The community at large has been severely affected by ponzi schemes whether it has been with Madoff Securities or one which recently hit the press aimed specifically to the local Orthodox community. How does this effect settlements that were negotiated, prior to the realization that these accounts in fact have no value. One who has divided the assets with ones spouse maintaining the account (which was later found to be valueless) and the other spouse receiving in liquid funds or trade off of some other asset of value. A law suit has been filed in New York County; Steven Simkin, a partner in a large New York law firm, entered in a divorce settlement with his wife of thirty years in which they divided all their marital assets. Included in that assets division was an investment of 5.4 million dollars with Bernie Madoff of which Mr. Simkin paid his wife 2.7 million dollars in cash for the value of the account. The agreement was executed on June 27, 2006. A time period before the revelation that in fact Madoff's investments were in fact a ponzi scheme. In February, 2009 Mr. Simkin instituted an action against his ex-wife to recover the amount paid to her for her share of that account. This raises an interesting question of law. Can one go back after an agreement was executed, based on new found evidence to renegotiate or recover assets thought to be in existence?
The case is pending, and one in which this column will keep you updated on when a decision will be rendered.
The issues to be reviewed are: Did Mr. Simkin have reason to know, despite the fact that statements were issued as to the balance of the account, that the returns were not in the realm of reality and in sync with normal rate of returns? Did Mr. Simkin or his attorney have a duty beyond verifying the statement balance that the account and funds were in liquid or able to become liquid prior to the execution of the agreement?
Justice Rigler said that Mr. Schaeffer had manipulated events to place his wife in the position of having to submit to the rabbinical court's authority and dismiss her divorce proceedings in New York.
This case before the court will have far reaching effects, as many people, especially in recent times having been effected by numerous schemes, where people have been left with assets that do not in fact exist. Thus accounts that individuals divided as part of their marital agreements, years later they may find (after much publicity) that these accounts in fact not existent. Unfortunately, an occurrence that has become a regular news item. An obvious danger, always lies in the fact that the spouse who received the payout, may no longer have funds to recover from as well. This is quit different from stock accounts, that due to market fluctuations many loose their value and one would have no right to seek recoupment.
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Martin E. Friedlander, Esq. is the principal of MARTIN FRIEDLANDER, PC specializing in Matrimonial/Family law.