Why Irving Picard deserves a Pulitzer

February 11, 2011: 11:43 AM ET

The complaints filed in the Madoff scandal read like a finance potboiler. Is trustee Irving Picard's talent being wasted as a lawyer?

Irving Picard

Irving Picard: Bankruptcy lawyer or brilliant screenwriter?

What is it with all the legal and regulatory documents that read like novels these days? The Financial Crisis Inquiry Report was criticized by many for a lack of new information, but praised by nearly all for its prosaic nature. It's for sale for $29.95 on Amazon and it's already made the New York Times bestseller list.

And now we've got the latest complaints filed by the trustee in the Madoff case against JPMorgan Chase (JPM) and Sterling Equities, the investment vehicle owned by New York Mets honchos Fred Wilpon and Saul Katz. Each contains a rich stew of allegation and innuendo, as well as the kind of details one normally expects in a work of complete fiction. In other words, they make for damn good reading.

You might make the case that the lawyers waxing poetic in the complaints are wasting their talents in the law. But maybe these things just write themselves. As befits a dramatic work, we'll take you through the cast of characters in this riveting drama.

Irving Picard (and his team of legal co-writers) – We haven't had a lawyer capable of whipping up this much of a narrative frenzy since the Starr Report. (Also for sale on Amazon (AMZN).) But Kenneth Starr had a stained blue dress and Linda Tripp to work with, making for some easy plot twists. Picard, a partner at Baker Hostetler, has done more with less, and has already managed to claw back some $10 billion in ill-gotten gains from the Madoff fraud. He is aiming for billions more.

Saul Katz – Had you ever heard of this guy before? I hadn't. He's Fred Wilpon's brother-in-law and, if Picard is to be believed, a genius of ignorance. Katz stands to be the family fall guy in this disaster. Just to be clear about how Picard feels about Katz, let's start with the first two sentences of the nature of the action against him: "There are thousands of victims of Madoff's massive Ponzi scheme. But Saul Katz is not one of them."

And in case you were wondering if Katz and his partner Wilpon knew complicated from simple, consider the list of financial entities that Picard's team managed to compile in which one or both of the two men had some sort of ownership: Mets Limited Partnership, Sterling Mets LP, Sterling Mets Associates I & II, Mets I & II LLC, Mets Partners, Coney Island Baseball, Brooklyn Baseball, Air Sterling LLC, Charles 15 Associates, Brunswick Seven LLC, etc. The list goes on and on. Do these guys meet the threshold of "should have known better that Madoff was too good to be true?" It looks to be so.

Fred Wilpon – In the complaint, he come across just as he looks—like a rich guy who only wants to hear the good news. Poor Fred. The game might be over. That's not to say he doesn't know opportunity when he sees it. Wilpon apparently had his own carry trade going on at Madoff: he used his Madoff accounts as collateral for bank loans which he then reinvested with Madoff under the assumption that the Madoff returns would exceed the interest due on the bank loans. This is smart business, and the kind of thing the big banks have been doing in the wake of the credit crisis, borrowing from the Fed at near-zero interest rates and then turning around and investing the money in Treasury bonds. It may provoke outrage, but you're an idiot if you don't take advantage of it. That's why they call it a free lunch.

JPMorgan Chase – I'm an on-the-record fan of the way JPMorgan Chase CEO Jamie Dimon runs his business. But Christ, the emails in these complaints suggest, at the very least, that there were numerous people all the way through the giant banking organization who would rather maintain a lucrative revenue stream than do the right thing. For shame, people. From Picard et al: "Incredibly, even when it admitted knowing that BLMIS was a likely fraud in October 2008, JPMC still did nothing to stop the fraud….It was Madoff himself who ultimately proclaimed his fraud to the world in December 2008, and the thread of the relationships allowing the fraud to exist and fester began to be revealed as well. JPMC's complicity in Madoff's fraud, however, remained disguised, cloaked in the myth that Madoff acted alone and fooled JPMC. But that is the fable. What follows is the true story."

That's on page 11 of a 121-page filing.

Merrill Lynch — Picard isn't going after Merrill Lynch (BAC) in this case. That's to be expected, as it wasn't involved. But if JPMorgan Chase is guilty of a moral lapse in this whole mess, Merrill is guilty of one once-removed. Read this: "Upon information and belief, Merrill had concerns regarding Madoff as early as 1998. At that time, Merrill flatly refused to deal with BLMIS because of concerns that Madoff's investment advisory business operations were not legitimate. Such concerns were well-known and widespread throughout Merrill. Merrill did not permit its own money to be invested directly or indirectly through BLMIS. Merrill's internal prohibition…was enforced by the highest authorities at Merrill."

Thanks a lot, Merrill. There really is no need to call the cops when you see a massive crime being perpetrated. For that, we present you with the Kitty Genovese award.

Jeffrey and Barbara Picower — It really is quite amazing how rich you can be in this country without being that well known. And how little one can know about said wealth. Forbes estimated Jeffrey Picower's wealth in 2009 at $1 billion. It seems he might have had a tad more. In December, the Trustee settled with the estate of the late Picower for $7.2 billion. Picard is even a generous enough writer to let others hoist themselves on their own petard. In the age-old American tradition of I'm-guilty-means-I'm-innocent, here's what Mrs. Picower said in the press release announcing the settlement: "It is a great tragedy that my husband Jeffrey's sudden and untimely death last fall prevented him from seeing the timely and full restoration of his reputation for honesty, integrity and professional achievement and the resumption of his life's work of caring for others and giving back to society through philanthropy.  He was committed to overcoming the devastation resulting from Bernard Madoff's fraud…and also by continuing the important charitable work that had been the focus of our lives for so many years."

Frank Avellino and Michael Bienes — The beauty of Picard's approach throughout this whole process has been his dual goals of bringing both the hammer of the law down on his targets as well as that of public opinion itself. Consider this excerpt from the complaint against Avellino and Bienes, two of Madoff's earliest "enablers" according to Picard: "Avellino and his wife purchased multi-million-dollar homes in exclusive areas of Manhattan, Nantucket, and Palm Beach, some of which were adorned with valuable artwork from famous artists and sculptors, such as Pablo Picasso and Edgar Degas."

What if he'd owned Giacommettis instead? What then?

Sonja Kohn -- Picard's complaint against Sonja Kohn reads like The DaVinci Code, if someone with talent had written it: "In Sonja Kohn, Madoff found a criminal soul mate, whose greed and dishonest inventiveness equaled his own," said Mr. Picard. "Given the scope of Madoff's Ponzi scheme, the deceptive nature of the defendants, and the deliberately Byzantine structure of the Medici Enterprise, we believe that even more information regarding the full scope of this criminal enterprise will be revealed through discovery."

It's too bad that Picard is past the deadline of filing complaints, as it looks like we've seen all the best ones there are to see. But someone put this guy on the short-list for writing Wall Street III.

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About This Author
Duff McDonald
Duff McDonald
Contributing Editor, Fortune

Duff McDonald is a contributing editor at Fortune. He has also written for New York, Vanity Fair, Condé Nast Portfolio, GQ, WIRED, Time, Newsweek, and others. In 2004, he was the recipient of two Canadian National Magazine Awards -- best business story (gold) and best investigative reporting (silver) -- for "Conrad's Fall" in National Post Business. Last Man Standing, his biography of Jamie Dimon, chairman and CEO of JPMorgan Chase, was published by Simon & Schuster in October 2009. He is also the co-author, with Owen Burke, of The CEO, a satire.

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