Posts Tagged ‘William Zabel’
Wednesday, January 13th, 2010

Barbara and Jeffry Picower. (Getty Images)

Investor and philanthropist Jeffry Picower, who was reportedly under criminal investigation in connection with the Bernard Madoff Ponzi scheme before his death in October, drowned accidentally, a final autopsy report has concluded, according to The Palm Beach Daily News.

Picower was found dead at the bottom of his pool at his mansion in Palm Beach, Fla., on Oct. 25. The Palm Beach County Medical Examiner’s office initially ruled that Picower had drowned after suffering a massive heart attack.

Newly released results of toxicology reports confirmed the initial finding, according to The Daily News.  The reports found caffeine and a sleep aid in Picower’s body at the time of his death, The Daily News said. The autopsy report said Picower had no substance abuse issues and that he had been “upbeat and exhibited no signs of depression or changes in sleeping, eating, or drinking patterns.”

The Palm Beach billionaire had a history of heart disease, the autopsy report said, according to The Daily News. A spokesperson for the medical examiner’s office told Main Justice the autopsy report is “complete” but would not discuss its details.

Picower was alleged to have taken more than $7 billion from the Madoff scheme, according to a civil 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.” The Wall Street Journal reported in May that Picower was under criminal investigation in the matter in the Southern District of New York.

In October, the SDNY’s criminal chief, Richard Zabel, recused himself from the Madoff investigation because his father, New York estate lawyer William D. Zabel, was Picower’s long-time attorney and close advisor. Read our previous report here.

Monday, October 26th, 2009

Two weeks ago Richard Zabel, the new criminal chief of the Southern District of New York U.S. Attorney’s office, recused himself from the Bernard Madoff investigation because his father represented an investor accused of being the biggest beneficiary of the $65 billion fraud.

Richard B. Zabel (Akin Gump)

Richard B. Zabel (Akin Gump)

On Sunday, William D. Zabel’s client was found dead at the bottom of his pool at his mansion in Palm Beach, Fla. Investor Jeffry Picower, who was 67, drowned after suffering a massive heart attack, the Florida medical examiner who conducted the autopsy said. Dr. Michael Bell told ABC News he is still awaiting the results of a toxicology report, which is expected to take 10 weeks.

Barbara and Jeffry Picower (Getty Images)

Barbara and Jeffry Picower (Getty Images)

The sudden death of this alleged key figure in the Madoff scheme underscores some potentially thorny management issues for the new U.S. Attorney in Manhattan, Preet Bharara. Bharara named Zabel his criminal chief on Oct. 6, calling the former Akin Gump criminal defense attorney a “legal All-Star.” Zabel also served eight years as an SDNY prosecutor in the 1990s.

Although Bharara’s pick for criminal chief quickly recused himself from all Madoff-related matters, line prosecutors now may have little choice but to attempt to seek information from his father, insofar as attorney-client privilege allows.

That’s because the elder Zabel wasn’t just Picower’s representative in the Madoff matter. An estate attorney and name partner in the New York firm Schulte, Roth & Zabel, William Zabel helped set up and oversee the Picower Foundation, a closely held charity accused in a civil complaint of reporting tens of millions of dollars in fabricated and backdated gains from its Madoff accounts.

The complaint, filed by Irving Picard of Baker & Hostetler, the court-appointed bankruptcy trustee seeking to recover money for the victims, said that Picower “knew, or should have known,” his gains in his Madoff-managed accounts were fraudulent. The Wall Street Journal reported in May that Picower was under criminal investigation by the SDNY in the Madoff scheme.

William Zabel is also listed in Securities and Exchange Commission records as the administrative contact for a Picower business accused in the fraud. And he served alongside Picower and Madoff on the board of the now-defunct Picower Institute for Medical Research, another charity accused in the civil lawsuit of having benefited from the Ponzi scheme.

In an interview before Picower’s death, Zabel told Main Justice he wasn’t aware of any fraud involving his client. “I had no knowledge of any of the allegations until after” the trustee’s complaint was filed, Zabel said.

Picower controlled businesses, trusts and charities that received $7.2 billion from the Madoff Ponzi scheme, according to the bankruptcy trustee’s complaint.

Through William Zabel, Picower issued statements and court filings denying the allegations.

“Rather than recognizing Mr. Picower and the other Defendants as victims of Madoff’s fraud, the Trustee instead casts them as villains in history’s largest Ponzi scheme,” a July court filing by Zabel said. Madoff had “callously betrayed” Picower’s trust, the filing said.

“Nothing could be further from the truth,” the Baker & Hostetler lawyers countered in a Sept. 30 court filing. “Many investors were damaged by the [Madoff] fraud, but Picower was not one of them. Based upon the Trustee’s investigation to date, Picower was instead the biggest beneficiary of Madoff’s scheme.”

“We will pursue the litigation with the same vigor irrespective of Mr. Picower’s passing,” David Sheehan, a Baker & Hostetler attorney working with Picard, said in a statement to the Wall Street Journal on Sunday. Jerry Reisman, an attorney representing about 26 victims, told The Associated Press that Picower’s death means, “We won’t be able to hear from his own words whether he was complicit.”

