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Family sues for return of US$10m

By Christopher Scinta | January 5, 2009, Monday | Print Edition

JUST six days before he was charged with running a US$50 billion Ponzi scheme, Bernard Madoff allegedly agreed to invest US$10 million for a family that had turned an ice delivery business into one of the largest independent heating oil distributors in New York City.

Rosenman Family LLC, managed by Martin Rosenman, president of Bronx-based Stuyvesant Fuel Service Corp, sued Irving Picard, the trustee appointed to supervise the unwinding of Madoff's business. He is seeking a ruling that Picard has no claim to the US$10 million. Rosenman, who hadn't previously invested with Bernard L. Madoff Investment Securities LLC, said he spoke by phone with Madoff on December 3 about investing the money, according to a complaint filed on New Year's Day in bankruptcy court in Manhattan.

''Madoff stated that the fund was closed until January 1, 2009, but that Mr Rosenman could wire money'' before that date into a Madoff account, ''where it would be held until the fund opened after the new year,'' according to the complaint. Rosenman's lawyers said Madoff was recommended as ''safe and reliable.''

Madoff's firm collapsed last month after he told his sons it was a fraud, according to a criminal complaint by the FBI. The firm is liquidating under the Securities Investor Protection Corp, whose funds cover securities and cash claims of as much as US$500,000 per customer, including as much as US$100,000 in cash, Bloomberg News said.

Stuyvesant, acquired by Hess Corp last year, was launched in 1934 by Rosenman's grandfather as an ice delivery firm and evolved into a coal supplier. The company owns a 22-million-gallon, deep-water oil terminal in the Bronx and a natural gas business called Stuyvesant Energy.

Money transfer

Unlike the midtown Manhattan skyscraper housing Madoff Securities, Stuyvesant's headquarters on Southern Boulevard in the Bronx is located among a mixture of bleak apartment blocks, delis and storefront churches. A two-story, brick building painted red with no windows, Stuyvesant takes up a third of a city block and is situated between the Cathedral of Deliverance and the Citizens Advice Bureau. A woman who answered the intercom at the building's entrance, a black-painted metal door, said Rosenman wasn't there on Friday and repeatedly declined further comment.

In his lawsuit, Rosenman said he received a fax from Madoff Securities employee Jodi Crupi on December 5 instructing him to transfer the US$10 million to a JPMorgan Chase & Co account, which he did.

Four days later, Rosenman received a confirmation from Madoff Securities telling him he'd sold short US$10 million in United States Treasury bills, a transaction he ''never authorized,'' according to the court filing.

''The confirmation contains a CUSIP number (an identification number) for the transaction,'' Rosenman said in his complaint. ''Multiple electronic searches for securities under this number have shown that it does not exist. In other words, BMIS never transacted a trade of US Treasury bills'' on Rosenman's behalf, according to the suit.

Rosenman declined to comment, said attorney David Yeger of New York-based Wachtel & Masyr.

The day after Rosenman allegedly received the trade confirmation, Madoff revealed the fraud to his sons, saying no more than US$300 million was left in his accounts, according to the FBI. The next day, Madoff, 70, was arrested and charged by federal prosecutors with one count of securities fraud. He faces as much as 10 years in prison and a US$5 million fine if convicted.

Picard said the US$10 million claimed by Rosenman is property of the firm's estate, court papers say.

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