On Friday February 21st 2009, Irving Picard, the trustee liquidating Bernard L. Madoff Investment Securities LLC on behalf of Securities Investor Protection Corp. ("SIPC"), held his first meeting with investors who were defrauded by Bernie Madoff. At that meeting, Mr. Picard said "We have found no evidence to indicate that securities were purchased for customers' accounts'' for "perhaps as much as 13 years.'' It was "cash in and cash out,'' he said. In short, the detailed monthly statements sent to investors were pure fiction.

This disclosure is important to the defrauded investors since it makes it more likely that each investor will be able to recover up to $500,000 from SIPC rather than $100,000 that would be available if there were actual securities held in the Madoff accounts. "We are operating out of a crime scene,'' Picard said at the meeting. He added that his office has received 2,350 customer claims as of noon yesterday. Those claims exceeded about $US1 billion, Picard told reporters after the meeting. "That's my recollection, plus or minus,'' Picard said, adding, "I can't tell you today how many of the 2,400 claims will be allowed.''

Mr. Picard told the assembled investors that his office has located Madoff firm books and records at its Manhattan offices, the basement of its Third Avenue building, at a warehouse and at a "backup site.'' "At the warehouse, we recently inventoried approximately 7,000 boxes and that's in addition to the file cabinets worth of materials we found at the premises and that we've been able to review under the watchful eye of the FBI,'' Picard said. "We're getting a feel for how this operation worked.''

Mr. Picard also reported that he found no separation between the company's broker-dealer division and its investment advisory unit. "We have found nothing to suggest there was any difference, any separateness,'' Picard said at a meeting today with Madoff clients in US Bankruptcy Court in Manhattan. "It was all one.'' Picard said he reduced overhead for the Madoff firm by about $300,000 a week. When he came in, it had about 175 or 180 employees, he told the clients. Now he has only 60, including 45 at the market-making operation, which he said are necessary. The trustee told the investors that he wants to sell the firm's market-making unit in "a matter of weeks.'' "That appears to have some value,'' he said. "We're in the process of getting some bids.''

Last Sunday Toomre Capital Markets LLC ("TCM") wrote about the possible sale of Charles (or perhaps Richard) Murphy's Manhattan townhouse in the post Former Fairfield Greenwich Executive To Sell Manhattan Townhouse. On Wednesday January 28th 2009, the New York City community website Cityfile reports that another of the principals associated with The Fairfield Greenwich Group is considering selling his recently purchased Manhattan townhouse.

Matthew C. Brown is married to the youngest of the Walter Noel daughters, Marisa Noel Brown. It is not clear whether Matt Brown still remains employed by his father-in-law's firm. Fairfield Greenwich Group has a very unclear future as many of their investors demand to get any and all remaining funds back. Hence, future management and performance fees will be quite diminished, if not non-existent. Then, there are the "small" issues of the lawsuits filed against Fairfield Greenwich and a number of its present and former partners. Surely there also will be others, including no doubt one from the trustee of the Bernard Madoff Investment Securities estate, demanding a "claw-back" payment for non-existent profits that were distributed by Bernie Madoff. Mr. Brown is a individually named defendant in the lawsuit Pacific West Health Medical Center Inc. Employees Retirement Trust et al vs Greenwich Group et al.

The couple purchased the Manhattan townhouse at 12 East 78th Street on January 31st, 2008 for the price of $13.5 million according to real estate records. Apparently Marisa Noel Brown and her husband took out a $9 million mortgage to complete the purchase. Assuming that this couple took out a traditional 30-year mortgage with a six percent interest rate, they will be required to make mortgage payments of about $540,000 per year. With limited income from the family business coming in and the likely pay-back of at least some previously paid compensation, one does wonder how long the various principals associated with the Bernie Madoff scandal will be hanging on to their various "trophies" — especially since the money to purchase such possessions likely resulted from more than four decades of fraudulent activity. TCM suspects that a number of such Manhattan properties will be put up for sale in the weeks and months to come.

The Sunday January 25th 2009 edition of The New York Times has an article in its Real Estate section entitled Every Man for Himself. This article details how one Richard Murphy in 2007 paid $33 million for the 25-foot-wide town house at 7 East 67th Street.

At the time, this purchase was the highest price on record for an Upper East Side town house built on a standard 25-foot-wide lot. The home has 12,000 square feet of space on seven levels, including the basement. Apparently Mr. Murphy has been considering listing it now for $36 million. "But brokers were skeptical that he would get that price, with one suggesting it might eventually sell for $30 million at most, about 10 percent less than he paid." This story is indicative of how even Manhattan real estate is beginning to sag under the weight of Wall Street layoffs, hedge fund retrenchment and the economic recession.