Rich Zabel did not return a phone call placed two weeks ago seeking comment. A spokeswoman for the SDNY, Rebekah Carmichael, said two weeks ago the office would have no comment. William Zabel is not accused of any wrongdoing, and the elder Zabel said in an interview before Picower’s death that he had no knowledge of any alleged fraud.

‘They’re in a mess’

On Dec. 1, 2008, shortly after Democrat Barack Obama was elected president, Republican-appointee Michael Garcia resigned as the U.S. Attorney in Manhattan. On Dec. 11, Madoff was arrested and charged in a giant Ponzi scheme that collapsed as clients panicked by the financial industry meltdown tried to pull their money out, exposing the $65 billion fraud.

The Madoff case mesmerized the public and came to symbolize, in some part, the idea that rampant greed and fraud on Wall Street had risked plunging the economy into depression.

But for the first nine months of the probe, there was no Senate-confirmed U.S. Attorney in Manhattan to oversee it. (Bharara was confirmed on Aug. 7). And in that time period — during which Madoff pleaded guilty, claiming to have acted alone — the Madoff prosecution seemed, outwardly at least, to be in some disarray.

The signs:

  • The government initially negotiated a bail package, allowing Madoff to remain under house arrest in his luxurious Manhattan apartment. The fact that Madoff wasn’t immediately thrown in the slammer outraged victims.
  • Then, Madoff on Christmas Eve mailed $1 million worth of jewelry to his sons in what victim’s lawyers said was evidence he was trying to distribute frozen assets to his family. The revelation sparked more public outrage, and the government went to court to try to revoke Madoff’s bail, but couldn’t convince the Magistrate Judge Richard Ellis he was a flight risk.
  • On Aug. 10, Madoff accountant Frank DiPascali pleaded guilty to 10 felony counts, including conspiracy and tax evasion. He’s apparently a cooperating witness now, and prosecutors pushed hard for his release on bail – but U.S. District Judge Richard J. Sullivan refused the government request.
  • On Aug. 16, Lucinda Franks in The Daily Beast reported that more indictments, possibly of Madoff family members, were expected soon after Labor Day. But Labor Day passed with no indictments. “They’re in a mess over there. They really don’t know what they’re doing,” Franks quoted an “FBI source” about the SDNY prosecutors.

It’s logical that Zabel’s marching orders included getting a handle on the Madoff investigation and fixing the reported “mess.” But a week later, Zabel recused himself from all matters related to the Madoff investigation.

In Madoff’s orbit

While the SDNY won’t discuss Zabel’s recusal, public records show his father had deep ties to Picower and other charities caught up in the Madoff fraud.

In 1989, William Zabel submitted to the Internal Revenue Service the application for tax exemption for the Picower Foundation. View the document here and here. Then, he served for the next 20 years as a trustee of the Picower Foundation while it allegedly reported phantom gains from the Madoff scheme.

The Picower Foundation board was a friends and family affair. There were usually not more than six trustees reported on the foundation’s tax returns – including both Jeffry Picower and his wife, Barbara, who was president of the foundation.

Zabel is also listed in Securities and Exchange Commission records as an administrative contact for Picower’s main investment vehicle, a company called Decisions Incorporated. The SEC records also list a Picower employee named April Freilich as president of Decisions Incorporated.

And Freilich, according to the bankruptcy trustee, worked closely with Bernard L. Madoff Investment Securities to falsify and back-date trading records that reported phantom gains for Picower. (Freilich was not named as a defendant in the civil suit, possibly suggesting that she is a cooperating witness).

The civil complaint describes Freilich’s participation in one alleged fraud involving Picower Foundation accounts:

On May 18, 2007, Freilich indicated the Foundation needed “$20 mil in gains” for January and February and “want[ed] 18% for year[] 07 appreciation,” but that she had to check the numbers “with Jeff.” On information and belief, “Jeff” is Defendant Jeffry Picower. Five days later, on May 23, Freilich told BLMIS that the numbers she had provided earlier were wrong, and the Foundation “needs only $12.3 mil [in gains] for” January and February 2007

Accordingly, the Picower Foundation’s May 2007 statement reflected millions of dollars in securities transactions for the months of January and February 2007 that collectively resulted in a purported gain to the account of $12.6 million.

But those transactions had never appeared on the foundation’s January or February 2007 statements, the complaint says. The result was an apparent $54.6 million increase in Picower Foundation assets, to $765.9 million in May 2007 “because the May 2007 statement was (and subsequent statements were) based on an entirely different account history: one in which various trades had taken place more than 15 months earlier, resulting in entirely different positions and values,” the complaint says.

(Click here to see an example of one of the allegedly fradulent “portfolio appraisals” the Picower Foundation filed to the IRS with its tax return).

The complaint adds:

The mysterious appearance of securities transactions months after the purported trades settled … was not credible and would have raised questions by an account holder who was not complicit in the manipulation.

