Finally, A Good Laugh Out of the Bernie Madoff Ponzi Scheme – Sorry Steven Simkin

The Gods of Irony Make a Fool Out of a Fancy New York Lawyer

The Bernie Madoff Ponzi scheme was and still is a tragedy.  The most severe tragedy of course was not monetary, but the suicide of Mr. Madoff’s son, and one has to feel that no matter what other punishments are doled out to Mr. Madoff, nothing can be worse than his having to live with the knowledge that he is largely responsible for that death.

For many other people the huge monetary loss is almost as tragic.  Many non-profits that invested with Mr. Madoff have been severely damaged.  A number of individuals will have lost almost all of their savings.  The legal vampires will be hovering for years over the victims as they try to recover some of their money and fend off having to give back some of the money they received in the past.

So this Forum has mixed feelings about presenting a story that should make everyone feel a little better, because it means laughing at a victim.  But at least here the victim is deserving of laughter, and in all likelihood his lifestyle will not be that severely affected. 

The story begins with the divorce between Steven Simkin and Laura Blank.  It turns out that this was a fairly amicable divorce and the parties were pretty much in agreement.

After 33 years of marriage, Steven Simkin and Laura Blank divorced in 2006.They decided to split their assets evenly.

And since both were high powered lawyers, they had a nice amount to split.  The two equally divided about $13.5 million in assets.  And guess what Mr. Simkin did.

Mr. Simkin kept most of his assets invested with Mr. Madoff. Ms. Blank took her settlement proceeds in cash.

So being an attorney Mr. Simkin did what every other attorney would have done.

Shortly after the fraud was revealed, Mr. Simkin asked Ms. Blank to revise their divorce deal. She refused, and he sued.

Divorce agreements are typically ironclad, but Mr. Simkin argued that Ms. Blank should be required to turn over millions of dollars she had received in the settlement to compensate him for the losses that he sustained in the Madoff fraud.

A trial judge dismissed Mr. Simkin’s suit, but in January 2011, a divided New York appellate court ruled that Mr. Simkin could sue to seek a revision of their settlement because of the Madoff fraud.

The case has gone to the state’s highest court and this is the decision.

The New York Court of Appeals rejected Mr. Simkin’s argument that he and Ms. Blank had made a “mutual mistake” about the existence of a Madoff account.

The doctrine of “mutual mistake” is a well-established legal doctrine allowing for the cancellation of contracts when both parties are innocently mistaken about a crucial element.

Mr. Simkin argued that the Madoff account did not exist because it had been nothing more than part of a giant Ponzi scheme — and should not have been counted as part of the marital assets.

The court did not agree. Judge Graffeo said that the Madoff account did exist because Mr. Simkin could have redeemed his investment at least until December 2008, when Mr. Madoff turned himself in.

“This situation, however sympathetic, is more akin to a martial asset that unexpectedly loses value after dissolution of a marriage,” she wrote. “The asset had value at the time of the settlement but the purported value did not remain consistent.”

So sorry Mr. Simkin.  You thought you were being clever by taking the Madoff account because he had done so well in investing and you were going to make a whole lot more money than your former spouse.  And then you thought, hey, even though you made a final and lasting agreement, you would just open it up for another round of negotiations just because it didn’t turn out so well for you.

Welcome to Law 101 Mr. Simkin, where an agreement is an agreement. It is easy to understand that you, being a very successful lawyer did not understand that concept.