Family Swindled By Madoff Fights $61 Million IRS Bill

From Forbes.com:

First the family of Norman F. Levy, the late New York City real estate tycoon, was swindled out of hundreds of millions of dollars by close friend Bernard L. Madoff, forcing the closing of two Levy charities. Then Levy heirs coughed up $220 million to the Madoff bankruptcy trustee to repay personal withdrawals made before Madoff's Ponzi fraud collapsed in 2008.

Now, adding insult to injury, the unlucky clan is fighting a $61 million estate tax bill from the Internal Revenue Service.

In a previously unreported U.S. Tax Court lawsuit against the IRS, Levy's estate and his two grown children, Francis N. Levy and Jeanne Levy-Church, contend they don't owe the $61 million. Instead, they claim the feds actually owe the estate a $19 million refund for losses from Madoff's thievery of certain assets after their father's death in 2005 at age 93.

Madoff, along with the Levy children, was initially named an executor of the estate. He has since resigned as an executor and is now serving a 150-year federal prison sentence after admitting he defrauded hundreds of investors out of an estimated $60 billion.

According to Tax Court and probate filings, Levy's gross estate was valued at $1.09 billion in 2005. Although some of that likely represented nonexistent wealth already looted by Madoff, Levy during his lifetime probably should have been on the Forbes list of the 400 Richest People in America, which he never made.

Madoff's Victims, One Year Later

It has been a whole year since Bernie Madoff was arrested for the largest Ponzi scheme in history. In honor of the anniversary, CNN Money has put together an article looking back on the illegal scam, the money trail, and how the victims are coping a year later. Many of them assert that they have yet to see any of their money returned.

"We've got nothing back," said Dana Foy, a 57-year-old computer programmer in New Mexico.

Foy, who wouldn't identify how much money he lost, saw his dream of a comfortable retirement with his wife wiped out by Madoff's scheme, which came crashing down when he was arrested on Dec. 11, 2008.

About $20 billion in investor funds were lost to Madoff's scam, according to the Web site of the court-appointed trustee Irving Picard, who is tasked with recovering and allocating as much of the money as possible. Some of the victims have been reimbursed, but many are still waiting.

Of the 16,000 claims that have been filed, about 70% have been processed, according to Picard. Of those 11,563 processed claims, 1,647 have been determined to be valid. Most of the claims, some 9,916, have been denied. Many of those are from people who invested in feeder funds, which are other funds that invested with Madoff. Claimants have to try and get reimbursement from those fund managers, not through the trustee.

Continue reading at CNN Money.com…

House Panel Votes to Give SEC More Money, Power

In the latest move to end corruption on Wall Street, the House of Representatives Financial Services Committee voted this morning to give more power and funding to Federal regulators. They hope the additional funds will help agents prevent future abuses, such as the high profile Bernie Madoff scandal. Check out the following coverage of the new legislation courtesy of the Associated Press.

The 41-28 vote was the panel's latest move to try to rein in abuses on Wall Street. It would give the Securities and Exchange Commission new enforcement powers, including the ability to offer bounty money to tipsters on fraud cases and the power to bar violators of the law from employment in any securities-related industry.

The bill also would double the SEC's budget in the next five years.

Rep. Paul Kanjorski sponsored the legislation after leading the panel's investigation into the government's failure to uncover Madoff's massive fraud scheme for nearly two decades. Madoff was sentenced in June to 150 years in prison.

"In the last five years, there's been a significant change and a greater sophistication in the financial service industry than has ever happened in the history of mankind," said Kanjorski, a Pennsylvania Democrat. "So we're going to have to change fast."

The proposal was part of a broader effort by the committee to tighten rules governing financial institutions after last year's market crisis. The full House was expected to vote on the bill and related proposals in early December.