Lifting the Lid-Some Madoff clients lay low to avoid lawsuits

[Joanne98]

NEW YORK, Jan 23 (Reuters) - Many of Bernard Madoff's oldest clients are shying away from trying to tap into a special reserve fund for defrauded investors, worried that filing a claim could open them to a legal fight seeking the return of their past profits.

These clients are in a unique situation: They actually made money over the years on their Madoff portfolios, often never touching their original investment but slowly getting paid their purported investment gains over time to pay living expenses like their home mortgage or a child's school tuition.

Some had invested with the accused swindler for decades, and for years received distributions that now appear to have been based on fictitious returns.

These investors fear that the court-appointed trustee overseeing Madoff's U.S. operations could seek the return of some of their past profits to compensate others hurt in the purported $50 billion fraud.

How the trustee will deal with their situation is one of the biggest questions among distraught Madoff investors. Lawyers who specialize in investor litigation say Madoff clients are flooding them with calls for advice.

Some lawyers say the best strategy for these investors, at least for now, may be to lay low and not seek financial help from the Securities Investor Protection Corp, which maintains a special reserve fund to help investors and is working with the Madoff firm trustee.

"My advice so far is they should wait until more information is available," said Brian Neville, an attorney at law firm Lax & Neville LLP in New York. "Many of these people are beside themselves with this decision."

http://www.reuters.com/article/fundsFundsNews/idUSN2333239320090123