Jeffry M. Picower

Jeffry M. Picower (May 5, 1942 – October 25, 2009) was an American investor involved in the Madoff investment scandal. He was the largest beneficiary of Madoff's Ponzi scheme, and his widow agreed to have his estate settle the claims against it by Madoff trustee Irving Picard for $7.2 billion, the largest single forfeiture in American judicial history. Picower was born in the Bronx, New York. He was a certified public accountant and lawyer, but made most of his fortune by investing with Madoff. As an accountant at Laventhol & Horwath in the 1980s, Picower set up questionable tax shelters. When the IRS challenged their validity, one of Picower's clients sued him and the firm. The case was settled out of court. Picower had his first brush with scandal in 1976, when he handed $616,000 to Adela Holzer. A prominent Broadway producer who backed hits like Hair, Holzer was also a Ponzi schemer who lured New York investors into fake business deals abroad with promised returns of 50%. By March 1977 Holzer reported Picower had profits of $253,000, but he was able to get back only $67,000 before the scheme imploded. Holzer was convicted in 1979 of seven counts of grand larceny and spent the rest of her life in and out of jail. At around the same time Picower was dealing with Holzer, he made his first Madoff investments. It's unclear how that relationship started, but until the early 1970s Picower's older sister, Emily, was married to Michael Bienes, who also grew up in Long Beach and worked in the 1960s as an accountant for Saul Alpern, Madoff's father-in-law. At the time of his sister's divorce, Picower was working as a manager at an accountancy, while Bienes and his partner, Frank Avellino, had taken over Alpern's accounting firm and helped transform it into an early Madoff feeder fund. While Madoff's investment firm took off, Picower dabbled in health care investments and sold dubious tax shelters involving computer leases that were challenged by the IRS. Picower was also one of Ivan Boesky's biggest investors, placing a reported $28 million in his main arbitrage fund before Boesky pleaded guilty to insider trading in 1986. In 1991, Picower and Anthony Cerami established a charity, the Picower Institute for Medical Research, with an initial endowment of $10 million. PharmaSciences. However, it was revealed that Picower owned 76% of PharmaSciences stock and actually controlled 86.2%, putting him in a conflict of interest in the merger negotiations. After Physician Computer Network, Inc., went bankrupt, Picower, the chairman of the board and 45% shareholder, had to give $21 million to other shareholders in 2000 after it was discovered that company executives had falsified financial statements. Alaris Medical Systems, 65% owned by Picower, was taken over by Cardinal Health in 2004 for $1.6 billion. The Jeffry M. and Barbara Picower Foundation was created in 1989 by Picower and his wife Barbara. Barbara Picower was listed as Executive Director and trustee, with both Picower's being members of the board of directors. Longtime friend Bernard Madoff managed foundation assets listed at over $1 billion. It distributed over $268 million in grants to various American organizations, including Human Rights First and the New York Public Library. In 2002, it granted $50 million to the Massachusetts Institute of Technology neuroscience research center, which was subsequently renamed the Picower Institute for Learning and Memory.However, the Picower Foundation was forced to close in 2009 due to losses arising from the uncovering of Madoff's Ponzi scheme. It was reported that between December 1995 and December 2008, Picower and his family withdrew "from their various Madoff accounts $5.1 billion more than they invested." The 67-year-old Picower remained co-conspirator Suspect Number One, in spite of his lawyer’s assertion that Picower was simply Bernie’s biggest victim. “Picower made off with a totally grotesque amount of money. Unlike many other people, I don’t know that he paid taxes on all of it,” an investigator told The Daily Beast. “Unless Bernie showed him his printing facility where he was making counterfeit, Picower had to know the money was stolen, those were the only choices.” What these men undeniably shared were similar backgrounds and interests. Based largely in New York and South Florida, they moved through parallel milieus of affluent Jewish country clubs and synagogues. They were active in similar philanthropies and served on the boards of foundations, universities and yeshivas. Many of those in the circle took money from the scheme as fees rather than investment gains. Members of this circle not only did far better than other investors, who averaged 10 percent to 12 percent returns annually, they also had a highly unusual level of input into the nature of their returns. According to the trustee’s complaint, there were several instances in