goldman seeks certification of a class “who ha[s] not received sufficient payments directly or indirectly from SIPC or from the BLMIS estate on behalf of SIPC to cover the full amount of their losses.” See Pamela Goldman Motion, Ex. A (“Pamela Goldman Draft Compl.”), ¶ 62.
Background
For a detailed background of the mechanics of the Madoff Ponzi scheme and the events preceding the Trustee's complaints, see SIPC v. BLMIS LLC (In re BLMIS), 424 B.R. 122, 125–32 (Bankr.S.D.N.Y.2010).
On May 12, 2009, the Trustee filed a complaint (the “Complaint”) against the Picower Defendants alleging, inter alia, that they had received approximately $7.2 billion in withdrawals from BLMIS and knew or should have known that BLMIS was engaged in fraudulent activity. The Complaint sought recovery of the entire amount known at the time of filing to have been transferred from BLMIS to the Picower Defendants throughout the history of the Picower Defendants' accounts. Compl., ¶¶ 3, 4, 28, 57, 65–67.
Complaint against Jeffry M. Picower, individually and as trustee for the Picower Foundation, Barbara Picower, individually and trustee for the Trust FBO Gabrielle H. Picower and the Picower Foundation, Capital Growth Company, Favorite Funds, JA Primary Limited Partnership, JA Special Limited Partnership, JAB Partnership, JEMW Partnership, JF Partnership, JFM Investment Company, JLN Partnership, JMP Limited Partnership, Jeffry M. Picower Special Co., Jeffry M. Picower, P.C., Decisions Incorporated, The Picower Foundation, The Picower Institute For Medical Research, The Trust FBO Gabrielle H. Picower (Adv. Pro. No. 09–01197) (Dkt. No. 1).
In February 2010, Adele Fox (“Fox”), a BLMIS customer and creditor of the estate, brought putative class actions in federal court in Florida (the “Florida Actions”) against the Picower Defendants. In that action, she was represented by Beasley Hauser Kramer & Galardi P.A., one of the firms which represents the Class Action Plaintiffs here as well. This Court enjoined the Florida Actions. See Sec. Investor Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC (“ Fox I ”), 429 B.R. 423, 437 (Bankr.S.D.N.Y.2010). Shortly thereafter, Fox appealed.
On December 17, 2010, the BLMIS Trustee entered into an agreement memorializing the Picower Settlement (the “Settlement Agreement”), which entailed the forfeiture and repayment of approximately $7.2 billion, of which $5 billion was to be paid to the BLMIS Trustee. This represented the return of 100 percent of the net withdrawals received by the Picower Defendants over the lifetime of their investments with BLMIS. In exchange, the Settlement Agreement provides for (i) the release of the Picower Defendants from all claims that the Trustee brought or could have brought against them in connection with BLMIS, as well as (ii) the prevention of putative plaintiffs filing lawsuits that are duplicative or derivative of the claims that the Picower Defendants settled. Specifically, the Settlement Agreement includes the Picower Injunction, which enjoins:
[A]ny BLMIS customer or creditor of the BLMIS estate who filed or could have filed a claim, anyone acting on their behalf or in concert or participation with them, or anyone whose claim in any way arises from or relates to BLMIS or the Madoff Ponzi scheme, from asserting any claim against the Picower BLMIS Accounts (as identified on Attachment A to the Settlement Agreement) and the Picower Releasees (as identified on Attachment C to the Settlement Agreement) that is duplicative or derivative of the claims brought by the Trustee, or which could have been brought by the Trustee, against the Picower Defendants.
Settlement Agreement, pp. 5–6 (emphasis added). In the Settlement Order, this Court approved the Settlement Agreement, which included the Picower Injunction. Fox appealed the Settlement Order as well.
There were only three objectors to the Settlement Agreement, and only two—the appellants of Fox I—appealed the Settlement Order.
Less than three months ago, on March 26, 2012, the District Court upheld both Fox I and the Settlement Order. See Picard v. Fox (“ Fox II ”), 848 F.Supp.2d 469 (S.D.N.Y.2012). Specifically, Judge Koeltl looked past the nominal title of the movants' causes of action, which sounded in tort, in affirming this Court's finding that they were property of the estate, subject to both the automatic stay, as well as an injunction under Code section 105. In so doing, the District Court emphasized that those causes of action were not substantively different than the Trustee's cause of action (the “New York Action”) since they, inter alia, (i) were based on the same conduct as the Trustee's New York Action, (ii) did not derive from any duties owed by the Picower Defendants to the Florida Plaintiffs, and (iii) could have been asserted by any creditor of BLMIS. The court also rejected the movants' arguments pertaining to the Trustee's purported lack of standing and the applicability of the Court of Appeals' 2008 opinion in the long-running Johns–Manville case.
Travelers Casualty and Surety Co. v. Chubb Indemnity Ins. Co. (In re Johns–Manville Corporation), 517 F.3d 52 (2d Cir.2008).
Despite this recent ruling directly on point, the Class Action Plaintiffs—two BLMIS customers who, like Fox and Marshall, filed customer claims—argue that the Court should not enjoin their “federal securities law claims” because they belong to shareholders and not the estate. Furthermore, they contend that the Trustee lacks standing to bring those claims and this Court lacks jurisdiction to adjudicate them in light of Johns–Manville. The Class Action Plaintiffs, however, have simply repeated, repackaged, and relabeled the wrongs alleged by the Trustee in an attempt to create independent claims where none exist. In fact, they re-iterate allegations almost verbatim of not only the Trustee's Complaint, but also of the complaints their same counsel set forth in Fox I. As such, the Court rejects the Plaintiffs' arguments and denies the Motion.
Discussion
“ It's déjà vu all over again.” The Class Action Plaintiffs are attempting to use inventive pleading to sidestep the automatic stay and the Picower Injunction. In affirming this Court's Fox I decision, Judge Koeltl warned against exactly this type of behavior:
Lawrence Peter “Yogi” Berra, available at Yogi Berra Official Web Site, http:// www. yogiberra. com/ yogi- isms. html [last visited June 19, 2012].
If potential creditors could bypass the automatic stay injunction by simply pleading around it, even when the substance of their claims—the wrongful acts pleaded, the relationships and duties between the actors, the nature of the damages suffered—was identical to the substance of an action already brought by a trustee, the bankruptcy laws' core purpose would be severely undermined, because some potential creditors could obtain payment of their claims in preference to and to the detriment of other creditors simply by styling their pleadings as sounding in tort.
Fox II, 848 F.Supp.2d at 481 (internal quotation marks omitted). To prevent this, “a court must look to the body of the complaint, not to the plaintiff's designation or stated intention” in determining the nature of the wrong alleged. Kramer v. W. Pac. Indus., Inc. 546 A.2d 348, 352 (Del.1988) (internal quotation marks omitted). Courts in this district therefore routinely “look[ ] past the nominal title of the cause of action pleaded in assessing whether or not a claim is in substance duplicative or derivative of a claim that is the property of the Trustee.” Fox II, 848 F.Supp.2d at 482 (citing In re Ionosphere Clubs, Inc., 156 B.R. 414, 439 (S.D.N.Y.1993), aff'd, 17 F.3d 600 (2d Cir.1994)). Indeed, “[w]hile as a general matter a court should accept as true the allegations pleaded in a complaint at this stage in a case, that principle has limits.” Fox II, 848 F.Supp.2d at 482;see also Matter of Commonwealth Oil Refining Co., Inc., 805 F.2d 1175, 1187 (5th Cir.1986) (“[T]he legislative intent underlying § 362[ ] should not be undermined by artful pleading that depends on form rather than substance.” (citation and internal quotation marks omitted)).
1. Identical Pleadings
While titling their cause of action as a federal securities claim, the Class Action Plaintiffs' action is based on pleadings that are nearly identical to those of the Trustee. For example, both the Trustee and the Class Action Plaintiffs allege that: (i) BLMIS customers received monthly or quarterly statements that purported to show securities held in their accounts, but these statements and the transactions appearing thereon were almost completely fabricated, compare Pamela Goldman Draft Compl., ¶ 33, and A & G Goldman Draft Compl., ¶ 33, with Tr.'s Compl., ¶ 21; (ii) Picower directed BLMIS to create fraudulent trading records including backdated trades, compare Pamela Goldman Draft Compl., ¶ 49, and A & G Goldman Draft Compl., ¶ 49, with Tr.'s Compl., ¶ 4; and (iii) Picower, and not Madoff, was the largest beneficiary of Madoff's fraud, withdrawing more than $7.2 billion of other people's money, compare Pamela Goldman Draft Compl., ¶¶ 1, 46, 47, and A & G Goldman Draft Compl., ¶¶ 1, 46, 47, with Tr.'s Mem. of Law in Opp'n to Def.'s Partial Mot. To Dismiss at 2, (Adv. Pro. No. 09–01197) (Dkt. No. 11), p. 2.
Furthermore, it appears that not only have the Class Action Plaintiffs substantially parroted the Trustee's Complaint, they have also recycled their own pleadings: many of the allegations currently before the Court mimic those set out in the Fox and Marshall complaints, which this Court found to be duplicative of the Trustee's, a finding the District Court affirmed. For example, the Class Action Plaintiffs allege that Picower directed withdrawals from the Decisions, Inc. account in amounts more than $50 million several times a year, totaling approximately $6 billion; compare Pamela Goldman Draft Compl., ¶ 55, and A & G Goldman Compl., ¶ 55, with Fox Compl., ¶ 51, and Marshall Compl., ¶ 51; instructed BLMIS to backdate trades, which resulted in increases in certain accounts, compare Pamela Goldman Draft Compl., ¶ 58, and A & G Goldman Draft Compl., ¶ 58, with Fox Compl., ¶¶ 56–57, and Marshall Compl., ¶¶ 56–57; and generated paper profits, including annual returns greater than 100%, compare Pamela Goldman Draft Compl., ¶ 50, and A & G Goldman Draft Compl., ¶ 50, with Fox Compl., ¶ 43, and Marshall Compl., ¶ 43. In short, the “Plaintiffs' claims arise out of the same wrongs alleged in the Trustee's Complaint, committed by the same defendants, in connection with the same Ponzi scheme.” Fox I, 429 B.R. at 435.
Affidavit in Support of The Trustee's Application For Temporary Restraining Order, Enforcement of Automatic Stay and Preliminary Injunction (“Trustee's Affidavit”) (Adv. Pro. No. 10–03114) (Dkt. No. 3) Ex. F (“Fox Complaint”).
Trustee's Aff., Ex. G (“Marshall Complaint”).
The extensiveness of the overlap among all of the above-mentioned complaints is clearly set out in the attached Exhibit A, which the Trustee submitted with his opposition. See Trustee's Opp'n to Motions of Class Action Plaintiffs to Proceed with their Proposed Class Actions (Dkt. No. 4797), Ex. A. The Court has independently reviewed the Exhibit and finds it substantially reflects and links the cloning of the pleadings.
2. Common Harms/No Particularized Injury
The Class Action Plaintiffs argue that the Court should look past these common facts and focus on the differences between their allegations and the Trustee's with respect to the harms committed and damages alleged. The Court declines to do so, as the Class Action Plaintiffs' claim is derivative of the Trustee's. To assert an independent claim, “a creditor must have suffered an injury significantly different from the injuries to creditors in general.” Fox I, 429 B.R. at 431 (internal quotation marks omitted) (emphasis added). Indeed, the Second Circuit has specified, “[i]f a claim is a general one, with no particularized injury arising from it, and if that claim could be brought by any creditor of the debtor, the trustee is the proper person to assert the claim, and the creditors are bound by the outcome of the trustee's action.” St. Paul Fire and Marine Ins. Co. v. PepsiCo, Inc., 884 F.2d 688, 701 (2d Cir.1989) (emphasis added); see also In re Cabrini Med. Ctr., No. 09–14398, 2012 WL 2254386, at *7 (Bankr.S.D.N.Y. June 15, 2012) (“[T]he injury cannot be a secondary effect from the harm done to the corporation.” (citing St. Paul, 884 F.2d at 704) (internal quotation marks omitted)).
Plaintiffs' counsel unconvincingly attempts to plead a particularized injury by re-classifying actions relevant to all defendants under a different body of law and manufacturing a duty thereunder. Specifically, the Plaintiffs attempt to distinguish the actions of the Picower Defendants as against the Plaintiffs by creating a security and concocting that Picower was a control person at BLMIS who, therefore, owed a duty to the Plaintiffs under relevant securities law to prevent their purchasing fraudulent securities. In turn, the Plaintiffs argue their claims are not duplicative since (i) their injuries arose when they purchased securities worth less than the amount the Plaintiffs paid to BLMIS, while the Trustee pursued fraudulent transfers from BLMIS to the Picower Defendants, and (ii) this overpayment necessarily precedes BLMIS's payments to the Picower Defendants. These arguments, however, are unpersuasive. The Class Action Plaintiffs' claim is inadequately particularized, as the harms alleged are limited to “general direction and control and action to the detriment of all [BLMIS's] creditors.” Cabrini, 2012 WL 2254386, at *8. Furthermore, all of these arguments, put the cart before the horse: but for the existence of the Ponzi scheme and the Picower Defendants' withdrawals therefrom, the Plaintiffs would not have “overpaid” in the first instance. Indeed, each of the Plaintiffs' arguments is based on a common harm: “the Picower defendants withdrawing funds from BLMIS to which they were not entitled....” Fox II, 848 F.Supp.2d at 480;see also Fox I, 429 B.R. at 432 (“Whether sounding in bankruptcy, state law or common law, the claims asserted in the Florida Actions seek to redress a harm common to all BLMIS customer claimants and, consistent with the purposes of the automatic stay, belong exclusively to the Trustee.”). Therefore, as was the case in the Fox II decision, “the very essence of the allegations against the Picower defendants is that they paid themselves out of assets that comprised other customers' accounts....” Id. at 480 (noting that “like Picard's New York Action, [the Plaintiff's allegations] are based upon the same conduct by the Picower Defendants: involvement in the Madoff Ponzi scheme, and the transfer of billions of dollars in BLMIS-held customer funds to the Picower defendants”).
According to the Class Action Plaintiffs, “the commingled discretionary securities trading account created by BLMIS pursuant to which BLMIS obtained billions of dollars of customer monies is, in fact, a separate security issued by BLMIS.” Reply in Support of Motion of Class Action Plaintiffs Determination that the Commencement of Securities Class Action Lawsuits Against Non–Debtor Parties is Not Prohibited by a Permanent Injunction Issued by this Court or Violative of the Automatic Stay (“Reply”), p. 7 (Dkt. No. 4813) (emphasis added).
The Plaintiffs allege that “[t]he volume, pattern and practice of the Defendants' fraudulent withdrawals from BLMIS and their control over fraudulent documentation of underlying transactions at BLMIS establishes the Defendants' ‘control person’ liability under the federal securities laws.” Draft A & G Partnership Compl., ¶ 41.
