Preet Bharara (DOJ)
This seems to be a pretty big misstep for new Southern District of New York U.S. Attorney Preet Bharara. His newly announced choice to head the office’s criminal division, Richard B. Zabel, has already had to recuse himself from the Bernie Madoff case. That’s because Zabel’s father is the lawyer for a potential prosecution target in Madoff’s massive financial fraud, ABC News reported.
Richard B. Zabel (Akin Gump)
William D. Zabel is the long-time counselor to Palm Beach billionaire Jeffry Picower, who was Madoff’s close friend. Picower is alleged to have taken more than $7 billion from the $65 billion Ponzi scheme that Madoff admitted running, according to this lawsuit filed by Irving Picard, the court-appointed bankruptcy trustee seeking to recover assets for the Madoff victims. The lawsuit says Picower was the “biggest beneficiary of Madoff’s scheme.”
William D. Zabel (Schulte Roth & Zabel LLP)
See, the problem for Bharara is this: Zabel’s father isn’t just Picower’s long-time lawyer. The elder Zabel actually helped set up and oversee one of the charities now alleged to be at the center of the fraud. That would be the now-infamous Picower Foundation, which I first exposed here in this 2001 investigation for the St. Petersburg Times.
William Zabel and Madoff served together as trustees on the Picower Foundation board, according to public records. And the foundation was a major part of a network of interlocking businesses, charities and trusts that Picower is alleged to have used to make transactions in his Madoff accounts that he knew, or should have known, were fraudulent, the Picard lawsuit says.
Barbara and Jeffry Picower (MIT)
Zabel has been an energetic defender of his long-time client. “Trustee continues to make false and outrageous claims about Mr. Picower based on a misreading of the purported ‘facts.’ When the true facts are known, the Court will see that Mr. Picower was deceived by Bernard L. Madoff,” Zabel said in a recent statement, as reported by Pro-Publica.
The Picard lawsuit, however, says Picower was not a victim. “Picower was instead the biggest beneficiary of Madoff’s scheme, having withdrawn either directly or through the entities he controlled more than $7.2 billion of other investors’ money,” the lawsuit said. Read the lawsuit here.
We were unable to reach William Zabel on Friday evening. We left a message on his voice mail and will update this story if we hear from him. But he told ABC News his son’s decision to recuse himself ”is entirely appropriate, because of the appearance of a conflict of interest.”
The U.S. Attorney’s office declined to say whether Picower is a potential prosecution target, ABC News reported. Picower has denied any wrongdoing.
The younger Zabel was most recently the litigation chief at the Akin Gump Strauss Hauer & Feld law firm, which he joined in 1999 after serving eight years as a prosecutor in the Southern District.
Click here to read my earlier story about how regulators repeatedly shrugged at the red flags waving around Picower.