Toomre Capital Markets LLC ("TCM") took particular note of this story because of the firm Mr. Murphy until very recently worked for: Fairfield Greenwich Group, the "feeder fund" group with the largest exposure to Bernie Madoff's fraudulent investment business. Fairfield Greenwich is reported to have had approximately $7.5 billion invested with Madoff at the time of his arrest. The article notes that Mr. Murphy is listed as one of the defendants, along with other Fairfield Greenwich partners, in lawsuits brought by disgruntled and aggrieved investors.

According to this court document, The New York Times may have gotten Mr. Murphy's first name wrong. The name listed in the lawsuit with other Fairfield Greenwich partners is Charles Murphy, who lives at 202 Round Hill Road in Greenwich, Connecticut — a short distance from 175 Round Hill Road and the home of Fairfield Greenwich Group founder, Walter Noel. Their Fairfield Sentry fund is said to have had substantially all of its approximate $7.2 billion in assets invested with Bernie Madoff.

Walter Noel and his wife Monica are parents to five daughters. The picture in the upper left of this post is from their 2005 Christmas card and show clockwise from the left, Lisina, Corina, Walter, Monica, Ariane, Marisa, and Alix. Each of the five daughters is now married and many of the son-in-laws became involved in Fairfield Greenwich Group business. Four of the five son-in-laws along with Walter Noel are named in the above referenced lawsuit.

Corina, the eldest, married a Columbian named Andres Piedrahita, who became a partner of Fairfield Greenwich. Corina and her husband apparently relocated to London some years ago and subsequently spent considerable time in Spain as well while raising funds from European and Latin American investors. Rumor has it that Andres Piedrahita "may have done something fatally stupid by placing 2x-3x-laundered Columbian Drug Cartel money into the FFG-Madoff sinkhole". The court document referenced above includes Andres Piedrahita as one of the defendants. According to that document, Mr. Piedrahita is being represented by Andrew Levander, the same lawyer who also happens to be representing Ezra Merkin and his "feeder funds" in lawsuits by other distraught Madoff investors.

Bernard Madoff allegedly defrauded many investors over many years. One of the key reasons why his alleged fraud was able to continue for so many years was that Madoff was able to claim that he only had a few investors, most of which were so-called "feeder funds". As Toomre Capital Markets LLC ("TCM") noted in the post Update on Bernie Madoff Scandal and Feeder Funds, the five largest admitted feed funds were Fairfield Greenwich, Tremont Capital, Banco Santander, Bank Medici and Ascot Partners. Two days ago, TCM wrote more about the legal travails of Ezra Merkin and his Ascot Partners and Gabriel Capital hedge funds in the post Ezra Merkin and Madoff Feeder Funds Face More Lawsuits.

The largest of the Madoff "feeder funds" was Fairfield Sentry Fund run by Walter Noel's hedge-fund firm Fairfield Greenwich Group. All told that firm had approximately $7.5 billion invested with the alleged fraudster Bernie Madoff. On Monday January 12th 2009, the latest (and at least the third) civil complaint was filed against this "feeder fund" manager. This suit was filed on behalf of investors by noted lawyer David Boies, who also represents "Hank" Greenberg (formerly the CEO of AIG) and who previously argued before the U.S. Supreme Court on behalf of presidential candidate Al Gore in the 2000 election litigation regarding the State of Florida re-count fiasco. Mr. Boies is now representing two trusts and a holding company based in the Cayman Islands as well as Carlos Gauch of Mexico.

The complaint states “Most, if not all, of the assets of the plaintiff class had invested with defendants were stolen through the Madoff Ponzi scheme.” Boies further wrote “These losses could have been avoided if defendants had fulfilled their duties” and “if they had adequately investigated and monitored Madoff. ” Through the complaint, the plaintiffs are seeking the return of their investments and fees as well as damages.

The defendants are the firm's founder Walter Noel, Andres Piedrahita and Jeffrey Tucker. They are accused of breach of fiduciary duty, negligence and unjust enrichment, among other counts. Other defendants apparently include the Dublin branch of Netherlands-based Citco Bank Nederland NV, which maintains Fairfield Sentry’s escrow account, according to the complaint. The inclusion of Citco (primarily known as a fund administrator for a great percentage of the largest hedge funds) is noteworthy because it suggests that Mr. Boies is attempting to go after other "deep pockets" that might be able to contribute to the funds available to aggrieved investors. This suit is referenced as Inter-American Trust v. Fairfield Greenwich Group, 09-cv-301, U.S. District Court, Southern District of New York (Manhattan).