Divorced husband loses Madoff-related case

ALBANY -- A divorced Manhattan lawyer is stuck with his losses from an investment with disgraced financier Bernard Madoff that tanked two years after his divorce settlement, New York's top court ruled yesterday.

The Court of Appeals rejected Steven Simkin's argument that he and ex-wife Laura Blank made a mutual mistake in believing they had $5.4 million in a fund that was actually "nonexistent" because of fraud to investors. The six judges rejected Simkin's claim he should get back $2.7 million, or half of the fund's supposed value, from the $6.25 million that Blank got as "an equitable distribution of property."

They concluded Simkin could have redeemed the investment until Madoff's Ponzi scheme began unraveling in 2008.

Madoff is serving a 150-year prison sentence after revealing he cheated thousands of investors out of roughly $20 billion.

"Viewed from a different perspective, had the Madoff account or other asset retained by husband substantially increased in worth after the divorce, should wife be able to claim entitlement to a portion of the enhanced value?" Judge Victoria Graffeo wrote. "The answer is obviously no."

Yesterday's ruling reverses a divided midlevel court, which had reinstated Simkin's complaint seeking to have the couple's "true assets" determined and alter their 2006 divorce settlement to reflect that.

"Marital settlement agreements are judicially favored and are not to be easily set aside," Graffeo wrote, although she added that they can be later changed "based on a mutual mistake by the parties."

Citing other case law, Graffeo said such mistakes must be "substantial," exist at the time the contract is entered, and warrant court-ordered relief only in "exceptional situations," but this did not qualify.

She cited a revisited settlement that called for subdividing land that another couple later learned had restrictions against it.

"Husband does not dispute that, until the Ponzi scheme began to unravel in late 2008 -- more than two years after the property division was completed -- it would have been possible for him to redeem all or part of the investment," the court said.

"In fact, the amended complaint contains an admission that husband was able to withdraw funds from the account in 2006 to partially pay his distributive payment to wife."

Simkin's court brief acknowledged that the Madoff Investment Securities account may yet have some value depending on the success of the liquidation trustee, Graffeo noted.