Thursday, May 14, 2009

Money and Sausage

The old joke about sausage is you don't want to know how it's made. The same applies to fortunes. Best not to how they were made.

When the Picower Foundation collapsed the day after Bernard Madoff's arrest. I felt really terrible. Through a client I had met Barbara Picower a few times. I found her intelligent, savvy and truly dedicated to dispensing the Foundation's money with wisdom and compassion. On my recommendation she hired one of my 2007 grad students. This particular client was hit with a seven-figure loss now and the loss of future gifts as well; and others with whom I am or were involved got hit too.

How could a billion dollars just go poof and the nez plus ultra Foundation offices on the 39th floor of 9 West 57th Street be shuttered overnight? I found this passing strange. Then earlier this week attorney Irving Picard the court-appointed trustee responsible for hunting down Madoff's assets so they could be returned to the investors Madoff screwed brought a "claw back" action against the Picowers, charging them personally with being "complicit in [Madoff's] fraudulent activity." As the Wall Street Journal reported, Picard said the Picowers had to know it was impossible for 14 funds they had invested with Madiff could each have returns of over 100% a year.

He is seeking the return of several billion dollars from the Picowers. How much was distributed by the Foundation we don't know yet. But we do know real charities got real money over time. How much will be clawed back is anyone's guess. Mine is not much. Word on the street is that Picard is bringing a second claw back suit against another major philanthropist - in the same Palm Beach social network as the Madoffs and the Picowers. I'll write about that one too but not until the law suit is brought (if it is) and the name is public.

The Picowers' high profile lawyer is William Zabel, former chairman of Human Rights First, trustee of amFAR and secretary of - oops - the JEHT Foundation which also crashed the day after the Madoff arrest. Mr. Zabel said the Picowers were "victims" and not "complicit." As in Casablanca when Captain Renault (Claude Rains) says to night club owner Rick Blaine (Humphrey Bogart) " I'm shocked, shocked to find that gambling is going on in here!"?

So if Picard is right and prevails we will know how the Picower fortune was - if not made - certainly enlarged. The current trial of Anthony Marshall charged with bilking the estate of his allegedly demented mother Mrs. Vincent Astor is interesting counterpoint. Forebear John Jacob Astor was not a paragon of probity. When you look at old fortunes you can conclude that it takes about three generations to bleach out the stains. By then nobody cares about how the money was made - only where it's going.

But sausage is of the moment. Pass the mustard and sauerkraut please.

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