Most of us thought that the story of Bernie Madoff would end as he began to serve his 150 year sentence for fraud. What most of us probably would not have predicted is Bernie Madoff's ability to affect people's lives beyond his prison cell. A New York appeals court has ruled that a prominent real estate lawyer can file a lawsuit to revise the division of property from his divorce agreement because of a Bernie Madoff account.
The real estate attorney and his former wife divorced after 33 years of marriage in 2006. The terms of the divorce outlined $6.6 million in payments from the real estate lawyer to his former wife, a university administrator. A Bernie Madoff account represented the couple's largest asset and the real estate lawyer agreed to pay $2.7 million from the account to his wife. The problem is that the Madoff account turned out to be worthless when Bernie Madoff was arrested and then convicted of fraud in 2009. The real estate attorney filed a lawsuit in an attempt to solve the problem.
The real estate attorney and former husband wanted the agreement changed to reflect that the account is now not worth anything and that the account was a sham. The real estate attorney's lawsuit also says that his wife received a windfall from the account. Initially, the man's lawsuit was thrown out by a district court but a New York appeals court eventually ruled in his favor. Three of the five appellate judges said the former husband had received an asset that did not exist. The court reasoned that Bernie Madoff admitted the accounts did not exist to make trades on, so the real estate attorney never had an account to divide in the first place.
Source: Associated Press, "NY Madoff Investor Gets New Shot at Ex's Cash," 1/4/10