Donald Trump's new national finance chairman was sued in 2010 for the return of $US3.2 million ($4.3 million) in fake profit from his mother's account with Bernard Madoff, the mastermind of a $US17.5 billion Ponzi scheme.
The lawsuit was dropped last year because of time restrictions imposed on a trustee seeking to recoup investors' losses from customers who inadvertently profited by withdrawing more money than they put in.
Steven Mnuchin, a business associate of Trump's and also chairman and chief executive officer of Dune Capital Management, was named to the Republican presidential candidate's campaign on Thursday. Mnuchin was linked to Madoff through the estate of his late mother, whose roughly $US2 million investment with the financier more than doubled to $US5.2 million.
When Mnuchin's mother, Elaine Cooper, died in February 2005, he and his brother Alan Mnuchin were named as beneficiaries and executors of her estate. Within a few months, $US5.2 million was withdrawn from her account at Bernard L. Madoff Securities. Three years later, in December 2008, Madoff was arrested. Picard said $US3.2 million of that was fake profit that Madoff had stolen from others.
"It was my mother's estate and I was merely the executor," Mnuchin said in a phone call. "I was not involved in it whatsoever. It's long over and I had nothing to do with it."
Madoff, a former chair of the Nasdaq Stock Market, operated the largest Ponzi scheme that has ever been uncovered. It collapsed in December 2008 after he told senior employees at his firm "it's all just one big lie" and turned himself in to the Federal Bureau of Investigation.
Madoff pleaded guilty in 2009 of defrauding thousands of investors and is serving a 150-year prison sentence. Investors lost $US17.5 billion in principal.
Suits dropped
Irving Picard, the trustee who sued seeking to refund thousands of victims of the fraud, dropped the case against Mnuchin after a court ruling forced him to forfeit hundreds of such suits because the bogus withdrawals were made more than two years before the fraud collapsed.
Picard had also sued Steven Mnuchin's brother Alan, their lawyer William Zabel and trusts associated with the family.
Neither Mnuchin nor his mother were accused of knowing about Madoff's fraud, but Picard sued all investors who withdrew more money than they put in. Picard has so far recovered more than $US11 billion for victims through such lawsuits, as well as complaints against banks and offshore feeder funds that helped feed the scam.
Steven Mnuchin declined to say who got the $US3.2 million withdrawn from Madoff's accounts.
"I'm not going to comment about who was the beneficiary," he said. "They are no longer trying to claw back."
Zabel, of Schulte Roth & Zabel in New York, was named in the suit for his role as trustee for the Mnuchin trusts. Zabel also represented the estate of Jeffry Picower, a longtime Madoff customer whose widow agreed to forfeit $US7.2 billion that the investor got from the con man's scam.
Zabel didn't respond to a phone call requesting comment, made after regular business hours.
Bloomberg