3. Re-litigation of Net Equity Decision
Finally, this appears to be yet another attempt by the same counsel to re-litigate this Court's Net Equity Decision. See SIPC v. BLMIS, 424 B.R. 122 (Bankr.S.D.N.Y.2010)aff'd, In re Bernard L. Madoff Inv. Sec. LLC, 654 F.3d 229 (2d Cir.2011) (the “Net Equity Decision”); see also Fox I, 429 B.R. at 427 (“The Florida Plaintiffs are obviously disappointed at the economic impact on them from this Court's Net Equity decision.”). Here the Plaintiffs emphasize that the damages they sustained “were the result of injuries that arose from their purchase of overvalued securities and are measured by the difference between the value of their BLMIS securities at the time of purchase [zero] and the price paid by each purchaser [the principal investment].” Reply, p. 2. Put differently, the Class Action Plaintiffs seek the repayment of their entire principal investments. Yet, the Net Equity Decision provides for the repayment of only net losses. An award of principal therefore would result in a windfall to not only the Class Action Plaintiffs, but also the classes they represent: net winners who are not entitled to any distributions and net losers who have already received disbursements from the Trustee and SIPC would potentially receive amounts greater than those to which they are entitled. See Fox II, 848 F.Supp.2d at 487 (affirming this Court's application of the injunction under Code section 105 in part because “the Florida Actions, if successful, could result in distributions to BLMIS customers outside of the plan that was determined by the Net Equity Decision, and could result in inconsistent judgments”); see also Fox I, 429 B.R. at 436 (“As the Court presiding over the SIPA liquidation of BLMIS, this Court has sole jurisdiction over the administration and distribution of estate assets to customers.”) (citing Tennessee Student Assistance Corp. v. Hood, 541 U.S. 440, 447, 124 S.Ct. 1905, 158 L.Ed.2d 764 (2004)).
Conclusion
For the foregoing reasons, the Motions are hereby DENIED.
IT IS SO ORDERED.
+-----------+ ¦EXHIBIT A ¦ +-----------+
+-----------------------------------------------------------------------------+ ¦Class Action ¦Pleadings Trustee's ¦Fox/Marshall Pleadings ¦ ¦ ¦Pleadings ¦ ¦ +-----------------------------------------------------------------------------+
+-----------------------------------------------------------------------------+ ¦In fact, however, Madoff ¦ ¦ ¦ ¦was not the most ¦Based upon the Trustee's ¦ ¦ ¦substantial beneficiary ¦investigation to date, ¦Defendants were, as a ¦ ¦of the Ponzi scheme. The ¦Picower was instead the ¦group, the largest ¦ ¦Defendants were. The ¦biggest beneficiary of ¦beneficiaries of the ¦ ¦accounting performed by ¦Madoff's scheme, having ¦Ponzi scheme, converting ¦ ¦the Madoff bankruptcy ¦withdrawn either directly¦and receiving billions of¦ ¦Trustee reveals that the ¦or through the entities ¦dollars from the accounts¦ ¦Defendants received at ¦he controlled more than ¦of innocent Madoff and ¦ ¦least $7.2 billion of ¦$7.2 billion of other ¦BLMIS customers. See ¦ ¦BLMIS customers' cash ...¦investors' money. See ¦Fox Compl. ¶ 1; Marshall ¦ ¦See Pamela Goldman ¦Tr.'s Mem. of Law in Opp.¦Compl. ¶ 1. ¦ ¦Compl. ¶ 1; A & G Goldman¦to Mot. to Dismiss pg. 2.¦ ¦ ¦Compl. ¶ 1. ¦ ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦ ¦According to the Trustee,¦ ¦ ¦ ¦BLMIS made payments and ¦ ¦ ¦ ¦other transfers to the ¦ ¦ ¦ ¦Defendants totaling over ¦ ¦ ¦ ¦$7.2 billion more than ¦ ¦ ¦ ¦Defendants deposited, ¦ ¦ ¦ ¦including $6.7 billion ¦ ¦ ¦ ¦from 1995 to 2008. See ¦ ¦ ¦ ¦Fox Compl. ¶ 38; Marshall¦ ¦ ¦ ¦Compl. ¶ 38. ¦ +-------------------------+-------------------------+-------------------------¦ ¦While Madoff and a few ¦Additionally, on ¦ ¦ ¦employees operated the ¦information and belief, ¦ ¦ ¦Ponzi scheme on a day to ¦Picower, directly and/or ¦ ¦ ¦day basis, they did so ¦through and/or with the ¦ ¦ ¦under the direction and ¦assistance of Freilich, ¦ ¦ ¦control of the Defendants¦directed fictitious, ¦ ¦ ¦who participated in the ¦backdated trades in order¦ ¦ ¦fraud for their own ¦to achieve fictitious ¦In fact, relevant ¦ ¦benefit by directing the ¦gains or losses in ¦documents and information¦ ¦creation of false books ¦earlier periods. For ¦show that Picower and the¦ ¦and records at BLMIS. The¦example, BLMIS records ¦Defendants directed BLMIS¦ ¦Defendants instructed ¦reflect several ¦to prepare account ¦ ¦Madoff and his employees ¦conversations beginning ¦statements for the ¦ ¦to make false ¦around May 14, 2007 ¦Defendants reflecting not¦ ¦transactions and book ¦between “April” and BLMIS¦actual trading results ¦ ¦entries to document ¦employees about gains ¦but the rates of return ¦ ¦allegedly profitable ¦that the Picower ¦Picower “wanted to ¦ ¦securities transactions ¦Foundation “need[ed] ¦achieve”. BLMIS complied ¦ ¦in the Defendants' BLMIS ¦during Jan & Feb [20]06.”¦with these directions, ¦ ¦accounts that in fact ¦On information and ¦and the vast majority of ¦ ¦never occurred, but ¦belief, “April” is ¦the purported “profits” ¦ ¦instead provided the ¦[Defendant] April ¦in the Defendants' ¦ ¦Defendants with the ¦Freilich. Since any ¦accounts were not a ¦ ¦returns that they “wanted¦legitimate gains or ¦result of the actual ¦ ¦to achieve.” BLMIS ¦losses in January or ¦purchase and sale of ¦ ¦complied, which allowed ¦February 2006 had to have¦securities. See Fox ¦ ¦the Defendants to steal ¦been achieved more than ¦Compl. ¶ 7; Marshall ¦ ¦billions of dollars of ¦one year before these ¦Compl. ¶ 7. ¦ ¦BLMIS customers' assets ¦conversations even ¦ ¦ ¦in the form of the ¦occurred, Freilich and ¦ ¦ ¦fictitious profits based ¦Defendants knew or should¦ ¦ ¦on the false trading ¦have known that they were¦ ¦ ¦documentation. See ¦participating in ¦ ¦ ¦Pamela Goldman Compl. ¶ ¦fraudulent activity. ¦ ¦ ¦2; A & G Goldman Compl. ¶¦See Tr.'s Compl. ¶ 63 ¦ ¦ ¦2. ¦(f). ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦Picower was a highly ¦Defendant Jeffry M. ¦ ¦ ¦sophisticated investor, ¦Picower (“Picower”) is a ¦Picower was a highly ¦ ¦accountant and attorney ¦sophisticated investor ¦sophisticated investor, ¦ ¦who participated in the ¦and businessman who ¦accountant and attorney ¦ ¦Madoff Ponzi scheme for ¦invested in BLMIS over ¦who participated in the ¦ ¦over 20 years, knowing ¦many decades through 24 ¦Madoff Ponzi scheme for ¦ ¦that he was participating¦entity and/or personal ¦over 20 years, knowing ¦ ¦in a fraud. Picower had ¦accounts. According to a ¦that he was participating¦ ¦vast experience in the ¦2002 Forbes article ¦in a fraud. Picower had ¦ ¦purchase and sale of ¦entitled “Unaccountable,”¦vast experience in the ¦ ¦businesses, including ¦Picower is a former ¦purchase and sale of ¦ ¦health care and ¦attorney, accountant and ¦businesses, including ¦ ¦technology companies. He ¦tax shelter promoter who ¦health care and ¦ ¦had also been personally ¦has been active in the ¦technology companies. He ¦ ¦responsible for managing ¦financial industry for ¦had also been personally ¦ ¦hundreds of millions, if ¦more than 25 years. He ¦responsible for managing ¦ ¦not billions, of dollars ¦maintains residences at ¦hundreds of millions, if ¦ ¦of assets, and he had ¦1410 South Ocean ¦not billions, of dollars ¦ ¦developed uncommon ¦Boulevard, Palm Beach, ¦of assets, and he had ¦ ¦sophistication in trading¦Florida 33480 and 4900 ¦developed uncommon ¦ ¦securities and evaluating¦Congress Street, ¦sophistication in trading¦ ¦returns therefrom. Upon ¦Fairfield, Connecticut ¦securities and evaluating¦ ¦information and belief, ¦06824. Upon information ¦returns therefrom, Upon ¦ ¦Picower was closely ¦and belief, Picower has ¦information and belief ¦ ¦associated with Madoff, ¦been closely associated ¦Picower was closely ¦ ¦both in business and ¦with Madoff on both a ¦associated with Madoff, ¦ ¦socially, for the last 30¦business and social level¦both in business and ¦ ¦years. Picower held an ¦for the last 30 years. ¦socially, for the last 30¦ ¦individual BLMIS account ¦Picower holds an ¦years. Picower held an ¦ ¦in the name of “Jeffry M.¦individual BLMIS account ¦individual BLMIS account ¦ ¦Picower,” with an account¦in the name “Jeffry M. ¦in the name of “Jeffry M.¦ ¦address of 1410 South ¦Picower,” with the ¦Picower,” with an account¦ ¦Ocean Boulevard, Palm ¦account address reported ¦address of l4l0 South ¦ ¦Beach, Florida. Picower ¦as 1410 South Ocean ¦Ocean Boulevard, Palm ¦ ¦was a trustee of the ¦Boulevard, Palm Beach, ¦Beach, Florida. Picower ¦ ¦Picower Foundation, and ¦Florida 33480. Upon ¦was a trustee of the ¦ ¦Chairman of the Board of ¦information and belief, ¦Picower Foundation, and ¦ ¦Defendant Decisions ¦Picower is trustee for ¦Chairman of the Board of ¦ ¦Incorporated. See ¦the Picower Foundation ¦Defendant Decisions ¦ ¦Pamela Goldman Compl. ¶ ¦and Chairman of the Board¦Incorporated. See Fox ¦ ¦10; A & G Goldman Compl. ¦of Defendant Decisions ¦Compl. ¶ 13; Marshall ¦ ¦¶ 10. ¦Incorporated. See Tr.'s¦Compl. ¶ 13. ¦ ¦ ¦Compl. ¶ 34. ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦Defendant Barbara Picower¦Defendant Barbara Picower¦Defendant Barbara Picower¦ ¦is a person residing at ¦is a person residing at ¦is a person residing at ¦ ¦1410 South Ocean ¦1410 South Ocean ¦l4l0 South Ocean ¦ ¦Boulevard, Palm Beach, ¦Boulevard, Palm Beach, ¦Boulevard, Palm Beach, ¦ ¦Florida 33480. Barbara ¦Florida 33480. Upon ¦Florida 33480. Barbara ¦ ¦Picower is Picower's ¦information and belief, ¦Picower is Picower's ¦ ¦surviving spouse. ¦Barbara Picower is ¦surviving spouse, ¦ ¦According to the Trustee,¦married to Picower. Upon ¦According to the Trustee,¦ ¦Barbara Picower holds an ¦information and belief, ¦Barbara Picower holds an ¦ ¦individual account at ¦Barbara Picower holds an ¦individual account at ¦ ¦BLMIS in the name ¦individual account at ¦BLMIS in the name ¦ ¦“Barbara Picower,” with ¦BLMIS in the name ¦“Barbara Picower,” with ¦ ¦the account address of ¦“Barbara Picower,” with ¦the account address of ¦ ¦1410 South Ocean ¦the account address ¦l4l0 South Ocean ¦ ¦Boulevard, Palm Beach, ¦reported as 1410 South ¦Boulevard, Palm Beach, ¦ ¦Florida 33480, and ¦Ocean Boulevard, Palm ¦Florida 33480, and ¦ ¦Barbara Picower is ¦Beach, Florida 33480. ¦Barbara Picower is ¦ ¦trustee for Defendant ¦Upon information and ¦trustee for Defendant ¦ ¦Trust f/b/o Gabrielle H. ¦belief, Barbara Picower ¦Trust f/b/o Gabrielle H. ¦ ¦Picower, an officer and/ ¦is trustee for Defendant ¦Picower, an officer and/ ¦ ¦or director of Defendant ¦Trust FBO Gabrielle H. ¦or director of Defendant ¦ ¦Decisions Incorporated, ¦Picower, an officer and/ ¦Decisions Incorporated, ¦ ¦and trustee and Executive¦or director of Defendant ¦and trustee and Executive¦ ¦Director of the Picower ¦Decisions Incorporated ¦Director of the Picower ¦ ¦Foundation. See Pamela ¦and trustee and Executive¦Foundation. See Fox ¦ ¦Goldman Compl. ¶ 12; A & ¦Director of the Picower ¦Compl. ¶ 15; Marshall ¦ ¦G Goldman Compl. ¶ 12. ¦Foundation. See Tr.'s ¦Compl. ¶ 15. ¦ ¦ ¦Compl. ¶ 35. ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦Defendant Decisions ¦Defendant Decisions ¦Defendant Decisions ¦ ¦Incorporated is a ¦Incorporated ¦Incorporated is a ¦ ¦corporation organized ¦(“Decisions”) is a ¦corporation organized ¦ ¦under the laws of ¦corporation organized ¦under the laws of ¦ ¦Delaware with a principal¦under the laws of ¦Delaware with a principal¦ ¦place of business at 950 ¦Delaware with a principal¦place of business at 950 ¦ ¦Third Avenue, New York, ¦place of business at 950 ¦Third Avenue, New York, ¦ ¦New York 10022 and an ¦Third Avenue, New York, ¦New York 10022 and an ¦ ¦alternate mailing address¦New York 10022 and an ¦alternate mailing address¦ ¦on its BLMIS account ¦alternate mailing address¦on its BLMIS account ¦ ¦listed as 22 Saw Mill ¦or its BLMIS account ¦listed as 22 Saw Mill ¦ ¦River Road, Hawthorne, ¦listed as 22 Saw Mill ¦River Road, Hawthorne, ¦ ¦New York, 10532. ¦River Road, Hawthorne, ¦New York, 10532. ¦ ¦According to the Trustee,¦New York, 10532. Upon ¦According to the Trustee,¦ ¦the Decisions ¦information and belief, ¦the Decisions ¦ ¦Incorporated office in ¦the Decisions office in ¦Incorporated office in ¦ ¦Hawthorne was merely a ¦Hawthorne was merely a ¦Hawthorne was merely a ¦ ¦store-front office ¦store-front office ¦store-front office ¦ ¦through which little or ¦through which little or ¦through which little or ¦ ¦no business was ¦no business was ¦no business was ¦ ¦conducted, and Decisions ¦conducted. Upon ¦conducted, and Decisions ¦ ¦Incorporated is a general¦information and belief, ¦Incorporated is a general¦ ¦partner of Defendants ¦Decisions is a general ¦partner of Defendants ¦ ¦Capital Growth Company, ¦partner of Defendants ¦Capital Growth Company, ¦ ¦JA Primary Limited ¦Capital Growth Company, ¦JA Primary Limited ¦ ¦Partnership, JA Special ¦JA Primary Limited ¦Partnership, JA Special ¦ ¦Limited Partnership, JAB ¦Partnership, JA Special ¦Limited Partnership, JAB ¦ ¦Partnership, JEMW ¦Limited Partnership, JAB ¦Partnership, JEMW ¦ ¦Partnership, JF ¦Partnership, JEMW ¦Partnership, JF ¦ ¦Partnership, JLN ¦Partnership, JF ¦Partnership, JLN ¦ ¦Partnership, JMP Limited ¦Partnership, JLN ¦Partnership, JMP Limited ¦ ¦Partnership and Jeffry M.¦Partnership, JMP Limited ¦Partnership and Jeffry M.¦ ¦Picower Special Co. See ¦Partnership and Jeffry M.¦Picower Special Co. See ¦ ¦Pamela Goldman Compl. ¶ ¦Picower Special Co. See ¦Fox Compl. ¶ 16; Marshall¦ ¦13; A & G Goldman Compl. ¦Tr.'s Compl. ¶ 37. ¦Compl. ¶ 16. ¦ ¦¶ 13. ¦ ¦ ¦ +-----------------------------------------------------------------------------+
+-----------------------------------------------------------------------------+ ¦Defendant Capital Growth ¦Upon information and ¦ ¦ ¦Company purports to be a ¦belief, Defendant Capital¦Defendant Capital Growth ¦ ¦limited partnership with ¦Growth Company purports ¦Company purports to be a ¦ ¦a mailing address for its¦to be a limited ¦limited partnership with ¦ ¦BLMIS account listed at ¦partnership with a ¦a mailing address for its¦ ¦22 Saw Mill River Road, ¦mailing address for its ¦BLMIS account listed at ¦ ¦Hawthorne, New York, ¦BLMIS account listed at ¦22 Saw Mill River Road, ¦ ¦10532, care of Decisions ¦22 Saw Mill River Road, ¦Hawthorne, New York, ¦ ¦Incorporated. According ¦Hawthorne, New York, ¦10532, care of Decisions ¦ ¦to the Trustee, Defendant¦10532, care of Decisions ¦Incorporated. According ¦ ¦Decisions Incorporated ¦Incorporated. Upon ¦to the Trustee, Defendant¦ ¦and/or Picower serve/ ¦information and belief, ¦Decisions Incorporated ¦ ¦served as General Partner¦Defendant Decisions ¦and/or Picower serve/ ¦ ¦or Director of Capital ¦Incorporated and/or ¦served as General Partner¦ ¦Growth Company, and ¦Defendant Picower serves ¦or Director of Capital ¦ ¦Decisions Incorporated ¦as General Partner or ¦Growth Company, and ¦ ¦and Picower transact/ ¦Director of Capital ¦Decisions Incorporated ¦ ¦transacted business ¦Growth Company, and ¦and Picower transact/ ¦ ¦through this entity. ¦Decisions Incorporated, ¦transacted business ¦ ¦See Pamela Goldman ¦Picower, and/or Freilich ¦through this entity. ¦ ¦Compl. ¶ 14; A & G ¦transact business through¦See Fox Compl. ¶ 17; ¦ ¦Goldman Compl. ¶ 14. ¦this entity. See Tr.'s ¦Marshall Compl. ¶ 17. ¦ ¦ ¦Compl. ¶ 38. ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦Defendant JA Primary ¦Defendant JA Primary ¦Defendant JA Primary ¦ ¦Limited Partnership is a ¦Limited Partnership is a ¦Limited Partnership is a ¦ ¦limited partnership ¦limited partnership ¦limited partnership ¦ ¦organized under the laws ¦organized under the laws ¦organized under the laws ¦ ¦of Delaware with a ¦of Delaware with a ¦of Delaware with a ¦ ¦principal place of ¦principal place of ¦principal place of ¦ ¦business at 25 Virginia ¦business at 25 Virginia ¦business at 25 Virginia ¦ ¦Lane, Thornwood, New York¦Lane, Thornwood, New York¦Lane, Thornwood, New York¦ ¦10594. According to the ¦10594. Upon information ¦10594. According to the ¦ ¦Trustee, Defendant ¦and belief, Defendant ¦Trustee, Defendant ¦ ¦Decisions Incorporated ¦Decisions Incorporated ¦Decisions Incorporated ¦ ¦and/or Picower serves/ ¦and/or Defendant Picower ¦and/or Picower serves/ ¦ ¦served as General Partner¦serves as General Partner¦served as General Partner¦ ¦or Director of JA Primary¦or Director of JA Primary¦or Director of JA Primary¦ ¦Partnership, and ¦Partnership, and ¦Partnership, and ¦ ¦Decisions Incorporated, ¦Decisions Incorporated, ¦Decisions Incorporated, ¦ ¦and/or Picower transact/ ¦Picower, and/or April ¦and/or Picower transact/ ¦ ¦transacted business ¦Freilich transact ¦transacted business ¦ ¦through this entity. ¦business through this ¦through this entity. ¦ ¦See Pamela Goldman ¦defendant entity. See ¦See Fox Compl. ¶ 18; ¦ ¦Compl. ¶ 15; A & G ¦Tr.'s Compl. ¶ 39. ¦Marshall Compl. ¶ 18. ¦ ¦Goldman Compl. ¶ 15. ¦ ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦Defendant JA Special ¦ ¦Defendant JA Special ¦ ¦Limited Partnership is a ¦Defendant JA Special ¦Limited Partnership is a ¦ ¦limited partnership ¦Limited Partnership is a ¦limited partnership ¦ ¦organized under the laws ¦limited partnership ¦organized under the laws ¦ ¦of Delaware with a ¦organized under the laws ¦of Delaware with a ¦ ¦principal place of ¦of Delaware with a ¦principal place of ¦ ¦business at 25 Virginia ¦principal place of ¦business at 25 Virginia ¦ ¦Lane, Thornwood, New ¦business at 25 Virginia ¦Lane, Thornwood, New ¦ ¦York, New York 10594. ¦Lane, Thornwood, New ¦York, New York 10594. ¦ ¦According to the Trustee,¦York, New York 10594. ¦According to the Trustee,¦ ¦Defendant Decisions ¦Upon information and ¦Defendant Decisions ¦ ¦Incorporated and/or ¦belief, Defendant ¦Incorporated and/or ¦ ¦Picower serve/served as ¦Decisions Incorporated ¦Picower serve/served as ¦ ¦General Partner or ¦and/or Defendant Picower ¦General Partner or ¦ ¦Director of JA Special ¦serves as General Partner¦Director of JA Special ¦ ¦Limited Partnership, and ¦or Director of JA Special¦Limited Partnership, and ¦ ¦Decisions Incorporated, ¦Limited Partnership, and ¦Decisions Incorporated, ¦ ¦and/or Picower transact/ ¦Decisions Incorporated, ¦and/or Picower transact/ ¦ ¦transacted business ¦Picower, and/or Freilich ¦transacted business ¦ ¦through this Defendant ¦transact business through¦through this Defendant ¦ ¦entity. See Pamela ¦this defendant entity. ¦entity. See Fox Compl. ¦ ¦Goldman Compl. ¶ 16; A & ¦See Tr.'s Compl. ¶ 40. ¦¶ 19; Marshall Compl. ¶ ¦ ¦G Goldman Compl. ¶ 16. ¦ ¦19. ¦ +-------------------------+-------------------------+-------------------------¦ ¦According to the Trustee,¦Upon information and ¦According to the Trustee,¦ ¦Defendant JAB Partnership¦belief, Defendant JAB ¦Defendant JAB Partnership¦ ¦purports to be a limited ¦Partnership purports to ¦purports to be a limited ¦ ¦partnership with a listed¦be a limited partnership ¦partnership with a listed¦ ¦mailing address care of ¦with a listed mailing ¦mailing address care of ¦ ¦Decisions Incorporated at¦address care of Decisions¦Decisions Incorporated at¦ ¦22 Saw Mill River Road, ¦Incorporated at 22 Saw ¦22 Saw Mill River Road, ¦ ¦Hawthorne, New York, ¦Mill River Road, ¦Hawthorne, New York, ¦ ¦10532. Upon information ¦Hawthorne, New York, ¦10532. Upon information ¦ ¦and belief, Defendant ¦10532. Upon information ¦and belief Defendant ¦ ¦Decisions Incorporated ¦and belief, Defendant ¦Decisions Incorporated ¦ ¦and/or Picower serve/ ¦Decisions Incorporated ¦and/or Picower serve/ ¦ ¦served as General Partner¦and/or Defendant Picower ¦served as General Partner¦ ¦or Director of JAB ¦serves as General Partner¦or Director of JAB ¦ ¦Partnership, and ¦or Director of JAB ¦Partnership, and ¦ ¦Decisions Incorporated, ¦Partnership, and ¦Decisions Incorporated, ¦ ¦and/or Picower transact/ ¦Decisions Incorporated, ¦and/or Picower transact/ ¦ ¦transacted business ¦Picower, and/or Freilich ¦transacted business ¦ ¦through this Defendant ¦transact business through¦through this Defendant ¦ ¦entity. See Pamela ¦this defendant entity. ¦entity. See Fox Compl. ¦ ¦Goldman Compl. ¶ 17; A & ¦See Tr.'s Compl. ¶ 41. ¦¶ 20; Marshall Compl. ¶ ¦ ¦G Goldman Compl. ¶ 17. ¦ ¦20. ¦ +-------------------------+-------------------------+-------------------------¦ ¦According to the Trustee,¦Upon information and ¦According to the Trustee,¦ ¦Defendant JEMW ¦belief, Defendant JEMW ¦Defendant JEMW ¦ ¦Partnership purports to ¦Partnership purports to ¦Partnership purports to ¦ ¦be a limited partnership ¦be a limited partnership ¦be a limited partnership ¦ ¦with a listed mailing ¦with a listed mailing ¦with a listed mailing ¦ ¦address care of Decisions¦address care of Decisions¦address care of Decisions¦ ¦Incorporated at 22 Saw ¦Incorporated at 22 Saw ¦Incorporated at 22 Saw ¦ ¦Mill River Road, ¦Mill River Road, ¦Mill River Road, ¦ ¦Hawthorne, New York, ¦Hawthorne, New York, ¦Hawthorne, New York, ¦ ¦10532; and Defendant ¦10532. Upon information ¦10532; and Defendant ¦ ¦Decisions Incorporated ¦and belief, Defendant ¦Decisions Incorporated ¦ ¦and/or Picower serve/ ¦Decisions Incorporated ¦and/or Picower serve/ ¦ ¦served as General Partner¦and/or Defendant Picower ¦served as General Partner¦ ¦or Director of JEMW ¦serves as General Partner¦or Director of JEMW ¦ ¦Partnership, and ¦or Director of JEMW ¦Partnership, and ¦ ¦Decisions Incorporated, ¦Partnership, and ¦Decisions Incorporated, ¦ ¦and/or Picower transact/ ¦Decisions Incorporated, ¦and/or Picower transact/ ¦ ¦transacted business ¦Picower, and/or Freilich ¦transacted business ¦ ¦through this Defendant ¦transact business through¦through this Defendant ¦ ¦entity. See Pamela ¦this defendant entity. ¦entity. See Fox Compl. ¦ ¦Goldman Compl. ¶ 18; A & ¦See Tr.'s Compl. ¶ 42. ¦¶ 21; Marshall Compl. ¶ ¦ ¦G Goldman Compl. ¶ 18. ¦ ¦21. ¦ +-------------------------+-------------------------+-------------------------¦ ¦According to the Trustee,¦Upon information and ¦According to the Trustee,¦ ¦Defendant JF Partnership ¦belief, Defendant JF ¦Defendant JF Partnership ¦ ¦purports to be a limited ¦Partnership purports to ¦purports to be a limited ¦ ¦partnership with a listed¦be a limited partnership ¦partnership with a listed¦ ¦mailing address care of ¦with a listed mailing ¦mailing address care of ¦ ¦Decisions Incorporated at¦address care of Decisions¦Decisions Incorporated at¦ ¦22 Saw Mill River Road, ¦Incorporated at 22 Saw ¦22 Saw Mill River Road, ¦ ¦Hawthorne, New York, ¦Mill River Road, ¦Hawthorne, New York, ¦ ¦10532; and Defendant ¦Hawthorne, New York, ¦10532; and Defendant ¦ ¦Decisions Incorporated ¦10532. Upon information ¦Decisions Incorporated ¦ ¦and/or Picower serve/ ¦and belief, Defendant ¦and/or Picower serve/ ¦ ¦served as General Partner¦Decisions Incorporated ¦served as General Partner¦ ¦or Director of JF ¦and/or Defendant Picower ¦or Director of JF ¦ ¦Partnership, and ¦serves as General Partner¦Partnership, and ¦ ¦Decisions Incorporated, ¦or Director of JF ¦Decisions Incorporated, ¦ ¦and/or Picower transact/ ¦Partnership, and ¦and/or Picower transact/ ¦ ¦transacted business ¦Decisions Incorporated, ¦transacted business ¦ ¦through this Defendant ¦Picower, and/or Freilich ¦through this Defendant ¦ ¦entity. See Pamela ¦transact business through¦entity. See Fox Compl. ¦ ¦Goldman Compl. ¶ 19; A & ¦this defendant entity. ¦¶ 22; Marshall Compl. ¶ ¦ ¦G Goldman Compl. ¶ 19. ¦See Tr.'s Compl. ¶ 43. ¦22. ¦ +-------------------------+-------------------------+-------------------------¦ ¦According to the Trustee,¦Upon information and ¦According to the Trustee,¦ ¦Defendant JFM Investment ¦belief, Defendant JFM ¦Defendant JFM Investment ¦ ¦Company is an entity ¦Investment Company is an ¦Company is an entity ¦ ¦through which Decisions ¦entity through which ¦through which Decisions ¦ ¦Incorporated, and/or ¦Decisions Incorporated, ¦Incorporated, and/or ¦ ¦Picower transact/ ¦Picower and/or Freilich ¦Picower transact/ ¦ ¦transacted business, with¦transact business, with a¦transacted business, with¦ ¦a listed mailing address ¦listed mailing address ¦a listed mailing address ¦ ¦care of Decisions ¦care of Decisions ¦care of Decisions ¦ ¦Incorporated at 22 Saw ¦Incorporated at 22 Saw ¦Incorporated at 22 Saw ¦ ¦Mill River Road, ¦Mill River Road, ¦Mill River Road, ¦ ¦Hawthorne, New York, ¦Hawthorne, New York, ¦Hawthorne, New York, ¦ ¦10532; and JFM Investment¦10532. Upon information ¦10532; and JFM Investment¦ ¦Company is a Limited ¦and belief, JFM ¦Company is a Limited ¦ ¦Partner of Capital Growth¦Investment Company is a ¦Partner of Capital Growth¦ ¦Company, and Decisions ¦Limited Partner of ¦Company, and Decisions ¦ ¦Incorporated and/or ¦Capital Growth Company, ¦Incorporated and/or ¦ ¦Picower serve/served as ¦and Decisions ¦Picower serve/served as ¦ ¦General Partner or ¦Incorporated and/or ¦General Partner or ¦ ¦Director of JFM ¦Picower serves as General¦Director of JFM ¦ ¦Investment Company. See ¦Partner or Director of ¦Investment Company. See ¦ ¦Pamela Goldman Compl. ¶ ¦JFM Investment Company. ¦Fox Compl. ¶ 23; Marshall¦ ¦20; A & G Goldman Compl. ¦See Tr.'s Compl. ¶ 44. ¦Compl. ¶ 23. ¦ ¦¶ 20. ¦ ¦ ¦ +-----------------------------------------------------------------------------+
