Payback for Madoff victims could begin in July

Victims of Bernard Madoff will start receiving partial reimbursements for their losses in his giant Ponzi scheme -- up to 4 percent of their investments -- as soon as July, according to a plan unveiled Wednesday by the bankruptcy trustee handling the case.

In a filing in Manhattan bankruptcy court, trustee Irving Picard said he wants to begin paying investors from a kitty of about $2.3 billion after the court approves his plan, possibly after a July 12 hearing.

Picard said more than $7 billion has been recovered from lawsuits and settlements, but that he couldn't tap into that full amount because of lawsuits by some investors challenging his actions.

Because of the uncertainty of that litigation, Picard said he is keeping funds in reserve and will pay qualified investors 4.08 percent of their investments for now.

Picard didn't name the investors who have filed lawsuits but New York Mets owners Fred Wilpon and Saul Katz and their Sterling Equities firm have led the charge in federal appeals court.

Sterling and its related companies contend Picard is incorrectly calculating the net equity held in investor accounts, alleging that he should be using the amounts reported by Madoff to customers in his last fictitious statements totaling $64 billion.

Picard insists that customers who withdrew profits in addition to their original investments aren't eligible for a special advance of up to $500,000 from the Securities Investor Protection Corp. or entitled to this first round of payments.

"The trustee's net equity definition is the only one accepted" under securities laws, "is consistent with decades of legal precedent and, in the Madoff case, had been upheld by the bankruptcy court," Picard's counsel, David Sheehan, said in a statement.

A spokesman for Sterling Equities and the Wilpon family didn't immediately return a request for comment.

Sheehan also said it was "regrettable" that a $5-billion settlement with the estate of the late Jeffry Picower, as well as another $220-million settlement with the estate of investor Norman Levy, were tied up in litigation and couldn't be used to make payments.

Because of the labyrinth of accounts and legal intricacies in the case, Picard said in his court papers that payout scenarios would run from at least 4 percent to as high as 44.12 percent if his position on net equity is upheld.

Picard calculated that the actual losses to investors totaled about $17.2 billion.

Picard has approved 2,297 investor claims, mostly people who lost money and never took out any fictitious profits.

Some have been fully paid off by $500,000 received from the SIPC while the rest will be paid under the formula presented to the court, legal papers stated.

Investors whose SIPC payments only partly compensated them won't have to repay those advances once they receive their share of recovered funds, said one bankruptcy expert.