Donald Trump’s new national finance chairman and his family pocketed about $3.2 million in fake profit from his mother’s account with convicted con man Bernard Madoff — money that didn’t have to be returned to victims because it was taken out of the Ponzi scheme in time.
Steven Mnuchin, a business associate of Trump’s and also chairman and chief executive officer of the hedge fund Dune Capital Management LP, was sued in 2010 by a trustee seeking to recoup Madoff investors’ losses from customers who’d withdrawn more money from his firm than they put in.
Mnuchin was named to the Republican presidential candidate’s campaign on Thursday. The suit against the hedge fund manager was dropped last year because of time restrictions imposed on the Madoff trustee, Irving Picard, in a ruling that allowed hundreds of customers to keep about $2 billion in stolen money.
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, according to the complaint. Within a few months, they withdrew the cash from her Madoff account. Madoff, a respected financier for decades, was arrested in December 2008. Picard said $3.2 million of the Mnuchin family’s withdrawal was fake profit that belonged to other investors.
“This was one of hundreds of cases that there was a decision on,” Mnuchin said in a phone call on Friday. “There is nothing special about this case.”
Picard dropped the suit after a federal appeals court ruled the trustee couldn’t claw back withdrawals of fake profit that were made more than two years before the fraud collapsed. Picard had been seeking to go back as far as six years. The ruling prevented Picard from recovering as much as $2 billion. In all, thousands of Madoff investors lost $17.5 billion in principal.
The trustee had also sued Steven Mnuchin’s brother Alan, their lawyer William Zabel and trusts associated with the family.
Neither the Mnuchins nor their mother were accused of knowing about Madoff’s fraud, but Picard sued all investors who emerged from the scam as “net winners.” Picard has so far recovered more than $11 billion for victims through such lawsuits, as well as complaints against banks and offshore feeder funds that helped feed the scam.
Calls to a phone number listed for Alan Mnuchin’s company, AGM Partners LLC, didn’t go through. He didn’t immediately return an e-mail seeking comment, sent through a social media account. Steven Mnuchin declined to say who got the $3.2 million.
“I’m not going to comment about who was the beneficiary,” he said. “They are no longer trying to claw back.”
Amanda Remus, a spokeswoman for Picard, declined to comment on the case.
Zabel, an attorney for trusts and estates with Schulte Roth & Zabel LLP in New York, was named in the suit for his role as trustee. Zabel also represented the estate of Jeffry Picower, a longtime Madoff customer whose widow agreed to forfeit $7.2 billion that the investor got from the scam.
Picower, his family and related entities deposited $619.4 million with Madoff beginning in the 1970s and eventually took out $7.8 billion — the vast majority of which was fake profit from securities trades that never took place. Picard sued Picower in May 2009 and later that year the investor had a heart attack and drowned in his swimming pool in Palm Beach, Florida.
Zabel didn’t respond to a phone call requesting comment.
After his appointment by Trump, Mnuchin, a registered Republican, said the campaign would sign a joint fundraising agreement with the Republican National Committee, planning to raise more than $1 billion between Trump’s campaign and the party.
Mnuchin started his career in the early 1980s as a trainee at Salomon Brothers. He went on to spend 17 years at Goldman Sachs Group Inc., becoming head of the mortgage department before becoming the investment bank’s chief information officer in 1999. Mnuchin left Goldman Sachs in 2002 and two years later founded Dune Capital.
The case is Picard v. The estate of Elaine Cooper, 10-05167, U.S. Bankruptcy Court for the Southern District of New York (Manhattan).