+-----------------------------------------------------------------------------+ ¦According to the Trustee,¦ ¦According to the Trustee,¦ ¦Defendant JLN Partnership¦Upon information and ¦Defendant JLN Partnership¦ ¦is a limited partnership ¦belief, Defendant JLN ¦is a limited partnership ¦ ¦with a listed mailing ¦Partnership is a limited ¦with a listed mailing ¦ ¦address care of Decisions¦partnership with a listed¦address care of Decisions¦ ¦Incorporated at 22 Saw ¦mailing address care of ¦Incorporated at 22 Saw ¦ ¦Mill River Road, ¦Decisions Incorporated at¦Mill River Road, ¦ ¦Hawthorne, New York, ¦22 Saw Mill River Road, ¦Hawthorne, New York, ¦ ¦10532; and Decisions ¦Hawthorne, New York, ¦70532; and Decisions ¦ ¦Incorporated and/or ¦10532. Upon information ¦Incorporated and/or ¦ ¦Picower serve/served as ¦and belief, Decisions ¦Picower serve/served as ¦ ¦General Partner or ¦Incorporated and/or ¦General Partner or ¦ ¦Director of JLN ¦Picower serves as General¦Director of JLN ¦ ¦Partnership, and ¦Partner or Director of ¦Partnership, and ¦ ¦Decisions Incorporated, ¦JLN Partnership, and ¦Decisions Incorporated, ¦ ¦and/or Picower transact/ ¦Decisions Incorporated, ¦and/or Picower transact/ ¦ ¦transacted business ¦Picower, and/or Freilich ¦transacted business ¦ ¦through this Defendant ¦transact business through¦through this Defendant ¦ ¦entity. See Pamela ¦this defendant entity. ¦entity. See Fox Compl. ¦ ¦Goldman Compl. ¶ 21; A & ¦See Tr.'s Compl. ¶ 45. ¦¶ 24; Marshall Compl. ¶ ¦ ¦G Goldman Compl. ¶ 21. ¦ ¦24. ¦ +-------------------------+-------------------------+-------------------------¦ ¦Defendant JMP Limited ¦ ¦Defendant JMP Limited ¦ ¦Partnership is a limited ¦Defendant JMP Limited ¦Partnership is a limited ¦ ¦partnership organized ¦Partnership is a limited ¦partnership organized ¦ ¦under the laws of ¦partnership organized ¦under the laws of ¦ ¦Delaware, with a ¦under the laws of ¦Delaware, with a ¦ ¦principal place of ¦Delaware, with a ¦principal place of ¦ ¦business at 25 Virginia ¦principal place of ¦business at 25 Virginia ¦ ¦Lane, Thornwood, New York¦business at 25 Virginia ¦Lane, Thornwood, New York¦ ¦10594. According to the ¦Lane, Thornwood, New York¦10594, According to the ¦ ¦Trustee, Decisions ¦10594. Upon information ¦Trustee, Decisions ¦ ¦Incorporated and/or ¦and belief, Decisions ¦Incorporated and/or ¦ ¦Picower serve/served as ¦Incorporated and/or ¦Picower serve/served as ¦ ¦General Partner or ¦Picower serves as General¦General Partner or ¦ ¦Director of JMP ¦Partner or Director of ¦Director of JMP ¦ ¦Partnership, and ¦JMP Partnership, and ¦Partnership, and ¦ ¦Decisions Incorporated, ¦Decisions Incorporated, ¦Decisions Incorporated, ¦ ¦and/or Picower transact/ ¦Picower, and/or Freilich ¦and/or Picower transact/ ¦ ¦transacted business ¦transact business through¦transacted business ¦ ¦through this Defendant ¦this defendant entity. ¦through this Defendant ¦ ¦entity. See Pamela ¦See Tr.'s Compl. ¶ 46. ¦entity. See Fox Compl. ¦ ¦Goldman Compl. ¶ 22; A & ¦ ¦¶ 25; Marshall Compl. ¶ ¦ ¦G Goldman Compl. ¶ 22. ¦ ¦25. ¦ +-------------------------+-------------------------+-------------------------¦ ¦According to the Trustee,¦Upon information and ¦According to the Trustee,¦ ¦Defendant Jeffry M. ¦belief, Defendant Jeffry ¦Defendant Jeffry M. ¦ ¦Picower Special Co. is an¦M. Picower Special Co. is¦Picower Special Co. is an¦ ¦entity through which ¦an entity through which ¦entity through which ¦ ¦Decisions Incorporated, ¦Decisions Incorporated, ¦Decisions Incorporated, ¦ ¦and/or Picower transact/ ¦Picower and/or Freilich ¦and/or Picower transact/ ¦ ¦transacted business, with¦transact business, with a¦transacted business, with¦ ¦a mailing address care of¦mailing address care of ¦a mailing address care of¦ ¦Decisions Incorporated 22¦Decisions Incorporated at¦Decisions Incorporated at¦ ¦Saw Mill River Road, ¦22 Saw Mill River Road, ¦22 Saw Mill River Road, ¦ ¦Hawthorne, New York, ¦Hawthorne, New York, ¦Hawthorne, New York, ¦ ¦10532; and Decisions ¦10532. Upon information ¦10532; and Decisions ¦ ¦Incorporated and/or ¦and belief, Decisions ¦Incorporated and/or ¦ ¦Picower serve/served as ¦Incorporated and/or ¦Picower serve/served as ¦ ¦General Partner or ¦Picower serves as General¦General Partner or ¦ ¦Director of Jeffry M. ¦Partner or Director of ¦Director of Jeffry M. ¦ ¦Picower Special Co. See ¦Jeffry M. Picower Special¦Picower Special Co. See ¦ ¦Pamela Goldman Compl. ¶ ¦Co. See Tr.'s Compl. ¶ ¦Fox Compl. ¶ 26; Marshall¦ ¦23; A & G Goldman Compl. ¦47. ¦Compl. ¶ 26. ¦ ¦¶ 23. ¦ ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦According to the Trustee,¦ ¦According to the Trustee,¦ ¦Defendant Favorite Funds ¦Defendant Favorite Funds ¦Defendant Favorite Funds ¦ ¦is an entity through ¦is an entity through ¦is an entity through ¦ ¦which Picower transacted ¦which Picower transacts ¦which Picower transacted ¦ ¦business, with a listed ¦business, with a listed ¦business, with a listed ¦ ¦mailing address care of ¦mailing address care of ¦mailing address care of ¦ ¦Decisions Incorporated at¦Decisions Incorporated at¦Decisions Incorporated at¦ ¦22 Saw Mill River Road, ¦22 Saw Mill River Road, ¦22 Saw Mill River Road, ¦ ¦Hawthorne, New York, ¦Hawthorne, New York, ¦Hawthorne, New York, ¦ ¦10532, and Decisions ¦10532. Upon information ¦10532, and Decisions ¦ ¦Incorporated and/or ¦and belief, Decisions ¦Incorporated and/or ¦ ¦Picower serve/served as ¦Incorporated and/or ¦Picower serve/served as ¦ ¦General Partner or ¦Picower serves as General¦General Partner or ¦ ¦Director of Favorite ¦Partner or Director of ¦Director of Favorite ¦ ¦Funds. See Pamela ¦Favorite Funds. See ¦Funds. See Fox Compl. ¶¦ ¦Goldman Compl. ¶ 24; A & ¦Tr.'s Compl. ¶ 48. ¦27; Marshall Compl. ¶ 27.¦ ¦G Goldman Compl. ¶ 24. ¦ ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦According to the Trustee,¦Upon information and ¦According to the Trustee,¦ ¦Defendant Jeffry M. ¦belief, Defendant Jeffry ¦Defendant Jeffry M. ¦ ¦Picower P.C. purports to ¦M. Picower P.C. purports ¦Picower P.C. purports to ¦ ¦be a limited partnership ¦to be a limited ¦be a limited partnership ¦ ¦with a listed mailing ¦partnership with a listed¦with a listed mailing ¦ ¦address at 25 Virginia ¦mailing address at 25 ¦address at 25 Virginia ¦ ¦Lane, Thornwood, New ¦Virginia Lane, Thornwood,¦Lane, Thornwood, New ¦ ¦York, New York 10594, and¦New York, New York 10594.¦York, New York 10594, and¦ ¦Decisions Incorporated ¦Upon information and ¦Decisions Incorporated ¦ ¦and/or Picower serve/ ¦belief, Decisions ¦and/or Picower serve/ ¦ ¦served as General Partner¦Incorporated and/or ¦served as General Partner¦ ¦or Director of Jeffry M. ¦Picower serves as General¦or Director of Jeffry M. ¦ ¦Picower P.C., and ¦Partner or Director of ¦Picower P.C., and ¦ ¦Decisions Incorporated, ¦Jeffry M. Picower P.C., ¦Decisions Incorporated, ¦ ¦and/or Picower transact/ ¦and Decisions ¦and/or Picower transact/ ¦ ¦transacted business ¦Incorporated, Picower, ¦transacted business ¦ ¦through this defendant ¦and/or Freilich transact ¦through this defendant ¦ ¦entity. See Pamela ¦business through this ¦entity. See Fox Compl. ¦ ¦Goldman Compl. ¶ 25; A & ¦defendant entity. See ¦¶ 28; Marshall Compl. ¶ ¦ ¦G Goldman Compl. ¶ 25. ¦Tr.'s Compl. ¶ 49. ¦28. ¦ +-------------------------+-------------------------+-------------------------¦ ¦Defendant Picower ¦ ¦Defendant Picower ¦ ¦Foundation is a trust ¦Upon information and ¦Foundation is a trust ¦ ¦organized for charitable ¦belief, Defendant Picower¦organized for charitable ¦ ¦purposes with Picower ¦Foundation is a trust ¦purposes with Picower ¦ ¦listed as donor, and ¦organized for charitable ¦listed as donor, and ¦ ¦Picower and Barbara ¦purposes with Picower ¦Picower and Barbara ¦ ¦Picower, among others, ¦listed as donor and ¦Picower, among others, ¦ ¦listed as Trustees during¦Picower and Barbara ¦listed as Trustees during¦ ¦the relevant time period.¦Picower, among others, ¦the relevant time period.¦ ¦Picower Foundation's ¦listed as Trustees. ¦Picower Foundation's ¦ ¦addresses are reported as¦Picower Foundation's ¦addresses are reported as¦ ¦1410 South Ocean ¦addresses are reported as¦l4l0 South Ocean ¦ ¦Boulevard, Palm Beach, ¦1410 South Ocean ¦Boulevard, Palm Beach, ¦ ¦Florida 33480 and 9 West ¦Boulevard, Palm Beach, ¦Florida 33480 and 9 West ¦ ¦57th Street, Suite 3800, ¦Florida 33480 and 9 West ¦57th Street, Suite 3800, ¦ ¦New York, New York 10019.¦57th Street, Suite 3800, ¦New York, New York 10019.¦ ¦See Pamela Goldman ¦New York, New York 10019.¦See Fox Compl. ¶ 29; ¦ ¦Compl. ¶ 26; A & G ¦See Tr.'s Compl. ¶ 50. ¦Marshall Compl. ¶ 29. ¦ ¦Goldman Compl. ¶ 26. ¦ ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦According to the Trustee,¦Upon information and ¦According to the Trustee,¦ ¦Defendant Picower ¦belief, Defendant Picower¦Defendant Picower ¦ ¦Institute for Medical ¦Institute for Medical ¦Institute for Medical ¦ ¦Research is a nonprofit ¦Research is a nonprofit ¦Research is a nonprofit ¦ ¦entity organized under ¦entity organized under ¦entity organized under ¦ ¦the laws of New York, ¦the laws of New York, ¦the laws of New York, ¦ ¦with a principal place of¦with a principal place of¦with a principal place of¦ ¦business at 350 Community¦business at 350 Community¦business at 350 Community¦ ¦Drive, Manhasset, New ¦Drive, Manhasset, New ¦Drive, Manhasset, New ¦ ¦York 11030. See Pamela ¦York 11030. See Tr.'s ¦York 11030. See Fox ¦ ¦Goldman Compl. ¶ 27; A & ¦Compl. ¶ 51. ¦Compl. ¶ 30; Marshall ¦ ¦G Goldman Compl. ¶ 27. ¦ ¦Compl. ¶ 30. ¦ +-----------------------------------------------------------------------------+
