RICO; CONSTRUCTIVE TRUST; INNOCENT SPOUSE RULE; DIVORCE; GROUNDS FOR DIVORCE
I was just over on Bloomberg and read an interesting article by Susan Antilla which she wrote yesterday about Ruth Madoff’s post-Bernie options. One option according to some lawyers Ms. Antilla interviewed, is for Ruth to divorce Bernie. Then she would have to show that the asset to be divvied up in “equitable distribution” is “clean.” Antilla writes:
Key for the ethically challenged executive is to stash the money before breaking the law so it’s not a “dirty” asset.
That is exactly what I was getting at when I was brainstorming about Deborah and Andrew Madoff back in December when I wrote this post called “Deborah Madoff’s post-divorce career prospects” http://www.divorcesaloon.com/deborah-madoffs-post-divorce-career-prospects where I similarly wrote in reference to Deborah Madoff:
So if there is clean money, Deborah may never have to work again if she doesn’t want to. But if the money that Andrew has amassed is “dirty”, she may have to.
Hme. So, my ideas are not as off the wall as I gave myself credit for. That’s good to know…I think Ruth, is going to be in a similar position as Deborah will likely find herself if Andrew is indicted. ( I read over at dealbreaker.com today that that Andrew and Mark are likely to be indicted soon.)
Ruth will have to show that the money she wants to keep and the penthouse too, are “clean” assets and not “dirty” assets. (BTW, since I used the term first back in December, can I flatter myself and take ownership of the term “dirty” assets?)
I definitely agree with Antilla that the Madoffs are going to have to get creative in order for Ruth to get away with keeping those assets.
I don’t know if a divorce would help her, though, as Ms. Antilla advocates in her article. First of all, in New York, Ruth will need to prove grounds. What is she going to allege? That Bernie constructively abandoned her? I mean, criminal wrongdoing is not a grounds for divorce in New York. So she could come up against a road block here. Unless Bernie will sign a waiver, I don’t think she has grounds. (Chances are Bernie will sign the waiver, unless they have had a breakdown in the marriage and have turned on each other.) But even assuming she has grounds, I think Ruth would look like a complete idiot to go in front of a divorce judge and ask for equitable distribution of assets which are frozen and which have been acquired by fraud. In other words, I don’t see what difference it makes if she is divorced. The bottom line is, if those assets are “dirty,” and were a product of the fraud, divorced or married, Ruth can’t get her paws on them. RICO (the racketeering statute we discussed in this post http://www.divorcesaloon.com/dear-ruth-madoff-did-you-make-these-mistakes-in-your-first-marriage) will be the end of those pipe dreams.
Even if the assets in question are “clean” we have to keep in mind that what is Ruth’s is Bernie’s and what is Bernie’s is Ruth’s so long as it was earned during the marriage. Those two have been married since “whappee killed phillip.” (In Jamaican twang that means a really really long time.) So just about everything they owned is marital. But they owe billions to their investors. So the marital debts outweigh the assets. So even if Ruth gets a divorce, I don’t see how that helps her. I think it just makes her look like an idiot who is perpetrating another fraud on the court with a fake divorce, which she will have to perjure herself to obtain.
A better bet would be for Ruth to stay married to Bernie. It makes her look like the faithful wife for one thing. And long suffering. Then she argues that she was like any other investor or employee or whatever and that what she owns was a “salary”…but wait. That is still marital….how does Ruth hold on to that money? CONSTRUCTIVE TRUST. She makes a constructive trust argument against Bernie. She also uses the arguments similar to the INNOCENT SPOUSE RULE in Tax Law/IRS Regs. It is a very novel concept. But I think her wiggle room is in there somewhere. CONSTRUCTIVE TRUST and INNOCENT SPOUSE RULE. And she asks the court to take the money from the brokerage side of the business which I believe was not the side that was the ponzi scheme. Wait…I am not sure about which side was the ponzi. But I read his business had two components. She has to argue CONSTRUCTIVE TRUST but with respect to the side that was not the ponzi.
Will she look like a complete idiot anyway? Maybe. But I think less of an idiot than going in there and telling the judge she wants a divorce and that she wants equitable distribution to the tune of $70 million dollars.
Yea. I think Antilla/Bloomberg and her sources are wrong on that one. You hear me Ruth? Listen to Johnny Cochran over here: CONSTRUCTIVE TRUST. You got that? That is what gets you out of this hell hole. Not a divorce.
More Ruth posts here: http://www.divorcesaloon.com/index.php?s=RUTH+MADOFF