Bernard Madoff’s wife Ruth, is featured in this week’s "Asset Search News Roundup".  I explained in my June 27, 2009 post, "Will Ruth Madoff Keep Her Remaining $2.5 Million In Assets?", that Madoff trustee Irving Picard could file a viable lawsuit against Ruth Madoff.  Last week this actually happened, when trustee Picard filed his July 29 complaint in Irving H. Picard v. Ruth Madoff, Adversary Proceeding 09-01391, U.S. Bankruptcy Court for the Southern District of New York. 

The July 29 complaint seeks almost $45 million from Ruth Madoff under the Bankruptcy Code and New York State’s version of the Fraudulent Conveyance Act codified at N.Y. Debt. & Cred. Law §§270-281.   The complaint asserts that Ruth Madoff was involved in fraudulent conveyances / was the wrongful transferee of assets from Bernard Madoff. 

To ultimately determine whether Ruth Madoff was a wrongful transferee, the Court will likely look for "badges of fraud", as explained by "Bernard Madoff & The Badges Of Fraud".  In analyzing any asset transfers to Ruth Madoff, the Court might particularly rely on Salomon v. Kaiser (In re Kaiser), 722 F.2d 1574 (2d Cir. 1983).  According to Kaiser, the following can be badges of fraud in relation to an asset transfer:

(1) the lack or inadequacy of consideration;

(2) the family, friendship or close associate relationship between the parties;

(3) the retention of possession, benefit or use of the property in question;

(4) the financial condition of the party sought to be charged both before and after the transaction in question;

(5) the existence or cumulative effect of a pattern or series of transactions or course of conduct after the incurring of debt, onset of financial difficulties or pendency or threat of suits by creditors; and

(6) the general chronology of the events and transactions under inquiry. (Id.)

Copyright 2009 Fred L. Abrams