+-----------------------------------------------------------------------------+ ¦According to the Trustee,¦Defendant Trust FBO ¦According to the Trustee,¦ ¦Defendant Trust f/b/o ¦Gabrielle H. Picower is a¦Defendant Trust f/b/o ¦ ¦Gabrielle H. Picower is a¦trust established for ¦Gabrielle H, Picower is a¦ ¦trust established for ¦beneficiary Gabrielle H. ¦trust established for ¦ ¦beneficiary Gabrielle H. ¦Picower, who upon ¦beneficiary Gabrielle H. ¦ ¦Picower, who is the ¦information and belief is¦Picower, who is the ¦ ¦daughter of Picower and ¦the daughter of Picower ¦daughter of Picower and ¦ ¦Barbara Picower, with ¦and Barbara Picower, with¦Barbara Picower, with ¦ ¦Defendant Barbara Picower¦Defendant Barbara Picower¦Defendant Barbara Picower¦ ¦listed as trustee, and ¦listed as trustee and the¦listed as trustee, and ¦ ¦the trust's BLMIS account¦trust's BLMIS account ¦the trust's BLMIS account¦ ¦address reported as 1410 ¦address reported as 1410 ¦address reported as l4l0 ¦ ¦South Ocean Boulevard, ¦South Ocean Boulevard, ¦South Ocean Boulevard, ¦ ¦Palm Beach, Florida ¦Palm Beach, Florida ¦Palm Beach, Florida ¦ ¦33480. See Pamela ¦33480. See Tr.'s Compl.¦33480. See Fox Compl. ¶¦ ¦Goldman Compl. ¶ 28; A & ¦¶ 52. ¦31; Marshall Compl. ¶ 31.¦ ¦G Goldman Compl. ¶ 28. ¦ ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦On information and ¦ ¦ ¦ ¦belief, the ... [Picower ¦ ¦ ¦On information and ¦Entities] in dealing with¦ ¦ ¦belief, the ... [Picower ¦BLMIS have been dominated¦On information and belief¦ ¦Entity Defendants] were ¦by and used merely as the¦the ... [Picower Entity ¦ ¦dominated, controlled and¦instrument of Picower to ¦Defendants] were ¦ ¦used as a mere ¦advance his personal ¦dominated, controlled and¦ ¦instrumentality of ¦interests rather than ¦used as a mere ¦ ¦Picower to advance his ¦corporate ends. As set ¦instrumentality of ¦ ¦interests in, and to ¦forth herein, Picower ¦Picower to advance his ¦ ¦participate in and ¦exercised complete ¦interests in, and to ¦ ¦control, the Madoff Ponzi¦dominion over the Picower¦participate in, the ¦ ¦scheme. Thus, the Picower¦Entities in dealing with ¦Madoff Ponzi scheme. ¦ ¦Entity Defendants are the¦BLMIS, which he knew or ¦Thus, the Picower Entity ¦ ¦alter egos of Jeffry ¦should have known was ¦Defendants are the alter ¦ ¦Picower and of each ¦predicated on fraud. As a¦egos of Picower and of ¦ ¦other. See Pamela ¦result, the Picower ¦each other. See Fox ¦ ¦Goldman Compl. ¶ 29; A & ¦Entities functioned as ¦Compl. ¶ 32; Marshall ¦ ¦G Goldman Compl. ¶ 29. ¦alter egos of Picower and¦Compl. ¶ 32. ¦ ¦ ¦no corporate veil can be ¦ ¦ ¦ ¦maintained between them. ¦ ¦ ¦ ¦See Tr.'s Compl. ¶ 53. ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦BLMIS is a New York ¦ ¦ ¦ ¦limited liability company¦ ¦ ¦ ¦that is wholly owned by ¦ ¦ ¦ ¦Madoff. Founded in 1959, ¦ ¦ ¦ ¦BLMIS operated from its ¦ ¦ ¦BLMIS is a New York ¦principal place of ¦ ¦ ¦Limited Liability ¦business at 885 Third ¦ ¦ ¦Corporation that was ¦Avenue, New York, New ¦ ¦ ¦wholly owned by Madoff. ¦York. Madoff, as founder,¦ ¦ ¦BLMIS was founded in ¦chairman, and chief ¦ ¦ ¦1959. Madoff as Founder, ¦executive officer, ran ¦ ¦ ¦Chairman, Chief Executive¦BLMIS together with ¦ ¦ ¦Officer, and sole ¦several family members ¦ ¦ ¦shareholder ran BLMIS as ¦and a number of ¦ ¦ ¦his alter ego with ¦additional employees. ¦ ¦ ¦several family members ¦BLMIS was registered with¦ ¦ ¦and a few employees. ¦the SEC as a securities ¦ ¦ ¦BLMIS was registered with¦broker-dealer under ¦ ¦ ¦the SEC as a Securities ¦Section 15(b) of the ¦ ¦ ¦Broker Dealer under § 15 ¦Securities Exchange Act ¦ ¦ ¦of the Exchange Act. ¦of 1934, 15 U.S.C. § 78o ¦ ¦ ¦See Pamela Goldman ¦(b). By that ¦ ¦ ¦Compl. ¶ 30; A & G ¦registration, BLMIS is a ¦ ¦ ¦Goldman Compl. ¶ 30. ¦member of SIPC. BLMIS had¦ ¦ ¦ ¦three business units: ¦ ¦ ¦ ¦investment advisory (the ¦ ¦ ¦ ¦“IA Business”), market ¦ ¦ ¦ ¦making and proprietary ¦ ¦ ¦ ¦trading. See Tr.'s ¦ ¦ ¦ ¦Compl. ¶ 19. ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦Although clients of the ¦ ¦ ¦ ¦IA Business received ¦ ¦ ¦ ¦monthly or quarterly ¦ ¦ ¦BLMIS customers received ¦statements purportedly ¦ ¦ ¦monthly statements ¦showing the securities ¦ ¦ ¦showing the purchase and ¦that were held in—or had ¦ ¦ ¦sales of securities in ¦been traded through—their¦ ¦ ¦their accounts along with¦accounts, as well as the ¦ ¦ ¦the profits purportedly ¦growth of and profit from¦ ¦ ¦realized from these ¦those accounts over time,¦ ¦ ¦securities transactions. ¦the trades reported on ¦ ¦ ¦But the transactions ¦these statements were a ¦ ¦ ¦reported on these ¦complete fabrication. The¦The Defendants' account ¦ ¦statements were a ¦security purchases and ¦records reflect, and ¦ ¦fabrication. The ¦sales depicted in the ¦Defendants were aware of,¦ ¦securities transactions ¦account statements ¦or should have been of, ¦ ¦described in the monthly ¦virtually never occurred ¦the fact that Madoff and ¦ ¦statements either never ¦and the profits reported ¦BLMIS booked in their ¦ ¦occurred or rarely ¦were entirely fictitious.¦accounts fictional ¦ ¦occurred, and the profits¦At the Plea Hearing, ¦profits from fictional ¦ ¦reported were entirely ¦Madoff admitted that he ¦trading. Upon information¦ ¦fictitious. Madoff ¦never in fact purchased ¦and belief, no purchases ¦ ¦admitted at his plea ¦any of the securities he ¦or sales of securities in¦ ¦hearing that he had never¦claimed to have purchased¦the Defendants' BLMIS ¦ ¦purchased any of the ¦for customer accounts. ¦accounts ever actually ¦ ¦securities in BLMIS ¦Indeed, based on the ¦occurred. Upon ¦ ¦customer accounts. ¦Trustee's investigation ¦information and belief, ¦ ¦Following an extensive ¦to date and with the ¦no purchases or sales of ¦ ¦and lengthy ¦exception of isolated ¦securities in the class ¦ ¦investigation, the ¦individual trades for ¦members' BLMIS accounts ¦ ¦Trustee for BLMIS has ¦certain clients other ¦ever actually occurred. ¦ ¦stated that, except for ¦than the Defendants, ¦See Fox Compl. ¶ 8; ¦ ¦isolated individual ¦there is no record of ¦Marshall Compl. ¶ 8. ¦ ¦transactions, there is no¦BLMIS having cleared any ¦ ¦ ¦record of BLMIS having ¦purchase or sale of ¦ ¦ ¦purchased or sold any ¦securities at the ¦ ¦ ¦securities in BLMIS ¦Depository Trust & ¦ ¦ ¦customer accounts. See ¦Clearing Corporation, the¦ ¦ ¦Pamela Goldman Compl. ¶ ¦clearing house for such ¦ ¦ ¦33; A & G Goldman Compl. ¦transactions, or any ¦ ¦ ¦¶ 33. ¦other trading platform on¦ ¦ ¦ ¦which BLMIS could have ¦ ¦ ¦ ¦reasonably traded ¦ ¦ ¦ ¦securities. See Tr.'s ¦ ¦ ¦ ¦Compl. ¶ 21. ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦ ¦Picower, the other ¦ ¦ ¦ ¦Defendants, and their ¦ ¦ ¦ ¦agents directly ¦ ¦The money that customers ¦ ¦participated in the ¦ ¦paid to BLMIS in ¦ ¦Madoff Ponzi scheme, and ¦ ¦connection with their ¦ ¦knew or should have known¦ ¦investment contracts with¦The money received from ¦that the funds used to ¦ ¦BLMIS was not used to ¦investors was not set ¦pay the Defendants' ¦ ¦purchase securities as ¦aside to buy securities ¦fictional profits could ¦ ¦described, but instead ¦as purported, but instead¦have only come from the ¦ ¦was used to make ¦was primarily used to ¦accounts of other BLMIS ¦ ¦distributions to other ¦make the distributions ¦customers. Picower and ¦ ¦investors, primarily to ¦to—or payments on behalf ¦Defendants converted the ¦ ¦the Defendants. See ¦of—other investors. See ¦cash in other innocent ¦ ¦Pamela Goldman Compl. ¶ ¦Tr.'s Compl. ¶ 24. ¦BLMIS customer accounts ¦ ¦34; A & G Goldman Compl. ¦ ¦for their own personal ¦ ¦¶ 34. ¦ ¦benefit with the ¦ ¦ ¦ ¦acquiescence and ¦ ¦ ¦ ¦assistance of Madoff and ¦ ¦ ¦ ¦BLMIS. See Fox Compl. ¶¦ ¦ ¦ ¦9; Marshall Compl. ¶ 9. ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦On December 11, 2008 (the¦ ¦ ¦ ¦“Filing Date”), Madoff ¦ ¦ ¦On December 11, 2008, ¦was arrested by federal ¦ ¦ ¦Madoff was arrested by ¦agents for violation of ¦ ¦ ¦federal agents and ¦the criminal securities ¦ ¦ ¦charged with criminal ¦laws, including, inter ¦ ¦ ¦violation of the federal ¦alia, securities fraud, ¦ ¦ ¦securities laws, ¦investment adviser fraud,¦ ¦ ¦including securities ¦and mail and wire fraud. ¦ ¦ ¦fraud, investment advisor¦Contemporaneously, the ¦ ¦ ¦fraud, and mail and wire ¦Securities and Exchange ¦ ¦ ¦fraud. On the same day, ¦Commission (“SEC”) filed ¦ ¦ ¦the SEC filed a complaint¦a complaint in the ¦ ¦ ¦in the United States ¦District Court which ¦ ¦ ¦District Court for the ¦commenced the District ¦ ¦ ¦Southern District of New ¦Court Proceeding against ¦ ¦ ¦York against Madoff and ¦Madoff and BLMIS. The ¦ ¦ ¦BLMIS, also alleging that¦District Court Proceeding¦ ¦ ¦Madoff and BLMIS engaged ¦remains pending in the ¦ ¦ ¦in securities fraud. ¦District Court. The SEC ¦ ¦ ¦See Pamela Goldman ¦complaint alleged that ¦ ¦ ¦Compl. ¶ 35; A & G ¦Madoff and BLMIS engaged ¦ ¦ ¦Goldman Compl. ¶ 35. ¦in fraud through the ¦ ¦ ¦ ¦investment advisor ¦ ¦ ¦ ¦activities of BLMIS. ¦ ¦ ¦ ¦See Tr.'s Compl. ¶ 9. ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦On December 15, 2008, the¦On December 15, 2008, ¦ ¦ ¦SEC consented to a ¦pursuant to 15 U.S.C. § ¦ ¦ ¦combination of its own ¦78eee(a)(4)(A), the SEC ¦ ¦ ¦action with an ¦consented to a ¦ ¦ ¦application of the ¦combination of its own ¦ ¦ ¦Securities Investor ¦action with an ¦ ¦ ¦Protection Corporation ¦application of the ¦ ¦ ¦(“SIPC”). Thereafter, ¦Securities Investor ¦ ¦ ¦pursuant to 15 U.S.C. § ¦Protection Corporation ¦ ¦ ¦78eee(a)(4)(B) of the ¦(“SIPC”). Thereafter, ¦ ¦ ¦Securities and Investor ¦pursuant to 15 U.S.C. § ¦ ¦ ¦Protection Action ¦78eee(a)(4)(B), SIPC ¦ ¦ ¦(“SIPA”), SIPC filed an ¦filed an application in ¦ ¦ ¦application in the ¦the District Court ¦ ¦ ¦District Court alleging ¦alleging, inter alia, ¦ ¦ ¦that BLMIS was not able ¦that BLMIS was not able ¦ ¦ ¦to meet its obligations ¦to meet its obligations ¦ ¦ ¦to its securities ¦to securities customers ¦ ¦ ¦customers as they came ¦as they came due and, ¦ ¦ ¦due and that such ¦accordingly, its ¦ ¦ ¦customers needed the ¦customers needed the ¦ ¦ ¦protections afforded by ¦protections afforded by ¦ ¦ ¦SIPA. See Pamela ¦SIPA. See Tr.'s Compl. ¦ ¦ ¦Goldman Compl. ¶ 36; A & ¦¶ 11. ¦ ¦ ¦G Goldman Compl. ¶ 36. ¦ ¦ ¦ +-----------------------------------------------------------------------------+
+-----------------------------------------------------------------------------+ ¦ ¦Also on December 15, ¦ ¦ ¦Also on December 15, ¦2008, Judge Stanton ¦ ¦ ¦2008, the District Court ¦granted the SIPC ¦ ¦ ¦appointed Irving H. ¦application and entered ¦ ¦ ¦Picard, Esq., as trustee ¦an order pursuant to SIPA¦ ¦ ¦(“Trustee”) for the ¦(the “Protective ¦ ¦ ¦substantively ¦Decree”), which, in ¦ ¦ ¦consolidated liquidation ¦pertinent part appointed ¦ ¦ ¦of Madoff's estate and of¦the Trustee for the ¦ ¦ ¦BLMIS under SIPA. See ¦liquidation of the ¦ ¦ ¦Pamela Goldman Compl. ¶ ¦business of BLMIS ¦ ¦ ¦37; A & G Goldman Compl. ¦pursuant to 15 U.S.C. § ¦ ¦ ¦¶ 37. ¦78eee(b)(3). See Tr.'s ¦ ¦ ¦ ¦Compl. ¶ 12(a). ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦Picower, now deceased, ¦ ¦ ¦ ¦was a sophisticated ¦Defendant Picower is a ¦ ¦ ¦investor, accountant and ¦sophisticated investor, ¦Picower was a highly ¦ ¦lawyer. Picower, directly¦accountant and lawyer who¦sophisticated investor, ¦ ¦and through the ¦has organized buyouts of ¦accountant and attorney ¦ ¦Defendants, had a very ¦health care and ¦who participated in the ¦ ¦close relationship with ¦technology companies ¦Madoff Ponzi scheme for ¦ ¦Madoff. Picower knew ¦since at least the 1980s.¦over 20 years, knowing ¦ ¦Madoff for decades and ¦He has reportedly known ¦that he was participating¦ ¦was an investor in BLMIS ¦Madoff for decades, and ¦in a fraud.... Upon ¦ ¦since at least the 1980s.¦has been invested in ¦information and belief ¦ ¦Madoff served as a ¦BLMIS since at least the ¦Picower was closely ¦ ¦Trustee for one of ¦1980s. Madoff served as a¦associated with Madoff, ¦ ¦Picower's foundations, ¦trustee of the Picower ¦both in business and ¦ ¦the Picower Institute for¦Institute for Medical ¦socially, for the last 30¦ ¦Medical Research. See ¦Research. See Tr.'s ¦years. See Fox Compl. ¶¦ ¦Pamela Goldman Compl. ¶ ¦Compl. ¶ 58. ¦13; Marshall Compl. ¶ 13.