One on One with Jeff Marwil, Partner at Winston & Strawn
Monday, December 15, 2008
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SUSIE GHARIB: More analysis now on the latest developments on the Bernie Madoff scandal. Joining us, an attorney representing a group of Madoff investors. Jeff Marwil, partner at the Chicago law firm of Winston and Strawn. Hi Jeff. Thanks for coming on the program.
JEFF MARWIL, PARTNER, WINSTON & STRAWN: Thank you for having me.
GHARIB: Everyone is wondering is there someone else involved? It's kind of hard to picture that Madoff at 70 years old pulled this off all by himself. What are your thoughts?
MARWIL: I'm not sure that there were others involved, certainly not a big web. I think given what I understand about the situation where he and perhaps only a few close associates were not only managing the money but also keeping the records, keeping dominion and control over the money and most importantly the auditor was a single-person audit firm, I think in upstate New York. The web of people involved had to be very small.
GHARIB: So what's the next step? Tell us what you think could be the best and worst scenario from here.
MARWIL: Well, in my experience the next step once the receiver gets control of the assets that are known to begin in earnest an investigation of assets that may not be known including litigation and there are claims against the professionals that may have been involved in providing advice both on behalf of the investors as well as Madoff. And then also looking at the investors who redeemed prior to announcement of the fraud and seeking to recover from them at least certain of the proceeds that they received in order to equalize the harm, if you will, from the fraud for the benefit of those who received nothing.
GHARIB: Do you think that investors -- and I'm here talking about average investors -- will be able to recover any of their money? What can they do?
MARWIL: Well, in my experience and in this area with massive Ponzi schemes in particular the value hedge fund case, where I am the receiver, we did pursue actions against early redeemers, those who received all of their principal back plus fictitious profits. We did through actions in Chapter 11 bankruptcy case under fraudulent conveyance section of the bankruptcy code in fact recover from those investors significant funds that will now be utilized to equalize distributions among all investors, so that everybody shares as equally as possible in the fraud and in the harm. So that those who are left with nothing right now ultimately hopefully will recover their fair share of what was distributed over the course of at least the last two years.
GHARIB: Jeff, you heard our report. There's a lot of questions swirling around the SEC and its culpability. I don't know if it's protected because it's a government agency, but can it be sued? Can the SEC be sued?
MARWIL: I don't think the investors can maintain any kind of cause of action against the SEC for recovery as a result of the fraud and I think the best place to spend limited resources is looking at the investors who did recover more than their fair share. Everybody was defrauded here. All of the investors even those who think they got their money back and there needs to be equalization. And I think that is the low-hanging fruit.
GHARIB: Real quickly, just a few seconds left, could this kind of scheme be going on at other prominent firms? This is a big worry of investors. What's a tip-off? How can they protect themselves?
MARWIL: Well, I think first and foremost you need to look at who the auditor is and expect that it's somebody reputable and somebody that you can actually speak to and confirm that the books and records have been audited. Secondly, I would look at whether the investment manager has actual dominion and control over the investments or whether it's being -- whether the investments are being held in trust at a separate institution, the latter being preferred.
GHARIB: We're going to have to leave it there. Thank you very much, Jeff. We appreciate you coming on the program and sharing.
MARWIL: Thank you very much.
GHARIB: My guest tonight, Jeff Marwil of the Chicago law firm Winston and Strawn.