which Picower or his associates contacted Madoff’s office, asking for specific monthly returns . Over a five-year period in the late ’90s, two of Picower’s accounts had annual returns ranging between 120 percent and 550 percent. A third had yearly returns as high as 950 percent. With Jeffry Picower gone, the inquiries will focus on how and why trusts, corporate entities and other legal instruments were used by Picower to move money. “Then the question comes, where is it?” Says the investigator. “If it turns out it moved around, he set up this trust, he set up that trust. The money went to 17 different countries. Who set up the trusts? Who coordinated the movements?” Yet at bottom, Picower was a Wall Street figure who sailed close to the wind. He was said to be the biggest investor in Ivan Boesky—the 1980s poster boy for Insider Trading. Later, there were questions about whether Picower acted ethically while using access gained by charitable giving to learn inside information about medical research before investing in medical products companies. Picower was trained as a certified public accountant and as a lawyer. Given those skills, it was especially hard for investigators to find any innocent explanation by Picower for repeated backdating of trades and one year returns of more than 900 percent in a Madoff account. Records dug up by bankruptcy trustee Irving Picard and his squadron of Baker & Hostetler lawyers show Picower and his foundations received— through more than two dozen accounts—$7.2 billion more than he invested with Madoff. In just the last six years. Picower collected $2.6 billion from Madoff, the trustee’s law suit says. Not surprisingly, the U.S. Attorney’s Office and civil investigators suspected Picower served as Madoff’s money-launderer-in-chief since he—at least on paper—got away with 30 times as much money as Bernie piled up in assets that have been seized. So what happens now that Picower, the man who may have known everything, has gone silent before being forced to talk? In June 2009, Irving Picard, the trustee liquidating Madoff's assets, filed a lawsuit against Picower in the U.S. Bankruptcy Court for the Southern District of New York (Manhattan), seeking the return of $7.2 billion in profits, alleging that Picower and his wife Barbara knew or should have known that their rates of return were "implausibly high", with some accounts showing annual returns ranging from 120% to more than 550% from 1996 through 1998, and 950% in 1999. According to a June 28, 2009, MSNBC article, that would make Picower and his wife the biggest beneficiaries of Madoff's scam, exceeding even Madoff himself. The Picower's lawyer, William D. Zabel of Schulte Roth & Zabel, responded that, "They were totally shocked by his fraud and were in no way complicit in it." Madoff has suggested that Picower was allowed to remain as a client because he was "the Ponzi equivalent of a bank too big to fail: an investor too big to fire." It would have been impossible for Madoff to find enough cash to completely redeem his multi-billion account. On November 1, 2009, an additional court filing by Irving Picard documented an apparently fraudulent gain benefiting Picower. "According to the new filing, Mr. Picower opened an account with Mr. Madoff on April 18, 2006, by wiring a check for $125 million, more than a quarter of the entire sum he invested with Mr. Madoff over time. Within two weeks, the $125 million deposit had purportedly grown to $164 million because of a dramatic ‘gain’ on the securities held in the account—all of which supposedly had been purchased three months earlier ... Five months later, Mr. Picower withdrew his original $125 million, leaving $81 million in the account. There is no legitimate explanation for these events nor any possibility that they escaped Picower’s notice." Settlement On December 17, 2010, it was announced that a settlement of $7.2 billion had been reached between Irving Picard and Barbara Picower, Picower's widow, the executor of the Picower estate to resolve the Madoff trustee suit, and repay losses in the Madoff fraud. It was the largest single forfeiture in American judicial history. "Barbara Picower has done the right thing," US Attorney Preet Bharara said. Death On October 25, 2009, Jeffry Picower died at his Palm Beach home. Picower's wife Barbara told dispatchers she found him "at the bottom of their swimming pool" at their oceanfront estate shortly after noon. He was taken to Good Samaritan Medical Center, where he was pronounced dead about 80 minutes later. According to the Palm Beach Police Department, "An autopsy of the body of Jeffry M. Picower was performed this morning. The Palm Beach County Medical Examiner's Office determined that Mr. Picower suffered a massive heart attack while in the swimming pool resulting in accidental drowning." He was buried on October 27, 2009, in Mount Ararat Cemetery in Farmingdale, New York.