Trustee demands Madoff family members return millions

NEW YORK -- Bernard Madoff's brother, sons and a niece used the family finance business like a "piggy bank," a court-appointed trustee charged yesterday as he demanded in a lawsuit that they return nearly $200 million that fueled their lavish lifestyles at the expense of investors.

Trustee Irving Picard sought $198.7 million from Madoff's brother, Peter, who had worked at Madoff's Manhattan investment company since 1965, and sons, Mark and Andrew.

Also sued was Shana D. Madoff, Bernard Madoff's niece and Peter Madoff's daughter.

Bernard Madoff, 71, a former Nasdaq chairman, is serving a 150-year sentence for the fraud in connection with a multibillion-dollar Ponzi scheme. No other family members have been criminally charged. The lawsuit said the defendants at least should have seen signs of irregularity and fraud at the company "but either failed to make sufficient inquiry or knew of the fraud, ignored it, and profited from it."

Lawyers for Picard said in papers filed in U.S. Bankruptcy Court in Manhattan that Madoff's family-run business "was operated as if it were the family piggy bank."

They said family members withdrew huge sums of money to fund personal business ventures and pay for expenses ranging from multimillion-dollar homes, cars and boats to monthly credit card charges for restaurants, vacations and clothing.

The lawyers said $141 million identified as fraudulent proceeds were received by family members in the six years before Madoff surrendered and revealed his plot last December while at least $58 million was received in the last two years.

Peter Madoff was the company's senior managing director and chief compliance officer while Mark and Andrew shared the title of co-director of trading.

Mark had worked with his father at the company since 1986, while Andrew had been there since 1988. Shana Madoff, a lawyer, had worked there since 1995 as compliance counsel and in-house counsel, the court papers said.

"Senior management -- the family defendants -- did not do their jobs," Picard's lawyers said. "Otherwise, the Ponzi scheme might have been detected and stopped many years ago."

Martin Flumenbaum, an attorney representing Mark and Andrew Madoff, said in a statement that the lawsuit's claims were baseless.

He said the brothers had no prior knowledge of Bernard Madoff's crimes and contacted the U.S. Department of Justice and the Securities and Exchange Commission immediately after their father told them he had defrauded clients.

"By immediately turning him in, the brothers saved the victims of the fraud more than $170 million that their father was about to distribute," Flumenbaum said.