Tax Refunds From 2008 on List of Forfeited Property at Madoff Sentencing
By Diane Freda
Publication date: 06/30/2009
Among the houses, boats, cars, furs, and even bedding that Bernard Madoff forfeited June 26 as a result of his crimes are “any and all tax refunds paid” to him and his wife Ruth through 2008.
U.S. District Judge Denny Chin entered a preliminary order of forfeiture totaling more than $170 billion in assets to be forfeited in connection with 11 counts related to Madoff's scheme to defraud Bernard L. Madoff Investment Securities clients from the 1980s through 2008 (United States v. Madoff, S.D.N.Y., No. 09 Cr. 213 (DC), order of forfeiture 6/26/09).
The 71-year-old Madoff was sentenced June 29 to 150 years in prison, the maximum sentence sought by prosecutors, for operation of Wall Street's biggest Ponzi scheme.
However, the tax refund forfeiture caught some by surprise.
“That's a bizarre twist,” one criminal tax attorney told BNA June 29. “I have never heard of a return of tax refunds being included in a forfeiture. With a tax refund, the idea is that the government is giving you money back because you overpaid—it's your money.” However, the source said in this case it appears that the amount of Madoff's theft was so huge that the court is assuming he fraudulently represented how much tax he owed—and that it was far more than he said.
The court is probably also trying to get around the two-year statute of limitations on the claiming of tax refunds, the source said. Any recovered money at this point will go to duped investors who are relying on the Securities Investor Protection Corporation, and refunds of their own through Internal Revenue Service theft loss rules, to recover their losses.
It seems like a natural thing that the government would try to recoup every penny for investors, Boca Raton, Fla., tax attorney Michael Lehman told BNA June 29.
“But we don't even know if he had any refunds,” Lehman said. “With $800 million in net worth, I'd be very surprised if he was able to show any losses.”
Order Divests Madoff of Property
Madoff pleaded guilty May 12 to all 11 counts brought against him, including securities fraud, investment adviser fraud, mail fraud, wire fraud, money laundering, and perjury, to name some of the charges.
The court order, which is final against Bernard Madoff, completely divests him of all his interest in all property including, but not limited to, real estate, investments, and cars and boats in partial satisfaction of the forfeiture judgment. The tax items relate to refunds “attributable to assets and liabilities.”
A stipulation and order also signed by Chin resolved all claims that Ruth Madoff would otherwise have brought against the aforementioned forfeited property, valued at $80 million. According to a release from the Office of the U.S. Attorney for the Southern District of New York, the government now owns Ruth Madoff's interest in all property, except $2.5 million in funds in settlement of the claims she would have brought against Madoff residences in New York. The government was unable to sufficiently link the residences to criminal conduct related to Madoff's activity, a news release said. However, the order said nothing will keep SIPC or other investors from going after that money as well.
In sentencing Madoff, Judge Chin said, “No other white collar case is comparable in terms of the scope, duration and enormity of the fraud and the degree of the betrayal.” The fraud was “staggering,” he said, and the breach of trust “massive.” He called Madoff's crimes “extraordinarily evil.”
Acting U.S. Attorney Lev Dassin said the investigation is continuing and officials are committed to bringing criminal charges “against anyone who bears criminal responsibility,” as well as “tracing, restraining, and liquidating assets to maximize recoveries for the victims.”
The complete text of this article can be found in the BNA Daily Tax Report, June 30, 2009. For comprehensive coverage of taxation, pension, budget, and accounting issues, sign up for a free trial or subscribe to the BNA Daily Tax Report today. Learn more »
© 2009, The Bureau of National Affairs, Inc.
Tax Refunds From 2008 on List of Forfeited Property at Madoff Sentencing
By Diane Freda
Publication date: 06/30/2009
Among the houses, boats, cars, furs, and even bedding that Bernard Madoff forfeited June 26 as a result of his crimes are “any and all tax refunds paid” to him and his wife Ruth through 2008.
U.S. District Judge Denny Chin entered a preliminary order of forfeiture totaling more than $170 billion in assets to be forfeited in connection with 11 counts related to Madoff's scheme to defraud Bernard L. Madoff Investment Securities clients from the 1980s through 2008 (United States v. Madoff, S.D.N.Y., No. 09 Cr. 213 (DC), order of forfeiture 6/26/09).
The 71-year-old Madoff was sentenced June 29 to 150 years in prison, the maximum sentence sought by prosecutors, for operation of Wall Street's biggest Ponzi scheme.
However, the tax refund forfeiture caught some by surprise.
“That's a bizarre twist,” one criminal tax attorney told BNA June 29. “I have never heard of a return of tax refunds being included in a forfeiture. With a tax refund, the idea is that the government is giving you money back because you overpaid—it's your money.” However, the source said in this case it appears that the amount of Madoff's theft was so huge that the court is assuming he fraudulently represented how much tax he owed—and that it was far more than he said.
The court is probably also trying to get around the two-year statute of limitations on the claiming of tax refunds, the source said. Any recovered money at this point will go to duped investors who are relying on the Securities Investor Protection Corporation, and refunds of their own through Internal Revenue Service theft loss rules, to recover their losses.
It seems like a natural thing that the government would try to recoup every penny for investors, Boca Raton, Fla., tax attorney Michael Lehman told BNA June 29.
“But we don't even know if he had any refunds,” Lehman said. “With $800 million in net worth, I'd be very surprised if he was able to show any losses.”
Order Divests Madoff of Property
Madoff pleaded guilty May 12 to all 11 counts brought against him, including securities fraud, investment adviser fraud, mail fraud, wire fraud, money laundering, and perjury, to name some of the charges.
The court order, which is final against Bernard Madoff, completely divests him of all his interest in all property including, but not limited to, real estate, investments, and cars and boats in partial satisfaction of the forfeiture judgment. The tax items relate to refunds “attributable to assets and liabilities.”
A stipulation and order also signed by Chin resolved all claims that Ruth Madoff would otherwise have brought against the aforementioned forfeited property, valued at $80 million. According to a release from the Office of the U.S. Attorney for the Southern District of New York, the government now owns Ruth Madoff's interest in all property, except $2.5 million in funds in settlement of the claims she would have brought against Madoff residences in New York. The government was unable to sufficiently link the residences to criminal conduct related to Madoff's activity, a news release said. However, the order said nothing will keep SIPC or other investors from going after that money as well.
In sentencing Madoff, Judge Chin said, “No other white collar case is comparable in terms of the scope, duration and enormity of the fraud and the degree of the betrayal.” The fraud was “staggering,” he said, and the breach of trust “massive.” He called Madoff's crimes “extraordinarily evil.”
Acting U.S. Attorney Lev Dassin said the investigation is continuing and officials are committed to bringing criminal charges “against anyone who bears criminal responsibility,” as well as “tracing, restraining, and liquidating assets to maximize recoveries for the victims.”
The complete text of this article can be found in the BNA Daily Tax Report, June 30, 2009. For comprehensive coverage of taxation, pension, budget, and accounting issues, sign up for a free trial or subscribe to the BNA Daily Tax Report today. Learn more »
© 2009, The Bureau of National Affairs, Inc.
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