Zabel said in an interview he did not set up Decisions Incorporated. He said he is likely listed in SEC records as the company’s administrative contact because he was Picower’s “personal lawyer.” But he said Picower had other lawyers who handled his corporate matters.

“I am his personal lawyer for his personal matters and foundations matters,” Zabel said, speaking before Picower’s death.

But Zabel, through his work for Picower, was in Madoff’s close orbit. The trustee’s complaint said “Picower has been closely associated with Madoff on both a business and social level for the last 30 years.”

Zabel, Madoff and Picower served together on the board of the Picower Institute for Medical Research, which closed in 2002 after I published this story in the St. Petersburg Times questioning whether money from Picower’s charitable entities had been used to help him gain personal control of a pharmaceutical company. See a copy of the Picower Institute board membership here.

(Zabel said the IRS investigated and cleared the Picower Foundation in the matter.)

‘In Pursuit of Justice’

William Zabel is the trustee and legal advisor for another charity caught up in the Madoff fraud. Last Dec. 15, the JEHT Foundation – a major funder of liberal causes, especially involving reform of the juvenile justice system and human rights — announced it would close its doors. Its founders’ money had been managed by Madoff, and they had lost everything.

William Zabel (left) and his son, Richard Zabel, at Human Rights First's 30th anniversary dinner last year. (Human Rights First)

William Zabel (left) and his son, Richard Zabel, at Human Rights First's 30th anniversary dinner last year. (Human Rights First)

The JEHT Foundation was run by Jeanne Levy-Church, whose father – a New York real estate magnate named Norman Levy – had been Madoff’s close friend. Norman Levy died in 2005, and Madoff became the executor of his estate, according to Vanity Fair magazine.

Public records show that after Levy’s death, $217 million from a Levy trust was donated to The Betty and Norman F. Levy Foundation, whose money was managed by Madoff. The Levy Foundation, in turn, donated heavily to the JEHT Foundation, for which Zabel served as a trustee.

The JEHT Foundation is not accused of any fraud. But it – along with the Picower Foundation – made contributions that totaled about 10 percent of the annual budget of an advocacy group called Human Rights First, whose board director is William Zabel.

Human Rights First also published a report last year co-authored by Rich Zabel called “In Pursuit of Justice, Prosecuting Terrorism Cases in the Federal Courts.”

The report, widely cited by news organizations and other non-profit groups, helped burnish Rich Zabel’s national security credentials after a decade in private practice.

In May 2008, Rich Zabel and his co-author held a news conference at the National Press Club in Washington to discuss the report’s findings. And last November, William and Rich Zabel appeared on stage at Human Rights First’s 30th anniversary celebration in New York to discuss the report. The gala dinner was hosted by actress Sigourney Weaver and featured entertainment from country-folk star Mary Chapin Carpenter.

Monday, October 19th, 2009

The U.S. Attorney for Southern District of New York filled several top leadership positions within the office’s criminal division, including co-chiefs of a newly created Complex Frauds Unit, the Manhattan-based office announced today.

Preet Bharara (DOJ)

Preet Bharara (DOJ)

Preet Bharara also named heads of the Securities and Commodities Fraud Task Force, General Crimes Unit, International Narcotics Trafficking Unit, and Organized Crime Unit. The new Complex Frauds Unit was established to investigate large-scale frauds and cyber crimes.

More biographical info on the new chiefs can be found here.

They are:

Anirudh Bansal:

-New Post: Complex Frauds Unit co-chief

-Previous Post: International Narcotics Trafficking Unit chief

Jonathan Kolodner:

-New Post: Complex Frauds Unit co-chief

-Previous Post: Criminal division acting deputy chief and Organized Crime Unit acting deputy chief

Christopher L. Garcia:

-New Post: Securities and Commodities Fraud Task Force deputy chief

-Old Post: Securities and Commodities Fraud Task Force prosecutor

Anjan Sahni:

-New Post: International Narcotics Trafficking Unit chief

-Old Post: International Narcotics Trafficking Unit deputy chief

Jocelyn E. Strauber:

-New Post: International Narcotics Trafficking Unit deputy chief

-Old Post: International Narcotics Trafficking Unit prosecutor

Jennifer G. Rodgers:

-New Post: Organized Crime Unit deputy chief

-Old Post: General Crimes Unit chief

Joan M. Loughnane:

-New Post: General Crimes Unit co-chief

-Old Post: Securities and Commodities Fraud Task Force and violent crimes unit prosecutor

Stephen J. Ritchin:

-New Post: General Crimes Unit co-chief

-Old Post: Major Crimes Unit chief

More biographical info on the new chiefs can be found here.

The office’s criminal division is led by Richard B. Zabel, who recently recused himself from the Bernie Madoff financial fraud investigation because his father, William D. Zabel, represents a potential prosecution target. Read our previous report on Zabel here. Also, read about previous promotions Bharara made here.

Friday, October 9th, 2009

Preet Bharara (DOJ)

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)

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)

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)

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.