Madoff Fraud Allows Revision in Divorce Settlement

Steven Simkin, an attorney from New York, can sue his former wife to recover as much as $2.7 million, her alleged half of their shared fraudulent Bernard Madoff account, as reported by Bloomberg, the New York Post and other media outlets.

Because of Madoff's Ponzi scheme, Simkin is able to revise their divorce settlement - that was originally made in 2006.

An appeals court has overturned a lower-court ruling that had dismissed Simkin's case.  Simkin had originally filed the suit in 2009 against Laura Blank, his ex-wife, because Madoff's fraud scheme was made public at that time.

First Department, the state's Appellate Division, cited the doctrines of the complaint as "mutual mistake" and "unjust enrichment."

Out of the five Appellate Division justices, two chose to dissent.

The statement from the court majority was, "Even though there is an express contract between the parties, it is unclear whether it covers the current dispute; therefore, plaintiff may plead unjust enrichment."

Out of the couple's largest mutual asset during the time of their marriage - $6.6 million in an account with Bernard L. Madoff Investment Securities LLC that was valued at $5.4 million - $2.7 million was paid to Blank in their divorce settlement.

Richard Emery, Blank's attorney, said the decision was "totally erroneous" and that he will be appealing in the New York state Court of Appeals.

Emery, via a telephone interview, said, "Of course, we have sympathy for Simkin's loss, but it doesn't mean that everybody he did business with should have their money clawed back just because he paid them believing he had more money than he did.  Is every divorce agreement to be revisited when values change in the future?"

The two justices that dissented did so as they felt the decision "undermines decades of established precedent favoring finality in divorce cases. The conclusion the majority reaches, not only fails to follow precedent, but is truly 'divorced' from reality."

The Simkin and Bland have two children from a marriage that began in 1973.  They separated before their twentieth anniversary, in 2001, and entered into the property division phase in 2006.

Simkin retained the Scarsdale, New York home and Frank the Manhattan apartment and it's $370,000 mortgage.  Simkin paid Frank $6.25 million - $368,000 was rolled over into her retirement account - and no spousal support.

The dissenting opinion was, "The agreement does not mention the Madoff account, but Steven liquidated part of the account to fund his payments to Laura under the agreement.  He did not liquidate the rest of the Madoff account after the parties divorced and he continued to invest in it."

Irving Picard, the trustee that is liquidating Bernard L. Madoff Investment Securities LLC said that the Ponzi scheme lost $20 billion in principal.  Statements, like the one the Simkin's referred to in their division of property, reflected $65 billion in nonexistent investments at the time of Madoff's arrest in December of 2008.

Even if your divorce has been finalized, if you were the victim of a Ponzi-type scheme you may be able to amend your settlement, click here to contact a Family Law Attorney from our directory.