Sorkin told the government he “believes” he transferred this investment around 1995 to another brokerage and that he has had no investment with Madoff since then, prosecutors said in a March 3 letter to U.S. District Judge Denny Chin in New York made public today.
Madoff, 70, arrived at a Manhattan courthouse this morning and will appear before Chin at 3 p.m. The judge will explore whether Sorkin has a conflict of interest in the case. Sorkin’s now-deceased father had an account with Madoff, and in 1992 the lawyer represented a Florida investment firm, Avellino & Bienes, that invested with Madoff.
The government’s letter provided the most detail to date of the two potential conflicts, both of which prosecutors say Madoff may waive. Prosecutors said Sorkin’s past investment with Bernard L. Madoff Investment Securities LLC, or BLMIS, doesn’t appear to be a conflict.
‘10 Years Ago’
Because Sorkin’s “investment was liquidated more than 10 years ago and Mr. Sorkin has had no investment with BLMIS since then, the government does not believe that these facts present any potential conflict,” Assistant U.S. Attorneys Marc Litt and Lisa Baroni said in the letter.
Sorkin transferred his deceased parents’ investment away from Madoff in August 2007, according to the letter.
“It will all come out in today’s hearings,” said Sorkin, a lawyer at Dickstein Shapiro LLP in New York, in a comment today.
Madoff was arrested Dec. 11 at his multimillion dollar apartment on Manhattan’s Upper East Side after allegedly confessing that he and his New York firm used new money to pay old investors in what he called a $50 billion Ponzi scheme. He hasn’t formally responded to the one count of securities fraud he currently faces, which carries a maximum 20-year prison sentence. Madoff, who is free on $10 million bail, has been ordered to remain in his home under house arrest.
He is set to appear in court again March 12, when he is scheduled to enter a plea to new criminal charges that will be filed against him and waive his right to a grand jury indictment. Defendants typically waive a grand jury indictment if they intend to plead guilty. Madoff has not indicated what his plea will be.
Pose a Conflict
In the government’s letter today, prosecutors said Sorkin’s representation of Avellino & Bienes and his parents’ investment pose a conflict. Sorkin may remain on the case if Madoff waives the conflicts, the government said.
Sorkin said in an interview last month that he met Madoff in the 1980s through one of the money manager’s longtime friends, Howard Squadron, the founding partner of New York law firm Squadron Ellenoff Plesent & Sheinfeld LLP. Squadron hired Sorkin in 1977 and again in 1997.
Sorkin represented Fort Lauderdale, Florida-based Avellino & Bienes in 1992 after it was sued by the U.S. Securities and Exchange Commission. The unregistered firm invested more than $441 million in client money with Madoff, according to court papers. The firm agreed to close the business and refund the money, the SEC said.
Michael Bienes told the Sun Sentinel of Fort Lauderdale, Florida, on March 8 that he lost millions of dollars and was wiped out after investing with Madoff.
‘Trial Witnesses’
“Avellino and Bienes, therefore, are potential trial witnesses against Madoff,” Litt and Baroni said in the letter. “These facts create a potential conflict of interest because Mr. Sorkin’s ability to cross-examine his former clients could be severely curtailed.”
Also, Sorkin’s parents invested about $900,000 with Madoff’s firm, prosecutors said. After their death, the investments were transferred to trust accounts set up for the benefit of Sorkin’s two sons, with Sorkin as trustee, according to the government.
“Documents provided by the government to Mr. Sorkin also show that the investment was transferred from BLMIS to Merrill Lynch in approximately August 2007,” the prosecutors wrote. “A situation may arise that could result in Mr. Sorkin having loyalties divided between his sons and Madoff,” especially in related civil litigation, prosecutors said.
Five Pages
The prosecutor’s letter included five pages of proposed questions that the government suggests Chin pose at today’s hearing. The questions ask whether Madoff is aware of the potential conflicts, is satisfied with Sorkin’s performance as a lawyer, wants to confer with another attorney and waives potential conflicts.
The day before he was arrested, Madoff told relatives his business was “one big lie,” prosecutors said in court paper.
Thousands of investors with Madoff’s firm have reported about $43 billion in losses, according to a Bloomberg tally of disclosures, news reports and court filings.
The investment by Sorkin’s father came to light last month with the filing of a list of Madoff clients in federal court. The elder Sorkin opened an individual retirement account that he left to the attorney’s mother in 2001, Sorkin said. When Sorkin’s mother died in 2007, the IRA was cashed out.
Madoff’s alleged Ponzi scheme, which would be the largest in history, went back at least to the 1970s, according to people familiar with the case.
Separately Irving Picard, the bankruptcy trustee for Madoff Securities, has been seeking to liquidate Madoff’s brokerage, find assets and distribute them to Madoff’s customers. So far, Picard and attorneys from the law firm Baker Hostetler LLP have found about $950 million in cash and securities.
The criminal case is U.S. v. Madoff, 08-Mag-02735, U.S. District Court for the Southern District of New York (Manhattan)
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