Salem, MA – Businessman and philanthropist Robert Lappin said he plans to fight a lawsuit filed against him by the trustee in the Bernard Madoff Ponzi scheme.
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Bankruptcy trustee Irving Picard filed a complaint in federal court earlier this month seeking $1.8 million from the Shetland Fund Limited Partnership, which was headed by the 88-year-old Lappin.
In a complicated legal case, Lappin now finds himself one of more than 1,000 Madoff investors being targeted as so-called “net winners” — individuals or entities who withdrew more from their accounts with Madoff over the years than they deposited.
This is a dramatic turnabout for Lappin, one of the victims of the convicted swindler. A North Shore charity he founded that sends Jewish teenagers to Israel and a pension fund for employees at his Salem office park were wiped out in the scandal.
Now, in this so-called “clawback” complaint, Lappin is being charged with earning “other people’s money” from his personal Madoff investments.
“Mr. Picard is claiming that the Shetland Fund was a net winner — I don’t agree with that,” Lappin said during a telephone interview yesterday from his winter residence in Florida. “We’re a net loser, so we are contesting that.”
Lappin said he has written to Picard and asked him to drop the charges.
“I won’t say that I’m optimistic he’s going to do that right off the bat, but I do have, I think, facts and arguments that certainly suggest the complaint is not justified,” he said.
If it goes to court, Lappin said he is “reasonably optimistic that the trustee will not prevail.”
Lappin, the owner of Shetland Properties, the large business and industrial park on the waterfront, is one of hundreds of investors victimized by Madoff, who is currently serving a 150-year federal prison sentence.
The Robert I. Lappin Charitable Foundation, which had $8 million invested with Madoff, was wiped out. The largest Jewish charity on the North Shore got back on its feet when the community responded with donations.
The Shetland Properties employees 401(k) fund also lost all of its assets, estimated at more than $10 million. Lappin repaid $5.1 million, the amount necessary to cover the pension losses of all his employees at the office park and charity.
In addition, Lappin said he lost more than $20 million of his personal fortune. The Shetland Fund Limited Partnership, he said, was wiped out and has been dissolved.
By filing the complaints, Picard is not necessarily alleging wrongdoing. Most Madoff investors targeted in the clawback lawsuits likely withdrew funds unknowingly since Madoff sent them fabricated account statements showing large gains.
But the trustee is still attempting to recover funds on behalf of “net losers,” or investors who put more money into their accounts than they withdrew.
An oddity in this complex legal case is that Lappin’s charity and employee pension fund could recover funds, while he could be asked to pay money back.
Thus far, Picard has recouped about $10 billion for Madoff investors, who claim they lost nearly twice that amount.
The largest repayment was the $7.2 billion settlement earlier this month with the estate of philanthropist Jeffry Picower. The trustee also recouped $625 million from Boston philanthropist Carl Shapiro and $45 million from the Jewish women’s organization Hadassah.
While unhappy he is being targeted, Lappin said he is encouraged Picard is recovering funds and hopes it may benefit the charity and employees’ pension fund.
“I’m glad that he’s had remarkable success in recouping money,” Lappin said. “That suggests that, at least in two of my accounts, there may be some recovery. But … I don’t think anybody, at this point, can say what that will be, or if it will be. But it’s kind of a ray of hope.”
The Swampscott resident learned he was the target of a complaint while on vacation in Florida.
“It really did take me by surprise,” he said. “I actually learned about it from an acquaintance who is also being clawed back …”
The past two years has been a roller-coaster ride for Lappin, who has learned to keep his eye on the horizon.
“I’ve kind of become, I won’t say immune to the shock, but once I made the restoration to the employees’ (pension fund) a great weight was lifted. It is not nearly as stressful as it might have been otherwise.”