California Gets $15 Million In Bernard Madoff Fraud Recovery
SACRAMENTO (AP) -- California will recover $15 million related to the massive Ponzi scheme engineered by Bernard Madoff as part of a larger agreement liquefying the $277 million estate of a Beverly Hills investment adviser, officials said Friday.
The settlement ends a 7-year-old lawsuit filed by the state attorney general against Stanley Chais, who charged what officials called astronomical fees to invest hundreds of millions of dollars from more than 460 often-elderly victims.
Chais, who died in 2010, collected nearly $270 million in fees between 1995 and 2008 while presenting himself as an "investment wizard," according to the lawsuit filed in Los Angeles Superior Court.
In fact, he simply funneled investors' life savings to Madoff, the one-time Nasdaq chairman whose $20 billion financial pyramid collapsed in 2008, the lawsuit said.
The agreement filed in federal bankruptcy court in New York settles separate lawsuits against Chais that trustees said will essentially turn over his estate to his victims.
That includes nearly $263 million in cash and other assets to the Bernard L. Madoff Investment Securities customer fund, and another $15 million that will be administered by the California attorney general's office to pay claims by investors in companies operated by Chais.
Investors in the Chais-operated companies cannot lay claim to the larger amount of money because that share will go to those who invested directly with Madoff, not through so-called "feeder funds," said Kristin Ford, a spokeswoman for California Attorney General Kamala Harris.
The lawsuit estimates there are more than 460 defrauded investors in three Chais-related companies, which would work out to reimbursements of about $32,600 each. Ford said the actual awards will be decided by an administrator and depend in part on how many former clients file claims. The state can also use up to $750,000 of the settlement money for its administrative costs.
Chais' investors had no idea the money that they had invested since the 1970s was being sent to Madoff, who now is serving a 150-year prison sentence after pleading guilty to fraud charges. The state's lawsuit says some lost their homes and had to move in with their adult children.
"For over 30 years, Stanley Chais unscrupulously defrauded Californians, many of them elderly, by taking their life savings, charging steep fees, and funneling their money to Bernie Madoff's elaborate Ponzi scheme," Harris said in a statement.
The settlement with Chais' widow and other family members brings total recoveries related to Madoff to more than $11.4 billion, Stephen Harbeck, president and chief executive officer of the Securities Investor Protection Corporation, said in a statement.
Nearly $9.5 billion of that money has already been distributed. Distributing all of it is expected to return more than 65 percent of the principal estimated to have been lost by Madoff customers whose claims have been allowed by trustees.
Officials did not say how much of Chais' estate would be left for his widow and other survivors.
The California lawsuit accusing Chais of securities and investment fraud was filed by Harris' predecessor, now-Gov. Jerry Brown. But the settlement was negotiated over the last four years under the tenure of Harris, who is running for the U.S. Senate against a fellow Democrat.
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