¦ ¦42; A & G Goldman Compl. ¦ ¦ ¦ ¦¶ 42. ¦ ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦Picower and, through him,¦ ¦ ¦ ¦the other Defendants ¦ ¦ ¦ ¦therefore enjoyed an ¦ ¦ ¦ ¦unusually close ¦ ¦ ¦ ¦relationship with Madoff.¦ ¦ ¦ ¦See Tr.'s Compl. ¶ 59. ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦Through the other ¦Picower and, through him,¦ ¦ ¦Defendants and through ¦the other Defendants, ¦ ¦ ¦his relationship with ¦therefore enjoyed an ¦ ¦ ¦Madoff, Picower became ¦unusually close ¦ ¦ ¦privy to information ¦relationship with Madoff,¦ ¦ ¦about BLMIS and its ¦and were privy to ¦ ¦ ¦operations not available ¦information and dealings ¦ ¦ ¦to other customers. See ¦not known to other BLMIS ¦ ¦ ¦Pamela Goldman Compl. ¶ ¦investors. See Tr.'s ¦ ¦ ¦43; A & G Goldman Compl. ¦Compl. ¶ 59. ¦ ¦ ¦¶ 43. ¦ ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦This entanglement ¦ ¦ ¦ ¦permitted Madoff, at his ¦ ¦ ¦ ¦whim and desire, to ¦ ¦ ¦Picower was able to ¦engage in innumerable ¦ ¦ ¦control BLMIS and use ¦financial transactions ¦By directly instructing ¦ ¦BLMIS as “a personal ¦wherein he essentially ¦Madoff and BLMIS ¦ ¦piggy bank” by ¦used BLMIS as his ¦employees to book such ¦ ¦withdrawing funds for ¦personal “piggy bank,” ¦phony transactions which ¦ ¦various entities he ¦... See SIPC v. BLMIS, ¦generated phony profits, ¦ ¦controlled, even if there¦Adv. Pro. No. 08–1789 ¦the Defendants controlled¦ ¦was no legitimate ¦(BRL), ECF No. 196 ¦and enabled the fraud to ¦ ¦underlying profitable ¦(S.D.N.Y. May 5, 2009) ¦convert the funds of ¦ ¦transaction warranting a ¦(Mem. of Law in Support ¦other innocent BLMIS ¦ ¦distribution of such ¦of Joint Mot. for Entry ¦account holders. See ¦ ¦funds. See Pamela ¦of Order Substantively ¦Fox Compl. ¶ 111; ¦ ¦Goldman Compl. ¶ 45; A & ¦Consolidating the Estate ¦Marshall Compl. ¶ 111. ¦ ¦G Goldman Compl. ¶ 45. ¦of Bernard L. Madoff Into¦ ¦ ¦ ¦the SIPA Proceeding of ¦ ¦ ¦ ¦Bernard L. Madoff ¦ ¦ ¦ ¦Investment Securities ¦ ¦ ¦ ¦LLC) ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦The Transfers were, in ¦ ¦ ¦ ¦part, false and ¦ ¦ ¦ ¦fraudulent payments of ¦ ¦ ¦ ¦nonexistent profits ¦ ¦ ¦ ¦supposedly earned in the ¦ ¦ ¦ ¦Accounts (“Fictitious ¦ ¦ ¦ ¦Profits”). See Tr.'s ¦ ¦ ¦ ¦Compl. ¶ 66. ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦In fact, the Defendants ¦ ¦ ¦ ¦benefited in a much more ¦ ¦ ¦ ¦substantial way than ¦ ¦ ¦ ¦Madoff and his family. ¦ ¦ ¦ ¦The Trustee has alleged ¦ ¦ ¦ ¦in an adversary action ¦ ¦ ¦ ¦against the Defendants ¦Based upon the Trustee's ¦ ¦ ¦that the Defendants ¦investigation to date, ¦Defendants were, as a ¦ ¦received at least $7.2 ¦Picower was instead the ¦group, the largest ¦ ¦billion from BLMIS, net ¦biggest beneficiary of ¦beneficiaries of the ¦ ¦of their investments. ¦Madoff's scheme, having ¦Ponzi scheme, converting ¦ ¦See Pamela Goldman ¦withdrawn either directly¦and receiving billions of¦ ¦Compl. ¶ 46; A & G ¦or through the entities ¦dollars from the accounts¦ ¦Goldman Compl. ¶ 46. The ¦he controlled more than ¦of innocent Madoff and ¦ ¦Picower Defendants were ¦$7.2 billion of other ¦BLMIS customers. See ¦ ¦far and away the primary ¦investors' money. See ¦Fox Compl. ¶ 1; Marshall ¦ ¦beneficiaries of the ¦Tr.'s Mem. of Law in Opp.¦Compl. ¶ 1. ¦ ¦Madoff fraud, having ¦to Mot. to Dismiss pg. 2.¦ ¦ ¦received almost 40% of ¦ ¦ ¦ ¦the approximately $18 ¦ ¦ ¦ ¦billion lost by BLMIS ¦ ¦ ¦ ¦customers. See Pamela ¦ ¦ ¦ ¦Goldman Compl. ¶ 47; A & ¦ ¦ ¦ ¦G Goldman Compl. ¶ 47. ¦ ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦ ¦According to the Trustee,¦ ¦ ¦ ¦BLMIS made payments and ¦ ¦ ¦ ¦other transfers to the ¦ ¦ ¦ ¦Defendants totaling over ¦ ¦ ¦ ¦$7.2 billion more than ¦ ¦ ¦ ¦Defendants deposited, ¦ ¦ ¦ ¦including $6.7 billion ¦ ¦ ¦ ¦from 1995 to 2008. See ¦ ¦ ¦ ¦Fox Compl. ¶ 38; Marshall¦ ¦ ¦ ¦Compl. ¶ 38. ¦ +-------------------------+-------------------------+-------------------------¦ ¦The Defendants directed ¦ ¦ ¦ ¦BLMIS to prepare ¦ ¦ ¦ ¦fraudulent trading ¦ ¦ ¦ ¦records and fraudulent ¦ ¦ ¦ ¦trading results, which ¦Picower and the other ¦ ¦ ¦effected returns in their¦Defendants also knew or ¦ ¦ ¦accounts based upon ¦should have known that ¦ ¦ ¦transactions which in ¦they were reaping the ¦ ¦ ¦fact never took place. ¦benefits of manipulated ¦In fact, relevant ¦ ¦Picower directly and ¦purported returns, false ¦documents and information¦ ¦through the other ¦documents and fictitious ¦show that Picower and the¦ ¦Defendants initiated, ¦profit. For example, some¦Defendants directed BLMIS¦ ¦directed, coordinated and¦purported “trades” in ¦to prepare account ¦ ¦cause to be effected ¦Defendants' accounts ¦statements for the ¦ ¦false records and back ¦supposedly took place ¦Defendants reflecting not¦ ¦dated records at BLMIS, ¦before the relevant ¦actual trading results ¦ ¦which resulted in the ¦direction from the ¦but the rates of return ¦ ¦appearance of trading ¦Defendants, or even ¦Picower “wanted to ¦ ¦profits in these ¦before the relevant ¦achieve”. BLMIS complied ¦ ¦accounts. Picower then ¦account was opened or ¦with these directions, ¦ ¦withdrew these false ¦funded. BLMIS records ¦and the vast majority of ¦ ¦profits from the ¦further suggest that not ¦the purported “profits” ¦ ¦Defendant accounts. This ¦only was Picower aware ¦in the Defendants' ¦ ¦direction of trading ¦(or at a minimum, should ¦accounts were not a ¦ ¦activity and direction of¦have been aware) that ¦result of the actual ¦ ¦preparation of false ¦BLMIS was creating ¦purchase and sale of ¦ ¦trading records over a ¦backdated transactions, ¦securities. See Fox ¦ ¦multi-year period shows ¦but that Picower and/or ¦Compl. ¶ 7; Marshall ¦ ¦control of the specific ¦his agent may have used ¦Compl. ¶ 7. ¦ ¦fraudulent activity which¦backdated documents to ¦ ¦ ¦constituted the ¦direct such backdated ¦ ¦ ¦underlying Ponzi scheme ¦trades themselves. See ¦ ¦ ¦and the underlying ¦Tr.'s Compl. ¶ 4. ¦ ¦ ¦violations of 10b–5 ¦ ¦ ¦ ¦engaged in by BLMIS. ¦ ¦ ¦ ¦See Pamela Goldman ¦ ¦ ¦ ¦Compl. ¶ 49; A & G ¦ ¦ ¦ ¦Goldman Compl. ¶ 49. ¦ ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦ ¦In fact, upon information¦ ¦ ¦ ¦and belief, Picower and ¦ ¦ ¦ ¦the other Defendants, ¦ ¦ ¦ ¦with the assistance of ¦ ¦ ¦ ¦Picower's associate April¦ ¦ ¦ ¦C. Freilich (“Freilich”),¦ ¦ ¦ ¦directed fictitious and ¦ ¦ ¦ ¦backdated trades, with ¦ ¦ ¦ ¦the consent of Madoff, ¦ ¦ ¦ ¦BLMIS and their agents, ¦ ¦ ¦ ¦to manufacture profits ¦ ¦ ¦ ¦and losses in accordance ¦ ¦ ¦ ¦with an overall ¦ ¦ ¦ ¦fraudulent trading ¦ ¦ ¦ ¦strategy developed by ¦ ¦ ¦ ¦Picower. See Fox Compl.¦ ¦ ¦ ¦¶ 48; Marshall Compl. ¶ ¦ ¦ ¦ ¦48. ¦ +-------------------------+-------------------------+-------------------------¦ ¦The false trading ¦ ¦ ¦ ¦documentation maintained ¦ ¦ ¦ ¦by BLMIS shows that the ¦ ¦ ¦ ¦Defendants' accounts ¦ ¦ ¦ ¦generated annual rates of¦ ¦ ¦ ¦return well in excess of ¦Defendants' accounts ¦ ¦ ¦any conceivable rates of ¦regularly earned ¦ ¦ ¦return for the relevant ¦extraordinary and ¦ ¦ ¦trading strategy in these¦implausibly high rates of¦ ¦ ¦accounts. For example, ¦return. For example, ¦ ¦ ¦two of the BLMIS accounts¦Picower's “Decision Inc. ¦ ¦ ¦controlled by Picower ¦# 3” and “Decision Inc. #¦ ¦ ¦generated annual rates of¦4” regular trading ¦ ¦ ¦return of over 100% for ¦accounts purportedly ¦The Defendants' “buy and ¦ ¦four consecutive years ¦earned annual rates of ¦hold strategy” ¦ ¦from 1996 through 1999. ¦return over 100% for four¦purportedly generated ¦ ¦According to the Trustee ¦consecutive years, from ¦extraordinary and ¦ ¦“between 1996 and 2007 ¦1996–1999, inclusive. The¦implausibly high annual ¦ ¦defendants' 24 regular ¦annual rates of return ¦rates of return. For ¦ ¦trading accounts enjoyed ¦for these accounts during¦example, two of the BLMIS¦ ¦14 instances of supposed ¦the period from 1996 to ¦accounts controlled by ¦ ¦annual returns of more ¦1999 ranged from a “low” ¦Picower generated annual ¦ ¦than 100%....” During ¦of approximately 120% to ¦rates of return of over ¦ ¦this time period the ¦a high of over 550%. Nor ¦100% for four consecutive¦ ¦annual rates of return ¦were these isolated or ¦years from 1996 through ¦ ¦for certain of ¦unusual occurrences; ¦1999. According to the ¦ ¦defendants' accounts ¦Picower's “Decision Inc. ¦Trustee: “Between 1996 ¦ ¦ranged from 120% to over ¦# 2” account, for ¦and 2007 defendants24 ¦ ¦550%. In actuality, ¦example, purported to ¦regular trading accounts ¦ ¦Picower directly and ¦earn over 950% in 1999. ¦enjoyed 14 instances of ¦ ¦through the Picower ¦Indeed, between 1996 and ¦supposed annual returns ¦ ¦defendants used his ¦2007, Defendants' 24 ¦of more than 100%....” ¦ ¦ability to control the ¦regular trading accounts ¦During this time period ¦ ¦BLMIS records maintained ¦enjoyed 14 instances of ¦the annual rates of ¦ ¦to cause the preparation ¦supposed annual returns ¦return for certain of ¦ ¦of trading records which ¦of more than 100% and 25 ¦Defendants' accounts ¦ ¦purported to show these ¦in which the annual ¦ranged from l20% to over ¦ ¦trading profits, which in¦returns purportedly ¦550%. Other Defendant ¦ ¦fact never occurred. By ¦exceeded 50%. On ¦accounts had documented ¦ ¦orchestrating the ¦information and belief, ¦earnings of almost 1000%.¦ ¦creation of these false ¦the high returns reported¦See Fox Compl. ¶ 43; ¦ ¦trading records, Picower ¦on Defendants' accounts ¦Marshall Compl. ¶ 43. ¦ ¦enabled himself to ¦were a form of ¦ ¦ ¦transfer proceeds from ¦compensation by Madoff to¦ ¦ ¦these purported ¦Picower for perpetuating ¦ ¦ ¦transactions to his own ¦the Ponzi scheme by ¦ ¦ ¦account and then to third¦investing and maintaining¦ ¦ ¦party bank accounts which¦millions of dollars in ¦ ¦ ¦he controlled. The funds ¦BLMIS. See Tr.'s Compl.¦ ¦ ¦he withdrew belonged to ¦¶ 63(a). ¦ ¦ ¦other BLMIS customers ¦ ¦ ¦ ¦including the class ¦ ¦ ¦ ¦members. See Pamela ¦ ¦ ¦ ¦Goldman Compl. ¶ 50; A & ¦ ¦ ¦ ¦G Goldman Compl. ¶ 50. ¦ ¦ ¦ +-----------------------------------------------------------------------------+
+-----------------------------------------------------------------------------+ ¦ ¦These implausibly high ¦ ¦ ¦ ¦purported returns have ¦ ¦ ¦ ¦enabled Picower and the ¦ ¦ ¦ ¦other Defendants to ¦ ¦ ¦ ¦collectively withdraw ¦ ¦ ¦ ¦more than $6.7 billion ¦ ¦ ¦ ¦since December 1995. At ¦ ¦ ¦ ¦least $5.1 billion of ¦ ¦ ¦ ¦that sum was over and ¦ ¦ ¦ ¦above any funds deposited¦ ¦ ¦ ¦by Defendants and ¦ ¦ ¦ ¦constituted money ¦ ¦ ¦ ¦belonging to victims of ¦ ¦ ¦ ¦the fraud. See Tr.'s ¦ ¦ ¦ ¦Compl. ¶ 63(b). ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦The operations of the ¦ ¦ ¦ ¦Decisions account ¦ ¦ ¦ ¦establishes Picower's ¦For example, Decisions ¦ ¦ ¦control of the cash flows¦maintained several ¦ ¦ ¦at BLMIS and his ¦accounts with BLMIS. One ¦ ¦ ¦unfettered ability to ¦of those accounts, ¦The several BLMIS ¦ ¦remove money from the ¦“Decisions Inc.,” was ¦accounts of Defendant ¦ ¦BLMIS customer accounts ¦used by Picower and the ¦Decisions Incorporated, ¦ ¦for his own benefit and ¦other Defendants as the ¦which was controlled by ¦ ¦as he saw fit. The ¦primary source of cash ¦Picower, provide concrete¦ ¦Decisions, Inc. accounts ¦withdrawals from BLMIS. ¦examples of the obviously¦ ¦were the primary source ¦The account reflected ¦fictitious profits ¦ ¦of the Picower ¦little trading activity ¦Defendants received as a ¦ ¦Defendants' cash ¦and relatively few ¦result of their ¦ ¦withdrawals from BLMIS. ¦holdings, but Picower ¦participation in the ¦ ¦These accounts reflect ¦directed quarterly ¦Ponzi scheme. See Fox ¦ ¦virtually no trading ¦distributions from this ¦Compl. ¶ 49; Marshall ¦ ¦activity and virtually no¦account in the millions ¦Compl. ¶ 49. ¦ ¦securities positions or ¦to hundreds of millions ¦ ¦ ¦other collateral for ¦of dollars throughout the¦ ¦ ¦loans from this account. ¦1990s and 2000s. See ¦ ¦ ¦See Pamela Goldman ¦Tr.'s Compl. ¶ 63(d). ¦ ¦ ¦Compl. ¶ 54; A & G ¦ ¦ ¦ ¦Goldman Compl. ¶ 54. ¦ ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦ ¦These accounts were a ¦ ¦ ¦ ¦primary source of ¦ ¦ ¦ ¦Defendants' cash ¦ ¦ ¦ ¦withdrawals from BLMIS ¦ ¦ ¦ ¦during the relevant time ¦ ¦ ¦ ¦period, yet the accounts ¦ ¦ ¦ ¦reflected virtually no ¦ ¦ ¦ ¦trading activity and very¦ ¦ ¦ ¦few purported securities ¦ ¦ ¦ ¦positions. See Fox ¦ ¦ ¦ ¦Compl. ¶ 49; Marshall ¦ ¦ ¦ ¦Compl. ¶ 49. ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦Prior to the Filing Date,¦ ¦ ¦ ¦BLMIS made payments or ¦ ¦ ¦Picower, directly and ¦other transfers ¦Picower and Freilich ¦ ¦through the other ¦(collectively, the ¦directed the withdrawals ¦ ¦Defendants, made ¦“Transfers”) totaling ¦from the Decisions ¦ ¦distribution requests and¦over $6.7 billion to one ¦Incorporated account even¦ ¦directed cash withdrawals¦or more of the ¦though the account ¦ ¦from this account ranging¦Defendants. The Transfers¦maintained a large ¦ ¦from $50 million to $150 ¦were made to or for the ¦negative cash balance of ¦ ¦million five or more ¦benefit of one or more of¦more than $6 billion and ¦ ¦times per year for a ¦the Defendants and ¦there was not enough cash¦ ¦total of approximately $6¦include, but are not ¦in the account to cover ¦ ¦billion. See Pamela ¦limited to, the Transfers¦the withdrawals. See ¦ ¦Goldman Compl. ¶ 55; A & ¦listed on Exhibit B. ¦Fox Compl. ¶ 50; Marshall¦ ¦G Goldman Compl. ¶ 55. ¦See Tr.'s Compl. ¶ 57; ¦Compl. ¶ 50. ¦ ¦ ¦see also Tr.'s Compl. ¦ ¦ ¦ ¦Ex. B. ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦On or about April 24, ¦ ¦ ¦ ¦2006, Decisions opened a ¦ ¦ ¦ ¦sixth account with BLMIS ¦ ¦ ¦ ¦(“Decisions 6”) by wire ¦ ¦ ¦ ¦transfer on April 18 of ¦ ¦ ¦ ¦$125 million. BLMIS ¦ ¦ ¦ ¦promptly began ¦ ¦ ¦ ¦“purchasing” securities ¦ ¦ ¦ ¦in the account, but it ¦ ¦ ¦ ¦backdated the vast ¦ ¦ ¦ ¦majority of these ¦ ¦ ¦ ¦purported transactions to¦ ¦ ¦ ¦January 2006. By the end ¦ ¦ ¦ ¦of April, a scant 12 days¦ ¦ ¦ ¦later, the purported net ¦ ¦ ¦ ¦equity value of the ¦ ¦ ¦ ¦account was over $164 ¦ ¦ ¦ ¦million, a gain of $39 ¦ ¦ ¦ ¦million, or a return of ¦ ¦ ¦ ¦more than 30% in less ¦ ¦ ¦ ¦than two weeks of ¦ ¦ ¦ ¦purported trading. The ¦That Picower, the other ¦ ¦The Defendants' control ¦reason for this massive ¦Defendants, and Madoff ¦ ¦of BLMIS's operations was¦gain: the Decisions 6 ¦and BLMIS actively ¦ ¦such that they were able ¦April 2006 customer ¦conspired to steal the ¦ ¦to direct BLMIS employees¦account statement ¦funds of the Plaintiff ¦ ¦to create and document ¦reflected 57 purported ¦and the class members is ¦ ¦false and non-existent ¦purchases of securities ¦also evidenced by the ¦ ¦securities transactions, ¦between January 10 and ¦fact that many purported ¦ ¦which, in turn, were ¦January 24, 2006, almost ¦trades in the Defendants'¦ ¦designed to generate ¦three months before the ¦accounts were back dated.¦ ¦fictitious profits for ¦account was opened or ¦Picower purportedly ¦ ¦Picower to withdraw from ¦funded. Defendants knew ¦“sold” positions on a ¦ ¦the Defendants' BLMIS ¦or should have known that¦fabricated earlier date ¦ ¦accounts. See Pamela ¦the account that they ¦to generate phony ¦ ¦Goldman Compl. ¶ 56; A & ¦opened in April could not¦profits. See Fox Compl.¦ ¦G Goldman Compl. ¶ 56. ¦legitimately have ¦¶ 54; Marshall Compl. ¶ ¦ ¦ ¦purchased securities in ¦54. ¦ ¦ ¦January, and that the ¦ ¦ ¦ ¦$125 million deposited on¦ ¦ ¦ ¦April 18 could not ¦ ¦ ¦ ¦legitimately have grown ¦ ¦ ¦ ¦by more than 30% in less ¦ ¦ ¦ ¦than two weeks, which, ¦ ¦ ¦ ¦annualized, would have ¦ ¦ ¦ ¦resulted in a rate of ¦ ¦ ¦ ¦return of more than 750%.¦ ¦ ¦ ¦The majority of the ¦ ¦ ¦ ¦securities “purchased” in¦ ¦ ¦ ¦January were “purchased” ¦ ¦ ¦ ¦near the lowest prices ¦ ¦ ¦ ¦for the period from ¦ ¦ ¦ ¦January to April 2006, ¦ ¦ ¦ ¦and were purportedly ¦ ¦ ¦ ¦chosen in order to create¦ ¦ ¦ ¦an unusually high ¦ ¦ ¦ ¦unrealized gain by the ¦ ¦ ¦ ¦end of April. See Tr.'s¦ ¦ ¦ ¦Compl. ¶ 63(e). ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦The Defendants' ability ¦ ¦ ¦ ¦to reconfigure for their ¦ ¦ ¦ ¦own fraudulent purpose ¦ ¦For example, as stated in¦ ¦the actual trading ¦ ¦the Trustee's Complaint, ¦ ¦records maintained by ¦ ¦on or about April 24, ¦ ¦BLMIS, a highly regulated¦ ¦2006, Decisions ¦ ¦broker and investment ¦ ¦Incorporated opened a new¦ ¦advisor, shows that the ¦ ¦account with BLMIS known ¦ ¦Defendants exercised ¦ ¦as the “Decisions ¦ ¦control over the day to ¦ ¦Incorporated 6” ¦ ¦day operations of BLMIS ¦ ¦(“Decisions 6”) account ¦ ¦and specifically over the¦ ¦by a wire transfer on ¦ ¦trading activity that ¦ ¦April 18, 2006 of $125 ¦ ¦constituted a violation ¦ ¦million. See Fox Compl.¦ ¦of the securities laws. ¦ ¦¶ 55; Marshall Compl. ¶ ¦ ¦See Pamela Goldman ¦ ¦55. ¦ ¦Compl. ¶ 57; A & G ¦ ¦ ¦ ¦Goldman Compl. ¶ 57. ¦ ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦By way of example, as ¦ ¦ ¦ ¦stated in the Trustee's ¦ ¦ ¦ ¦complaint, on or about ¦ ¦ ¦ ¦April 24, 2006, Defendant¦ ¦ ¦ ¦Decisions, Inc. opened a ¦ ¦ ¦ ¦new account with BLMIS ¦ ¦ ¦ ¦known as the Decisions, ¦ ¦ ¦ ¦Inc. 6 account. This ¦ ¦ ¦ ¦account was opened with a¦ ¦ ¦ ¦wire transfer of $125 ¦ ¦ ¦ ¦million. The Defendants ¦ ¦ ¦ ¦instructed BLMIS to back ¦ ¦ ¦ ¦date trades in this ¦ ¦ ¦ ¦account to January 2006, ¦ ¦ ¦ ¦which was four months ¦ ¦ ¦ ¦prior to the time the ¦ ¦ ¦ ¦account was actually ¦ ¦ ¦ ¦opened. BLMIS employees ¦ ¦ ¦ ¦carried out the ¦ ¦ ¦ ¦Defendants' direct ¦ ¦ ¦ ¦instructions and ¦ ¦Picower instructed BLMIS ¦ ¦fabricated and back dated¦ ¦to backdate trades in ¦ ¦trades in the Decision 6 ¦ ¦this account to January ¦ ¦account. This resulted in¦ ¦2006, which was before ¦ ¦the net value of the ¦ ¦the Decisions 6 account ¦ ¦account increasing by ¦ ¦was even opened. See ¦ ¦almost $40 million, or ¦ ¦Fox Compl. ¶ 56; Marshall¦ ¦30%, in less than two ¦ ¦Compl. ¶ 56. ¦ ¦weeks after it “actually ¦ ¦ ¦ ¦opened.” The Defendants' ¦ ¦ ¦ ¦ability to affect back ¦ ¦ ¦ ¦dated trades in the ¦ ¦ ¦ ¦Decisions 6 account ¦ ¦ ¦ ¦generated phony paper ¦ ¦ ¦ ¦profits which had ¦ ¦ ¦ ¦appreciated only on a ¦ ¦ ¦ ¦hindsight basis and ¦ ¦ ¦ ¦represented part of a ¦ ¦ ¦ ¦continuous pattern of the¦ ¦ ¦ ¦Picower defendants ¦ ¦ ¦ ¦directing the ¦ ¦ ¦ ¦falsification of trading ¦ ¦ ¦ ¦records at BLMIS, which ¦ ¦ ¦ ¦allowed Picower to pilfer¦ ¦ ¦ ¦from other BLMIS ¦ ¦ ¦ ¦accounts. See Pamela ¦ ¦ ¦ ¦Goldman Compl. ¶ 58; A & ¦ ¦ ¦ ¦G Goldman Compl. ¶ 58. ¦ ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦ ¦As a result of the ¦ ¦ ¦ ¦fabrication/backdating of¦ ¦ ¦ ¦trades, the purported net¦ ¦ ¦ ¦value of securities in ¦ ¦ ¦ ¦the Decisions 6 account ¦ ¦ ¦ ¦by the end of April 2006 ¦ ¦ ¦ ¦had increased by almost ¦ ¦ ¦ ¦$40 million, for a return¦ ¦ ¦ ¦of 30% in less than two ¦ ¦ ¦ ¦weeks of “purported ¦ ¦ ¦ ¦trading”. See Fox ¦ ¦ ¦ ¦Compl. ¶ 57; Marshall ¦ ¦ ¦ ¦Compl. ¶ 57. ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦ ¦Picower's scheme to ¦ ¦ ¦ ¦backdate trades in ¦ ¦ ¦ ¦Decisions 6 was designed ¦ ¦ ¦ ¦to generate phony paper ¦ ¦ ¦ ¦profits in the account by¦ ¦ ¦ ¦picking stocks which had ¦ ¦ ¦ ¦appreciated on a ¦ ¦ ¦ ¦“hindsight basis,” and ¦ ¦ ¦ ¦represented part of a ¦ ¦ ¦ ¦continuous pattern of ¦ ¦ ¦ ¦false generation of ¦ ¦ ¦ ¦profits which enabled ¦ ¦ ¦ ¦Picower and the ¦ ¦ ¦ ¦Defendants to pilfer ¦ ¦ ¦ ¦other BLMIS customer ¦ ¦ ¦ ¦accounts for actual cash ¦ ¦ ¦ ¦based upon phony booked ¦ ¦ ¦ ¦profits. See Fox Compl.¦ ¦ ¦ ¦¶ 58; Marshall Compl. ¶ ¦ ¦ ¦ ¦58. ¦ +-----------------------------------------------------------------------------+
+-----------------------------------------------------------------------------+ ¦ ¦BLMIS records, together ¦ ¦ ¦ ¦with Picower's own ¦ ¦ ¦ ¦documents, further ¦ ¦ ¦ ¦suggest Picower's and his¦ ¦ ¦ ¦agents' complicity in the¦ ¦ ¦By way of further ¦fraud, through two ¦ ¦ ¦example, on or about ¦additional backdated ¦ ¦ ¦December 29, 2005, ¦trades in December 2005. ¦ ¦ ¦Picower's assistant April¦On or around December 29,¦ ¦ ¦Freilich, acting on ¦2005, April Freilich, ¦ ¦ ¦behalf of the Defendants,¦acting on behalf of ¦On or around December 29,¦ ¦faxed BLMIS a letter ¦Picower, faxed to BLMIS a¦2005, Freilich, acting on¦ ¦signed by Picower that ¦letter signed by Picower ¦Picower's behalf, faxed ¦ ¦directed BLMIS to ¦that directed BLMIS to ¦BLMIS a letter signed by ¦ ¦“realize” a gain of $50 ¦“pick up long term ¦Picower, that directed ¦ ¦million in the Picower ¦capital gains in the ¦BLMIS to realize a gain ¦ ¦accounts. Upon direction ¦accounts listed below ¦of $50 million. Upon ¦ ¦from Picower and ¦before December 31, 2005”¦instruction from Picower ¦ ¦Freilich, BLMIS sold ¦across five Decisions ¦and/or Freilich, BLMIS ¦ ¦large amounts of stock in¦accounts. The letter ¦“sold” large amounts of ¦ ¦Agilent Technologies and ¦further directed BLMIS to¦Agilent Technologies and ¦ ¦Intel Corporation in ¦realize $50,000,000 in ¦Intel Corporation stock ¦ ¦various Defendant ¦gains, and attached the ¦in various Defendant ¦ ¦accounts on a back dated ¦relevant “portfolio ¦accounts on a backdated ¦ ¦basis. Freilich directed ¦appraisal” statements for¦basis. Freilich directed ¦ ¦the sales of large ¦the five Decisions ¦the sale of large amounts¦ ¦amounts of these ¦accounts listed in the ¦of these purported ¦ ¦purported securities on ¦letter. Each “portfolio ¦securities on or about ¦ ¦or about December 29, ¦appraisal,” created by ¦December 29, 2005, ¦ ¦2005, requesting that the¦Picower and/or his ¦requesting that the sales¦ ¦sales be booked to take ¦agents, purported to show¦be booked to take place ¦ ¦place on an earlier date,¦the securities held in ¦on an earlier date, i.e.,¦ ¦i.e., December 8 or 9. ¦each account, the date ¦December 8th or 9th. ¦ ¦BLMIS backdated the ¦they were “purchased,” ¦These trades were ¦ ¦trades at Picower's ¦the quantity held, and ¦backdated by Picower and ¦ ¦direction and on ¦also purported to ¦BLMIS for the purpose of ¦ ¦Picower's behalf for the ¦calculate the unrealized ¦generating phony “paper” ¦ ¦purpose of generating ¦gain or loss on each ¦profits of approximately ¦ ¦phony paper profits of ¦security based on the ¦$46.3 million, making up ¦ ¦approximately $46.3 ¦market values as of ¦most of Picower's ¦ ¦million, which made up ¦November 30, 2005, the ¦requested $50 million ¦ ¦most of Picower's ¦date of the “portfolio ¦gain. See Fox Compl. ¶ ¦ ¦requested $50 million ¦appraisal.” According to ¦62; Marshall Compl. ¶ 62.¦ ¦distribution. See ¦Picower's own “portfolio ¦ ¦ ¦Pamela Goldman Compl. ¶ ¦appraisals,” none of ¦ ¦ ¦59; A & G Goldman Compl. ¦these Decisions accounts ¦ ¦ ¦¶ 59. ¦held more than 11 ¦ ¦ ¦ ¦different securities, and¦ ¦ ¦ ¦three of these accounts ¦ ¦ ¦ ¦held 5 or fewer ¦ ¦ ¦ ¦securities as of November¦ ¦ ¦ ¦30, 2005. See Tr.'s ¦ ¦ ¦ ¦Compl. ¶ 63(i). ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦Upon Picower's ¦ ¦ ¦ ¦instruction, BLMIS “sold”¦ ¦ ¦ ¦Agilent Technologies ¦ ¦ ¦ ¦(“Agilent”) and Intel ¦ ¦ ¦ ¦Corporation (“Intel”) ¦ ¦ ¦ ¦across these accounts, ¦ ¦ ¦ ¦realizing a long-term ¦ ¦ ¦ ¦gain of approximately ¦ ¦ ¦ ¦$46.3 million, a ¦ ¦ ¦ ¦significant majority of ¦ ¦ ¦ ¦the requested gain. ¦ ¦ ¦ ¦According to the account ¦ ¦ ¦ ¦statements generated by ¦ ¦ ¦ ¦BLMIS for December ¦ ¦ ¦ ¦2005—and forwarded to ¦ ¦ ¦ ¦Picower and his ¦ ¦ ¦ ¦agents—these trades ¦ ¦ ¦ ¦purportedly settled ¦ ¦ ¦ ¦around December 8 and 9, ¦ ¦ ¦ ¦2005, approximately 3 ¦ ¦ ¦ ¦weeks before the relevant¦ ¦ ¦ ¦instruction was sent to ¦ ¦ ¦ ¦BLMIS. Picower's failure ¦ ¦ ¦ ¦to question BLMIS' ¦ ¦ ¦ ¦apparent clairvoyance ¦ ¦ ¦ ¦suggests that Picower ¦ ¦ ¦ ¦knew that BLMIS was ¦ ¦ ¦ ¦backdating trades. See ¦ ¦ ¦ ¦Tr.'s Compl. ¶ 63(i)(i ).¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦In December 2005, BLMIS ¦ ¦ ¦ ¦also created backdated ¦ ¦ ¦ ¦“purchases” on margin of ¦ ¦ ¦ ¦Google, Diamond Offshore ¦ ¦ ¦Picower, on behalf of the¦Drilling (“Diamond”) and ¦ ¦ ¦Defendants, directed and ¦Burlington Resources, ¦ ¦ ¦caused BLMIS to affect ¦Inc. (“Burlington”) ¦ ¦ ¦other back dated ¦across all of the ¦ ¦ ¦transactions generating ¦referenced accounts. ¦Also according to the ¦ ¦phony profits. During ¦These “purchases”—with ¦Trustee, Picower and ¦ ¦December 2005, the ¦purported settlement ¦BLMIS backdated other ¦ ¦Defendants purported to ¦dates between January 12 ¦purported securities ¦ ¦purchase the following ¦and January 20, 2005—were¦transactions during ¦ ¦securities on margin in ¦entirely fictitious and ¦December 2005, including ¦ ¦their accounts: Google, ¦were reflected for the ¦purported purchases on ¦ ¦Diamond Offshore ¦first time in the ¦margin of Google, Diamond¦ ¦Drilling, Inc., and ¦BLMIS-created account ¦Offshore Drilling, Inc., ¦ ¦Burlington Resources, ¦statements issued at the ¦and Burlington Resources,¦ ¦Inc. This resulted in a ¦end of December 2005. ¦Inc. across several of ¦ ¦purported gain of almost ¦This backdated trading ¦Defendants' accounts, ¦ ¦$80 million. These ¦activity resulted in an ¦which resulted in a ¦ ¦purchases purportedly ¦immediate purported ¦purported gain for ¦ ¦occurred between January ¦12–month unrealized ¦Picower of almost $80 ¦ ¦12 and 20, 2005 but were ¦“gain” for Picower of ¦million. These purchases ¦ ¦fictitious, as the ¦approximately $79 million¦purportedly occurred ¦ ¦transactions actually ¦and a portfolio value of ¦between January 12 and ¦ ¦occurred eleven months ¦over $155 million as of ¦20, 2005, but they were ¦ ¦later in December 2005. ¦the end of December as a ¦entirely fictitious, as ¦ ¦Defendants caused BLMIS ¦result of the increase in¦the transactions were ¦ ¦to create false book and ¦the market value of these¦first reflected 11 months¦ ¦record entries in order ¦securities during the ¦later in Defendants' ¦ ¦to create a phony $80 ¦calendar year.... ¦December 2005 BLMIS ¦ ¦million profit on ¦Picower's failure to ¦account statements. See ¦ ¦“transactions” that did ¦question or to repudiate ¦Fox Compl. ¶ 63; Marshall¦ ¦not take place on the ¦these trades—indeed, he ¦Compl. ¶ 63. ¦ ¦dates recorded on BLMIS's¦benefited from them by ¦ ¦ ¦records. See Pamela ¦being paid dividends and ¦ ¦ ¦Goldman Compl. ¶ 60; A & ¦by selling the positions ¦ ¦ ¦G Goldman Compl. ¶ 60. ¦years later—is evidence ¦ ¦ ¦ ¦of Picower's awareness of¦ ¦ ¦ ¦BLMIS' fraudulent ¦ ¦ ¦ ¦activities. See Tr.'s ¦ ¦ ¦ ¦Compl. ¶ 63(i)(ii ). ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦ ¦For example, according to¦ ¦ ¦ ¦the Trustee's Complaint, ¦ ¦ ¦ ¦on May 18, 2007, Freilich¦ ¦ ¦ ¦indicated that the ¦ ¦ ¦ ¦Foundation needed “$20 ¦ ¦The Defendants also ¦ ¦mil in gains” for January¦ ¦directed and orchestrated¦ ¦and February and “want ¦ ¦the preparation of false ¦Additionally, on ¦[ed] 18% for year[ ] 07 ¦ ¦statements in May 2007, ¦information and belief, ¦appreciation,” but that ¦ ¦which reflected millions ¦Picower, directly and/or ¦she had to check the ¦ ¦of dollars in securities ¦through and/or with the ¦numbers “with Jeff.” Upon¦ ¦transactions which ¦assistance of Freilich, ¦information and belief, ¦ ¦reportedly took place in ¦directed fictitious, ¦“Jeff” is Picower, Five ¦ ¦earlier in 2007, but ¦backdated trades in order¦days later on May ¦ ¦which in fact did not ¦to achieve fictitious ¦23,2007, and presumably ¦ ¦take place at all. See ¦gains or losses in ¦after consulting with ¦ ¦Pamela Goldman Compl. ¶ ¦earlier periods. See ¦Picower, Freilich told ¦ ¦61; A & G Goldman Compl. ¦Tr.'s Compl. ¶ 63(f). ¦BLMIS that the numbers ¦ ¦¶ 61. ¦ ¦she provided earlier were¦ ¦ ¦ ¦wrong, and the Foundation¦ ¦ ¦ ¦“needs only $12.3 mil [in¦ ¦ ¦ ¦gains] for” January and ¦ ¦ ¦ ¦February 2007. See Fox ¦ ¦ ¦ ¦Compl. ¶ 60; Marshall ¦ ¦ ¦ ¦Compl. ¶ 60. ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦On May 18, 2007, Freilich¦ ¦ ¦ ¦indicated the Foundation ¦ ¦ ¦ ¦needed “$20 mil in gains”¦ ¦ ¦ ¦for January and February ¦ ¦ ¦ ¦and “want[ed] 18% for ¦ ¦ ¦ ¦year[ ] 07 appreciation,”¦ ¦ ¦ ¦but that she had to check¦ ¦ ¦ ¦the numbers “with Jeff.” ¦ ¦ ¦ ¦On information and ¦ ¦ ¦ ¦belief, “Jeff” is ¦ ¦ ¦ ¦Defendant Jeffry Picower.¦ ¦ ¦ ¦Five days later, on May ¦ ¦ ¦ ¦23, Freilich told BLMIS ¦ ¦ ¦ ¦that the numbers she had ¦ ¦ ¦ ¦provided earlier were ¦ ¦ ¦ ¦wrong, and the Foundation¦ ¦ ¦ ¦“needs only $12.3 mil [in¦ ¦ ¦ ¦gains] for” January and ¦ ¦ ¦ ¦February 2007. See ¦ ¦ ¦ ¦Tr.'s Compl. ¶ 63(f)(i ).¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦Class members purchased ¦ ¦ ¦ ¦securities issued by ¦ ¦ ¦ ¦BLMIS, which consisted of¦ ¦ ¦ ¦a discretionary trading ¦For certain accounts in ¦ ¦ ¦account purportedly ¦the IA Business, BLMIS ¦ ¦ ¦investing in stock and ¦purported to participate ¦ ¦ ¦options and operated ¦in a capital appreciation¦ ¦ ¦pursuant to a power of ¦/depreciation strategy, ¦ ¦ ¦attorney (the “BLMIS ¦depending on whether the ¦ ¦ ¦Discretionary Trading ¦customer sought to ¦ ¦ ¦Program”). Each class ¦generate gains or losses.¦ ¦ ¦member received monthly ¦For example, the strategy¦ ¦ ¦statements purportedly ¦was executed by either ¦ ¦ ¦reflecting the securities¦purporting to purchase ¦ ¦ ¦in their account, the ¦small groups of ¦ ¦ ¦trading activity during ¦securities transactions ¦ ¦ ¦the month, and the ¦near lows and then ¦ ¦ ¦profits earned over the ¦purporting to sell those ¦ ¦ ¦relevant time period. The¦same securities at highs,¦ ¦ ¦monthly statements for ¦or by purporting to sell ¦ ¦ ¦customer accounts ¦securities near highs and¦ ¦ ¦depicted consistent ¦then purporting to ¦ ¦ ¦profits on a monthly ¦repurchase those ¦ ¦ ¦basis and rarely, if ¦securities near lows. ¦ ¦ ¦ever, showed loses. See ¦See Tr.'s Compl. ¶ 20. ¦ ¦ ¦Pamela Goldman Compl. ¶ ¦ ¦ ¦ ¦69; A & G Goldman Compl. ¦ ¦ ¦ ¦¶ 69. ¦ ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦Madoff has admitted, and ¦ ¦ ¦ ¦it is a fact, that BLMIS ¦ ¦ ¦ ¦and the BLMIS ¦For all periods relevant ¦At a plea hearing on ¦ ¦Discretionary Trading ¦hereto, the IA Business ¦March 12,2009 in Madoff ¦ ¦Program operated as a ¦was operated as a Ponzi ¦pled guilty to the ¦ ¦Ponzi scheme and Madoff ¦scheme and Madoff ¦eleven-count criminal ¦ ¦and other BLMIS employees¦concealed the ongoing ¦information and admitted ¦ ¦concealed this ongoing ¦fraud in an effort to ¦under oath that he ¦ ¦fraud in an effort to ¦hinder and delay other ¦“operated a Ponzi scheme ¦ ¦hinder and delay ¦current and prospective ¦through, ... [BLMIS]....”¦ ¦customers of BLMIS from ¦customers of BLMIS from ¦See Fox Compl. ¶ 35; ¦ ¦discovering this fraud. ¦discovering the fraud. ¦Marshall Compl. ¶ 35 ¦ ¦See Pamela Goldman ¦See Tr.'s Compl. ¶ 24. ¦ ¦ ¦Compl. ¶ 71; A & G ¦ ¦ ¦ ¦Goldman Compl. ¶ 71. ¦ ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦ ¦Madoff also admitted ¦ ¦ ¦ ¦that, during the relevant¦ ¦ ¦ ¦time period, he never ¦ ¦ ¦ ¦actually invested any of ¦ ¦ ¦ ¦the funds he received ¦ ¦ ¦ ¦from BLMIS customers, ¦ ¦ ¦ ¦instead depositing the ¦ ¦ ¦ ¦funds into a bank ¦ ¦ ¦ ¦account, Madoff never ¦ ¦ ¦ ¦actually purchased and ¦ ¦ ¦ ¦sold securities in BLMIS ¦ ¦ ¦ ¦customer accounts, ¦ ¦ ¦ ¦instead using client ¦ ¦ ¦ ¦funds simply to pay ¦ ¦ ¦ ¦other, different, ¦ ¦ ¦ ¦clients' purported ¦ ¦ ¦ ¦returns and redemption of¦ ¦ ¦ ¦principal. See Fox ¦ ¦ ¦ ¦Compl. ¶ 36; Marshall ¦ ¦ ¦ ¦Compl. ¶ 36 ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦ ¦Madoff also admitted ¦ ¦ ¦ ¦that, during the relevant¦ ¦Monies received from ¦The money received from ¦time period, he never ¦ ¦investors in connection ¦investors was not set ¦actually invested any of ¦ ¦with the BLMIS ¦aside to buy securities ¦the funds he received ¦ ¦Discretionary Trading ¦as purported, but instead¦from BLMIS customers, ¦ ¦Program were not invested¦was primarily used to ¦instead depositing the ¦ ¦as described by BLMIS in ¦make the distributions ¦funds into a bank ¦ ¦confirmations and monthly¦to—or payments on behalf ¦account, Madoff never ¦ ¦statements, but instead ¦of—other investors. The ¦actually purchased and ¦ ¦were used to make ¦money sent to BLMIS for ¦sold securities in BLMIS ¦ ¦distributions to selected¦investment, in short, was¦customer accounts, ¦ ¦other investors, ¦simply used to keep the ¦instead using client ¦ ¦primarily Madoff and the ¦operation going and to ¦funds simply to pay ¦ ¦controlling Picower ¦enrich Madoff, his ¦other, different, ¦ ¦Defendants. See Pamela ¦associates and others, ¦clients' purported ¦ ¦Goldman Compl. ¶ 73; A & ¦including Defendants ... ¦returns and redemption of¦ ¦G Goldman Compl. ¶ 73. ¦See Tr.'s Compl. ¶ 24. ¦principal. See Fox ¦ ¦ ¦ ¦Compl. ¶ 36; Marshall ¦ ¦ ¦ ¦Compl. ¶ 36 ¦ +-------------------------+-------------------------+-------------------------¦ ¦In or about December ¦ ¦ ¦ ¦2008, the Ponzi scheme ¦ ¦ ¦ ¦collapsed when customer ¦ ¦ ¦ ¦redemptions in the BLMIS ¦ ¦ ¦ ¦Discretionary Trading ¦ ¦ ¦ ¦Program overwhelmed the ¦ ¦ ¦ ¦amount of money which was¦ ¦ ¦ ¦being placed in new BLMIS¦ ¦ ¦ ¦accounts.... The BLMIS ¦ ¦ ¦ ¦Ponzi scheme also ¦ ¦ ¦ ¦involved the preparation ¦The money sent to BLMIS ¦ ¦ ¦and publication to ¦for investment, in short,¦ ¦ ¦investors and brokerage ¦was simply used to keep ¦ ¦ ¦customers of false BLMIS ¦the operation going and ¦ ¦ ¦audit reports prepared by¦to enrich Madoff, his ¦ ¦ ¦Frielich and Horowitz as ¦associates and others, ¦ ¦ ¦members of a three person¦including Defendants, ¦ ¦ ¦accounting firm in ¦until such time as the ¦ ¦ ¦Rockland County, New ¦requests for redemptions ¦ ¦ ¦York. BLMIS provided the ¦in December 2008 ¦ ¦ ¦financial reports to ¦overwhelmed the flow of ¦ ¦ ¦regulators and investors ¦new investments and ¦ ¦ ¦in the BLMIS ¦caused the inevitable ¦ ¦ ¦Discretionary Trading ¦collapse of the Ponzi ¦ ¦ ¦Program for the purpose ¦scheme. See Tr.'s ¦ ¦ ¦of their reliance ¦Compl. ¶ 24. ¦ ¦ ¦thereon. The accounting ¦ ¦ ¦ ¦reports falsely reported ¦ ¦ ¦ ¦that Madoff was effecting¦ ¦ ¦ ¦customer transactions and¦ ¦ ¦ ¦that BLMIS was profitable¦ ¦ ¦ ¦and generating customer ¦ ¦ ¦ ¦profits in customer ¦ ¦ ¦ ¦accounts. See Pamela ¦ ¦ ¦ ¦Goldman Compl. ¶ 75; A & ¦ ¦ ¦ ¦G Goldman Compl. ¶ 75. ¦ ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦ ¦Not only did Madoff seek ¦ ¦ ¦ ¦to evade regulators, ¦ ¦ ¦ ¦Madoff also had false ¦ ¦ ¦ ¦audit reports “prepared” ¦ ¦ ¦ ¦by Friehling & Horowitz, ¦ ¦ ¦ ¦a three-person accounting¦ ¦ ¦ ¦firm in Rockland County, ¦ ¦ ¦ ¦New York. Of the three ¦ ¦ ¦ ¦employees at the firm, ¦ ¦ ¦ ¦one employee was an ¦ ¦ ¦ ¦assistant and one was a ¦ ¦ ¦ ¦semiretired accountant ¦ ¦ ¦ ¦living in Florida. See ¦ ¦ ¦ ¦Tr.'s Compl. ¶ 31. ¦ ¦ +-------------------------+-------------------------+-------------------------¦ ¦At all times relevant ¦At all times relevant ¦ ¦ ¦hereto, the BLMIS's ¦hereto, the liabilities ¦ ¦ ¦actual liabilities were ¦of BLMIS were billions of¦ ¦ ¦billions of dollars ¦dollars greater than the ¦ ¦ ¦greater than its assets. ¦assets of BLMIS. At all ¦ ¦ ¦As a result, BLMIS and ¦relevant times, BLMIS was¦ ¦ ¦the BLMIS Discretionary ¦insolvent in that (i) its¦ ¦ ¦Trading Program were ¦assets were worth less ¦ ¦ ¦rendered insolvent by the¦than the value of its ¦ ¦ ¦Ponzi scheme. Customer ¦liabilities; (ii) it ¦ ¦ ¦assets were effectively ¦could not meet its ¦ ¦ ¦stolen by Madoff and the ¦obligations as they came ¦ ¦ ¦Picower Defendants in ¦due; and (iii) at the ¦ ¦ ¦connection with this ¦time of the transfers, ¦ ¦ ¦Ponzi scheme. See ¦BLMIS was left with ¦ ¦ ¦Pamela Goldman Compl. ¶ ¦insufficient capital. ¦ ¦ ¦76; A & G Goldman Compl. ¦See Tr.'s Compl. ¶ 32. ¦ ¦ ¦¶ 76. ¦ ¦ ¦ +-----------------------------------------------------------------------------+