Bernard Madoff $50 Billion Ponzi Scheme

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Some Madoff victims also lost big in KL scam
By ALEXANDRA CLOUGH

Palm Beach Post Staff Writer

Monday, January 12, 2009

The Bernard Madoff debacle has claimed some of the same investors who were defrauded in the 2005 KL Financial hedge fund scandal, said Miami attorney David Rosemberg.

He should know: Rosemberg was the attorney for Guy Lewis, the Miami court-appointed receiver assigned to sort through the KL wreckage that claimed the fortunes of many Palm Beach residents. The West Palm Beach hedge fund, led by principals John B. Kim, Yung B. Kim and Won S. Lee, lost or stole $194 million in investor money. Among the investors: Nine West shoes co-founder Jerome Fisher. He is rumored to have lost $15 million with KL, a pittance to the $150 million he reportedly lost with Madoff.

At the time, the KL fraud was the largest financial scam in Palm Beach County history. In retrospect, those were the good old days.

Rosemberg, now an attorney at Broad & Cassel in Miami, said the staggering $50 billion fraud perpetrated by Bernard L. Madoff Securities in New Yorkis a complex affair to unravel. A court-appointed receiver and forensic accountants now are combing through records, Rosemberg said, trying to find assets for burned investors.

Several Madoff investors are former KL victims, Rosemberg said. In addition, Rosemberg has talked to a number of Madoff investors from Jewish communities in Brazil, Mexico, Venezuela and other Latin American countries. Madoff, a member of the mostly Jewish Palm Beach Country Club on Palm Beach, drew a number of his investors from the Jewish community.

But will investors ever see most of their money again? If you consider the KL scandal, chances are dim.

In the months following the disclosure of the KL scam, more than 150 claims were filed with the receiver. In the end, only $6.5 million was recovered, mostly through the sale of the principals' assets, according to a final report issued by the receiver in December.

Even though the $6.5 million is but a fraction of the losses, Rosemberg called it a good recovery, given the difficulty in tracking down assets from third parties.

However, it's going to take more a lot more than a few baubles and some luxury cars to help restore the fortunes of Madoff's victims. Right now, attorneys at Broad & Cassel and other law firms hope to recover from third party "feeder" funds that steered clients' money to Madoff, Rosemberg said. Investor claims will be stronger if the funds failed to provide written disclosure to customers that they were investing money with Madoff, he said.

A final note: Among those filing claims to recover money from the court-appointed receiver in the KL scandal was trusts and estates lawyer Ronald Kochman of West Palm Beach.

Kochmansteered clients to KL, but didn't tell them he was a KL principal and received commissions totaling $487,800 for doing so, according to the receiver's report. Kochman has claimed he didn't know about the scam and lost his family fortune. He was not charged in the case and he returned the $487,800 in commissions.

But when Kochman, his wife and kids submitted a claim for $3,268,407 in KL losses, the receiver denied Kochman's claim because he was a KL insider, the report said. "There was no way, absent a court order, we were going to allow Ron Kochman to get a penny out of this thing. He had the gumption to submit a claim, and he tried to press it, but it was denied 100 percent," said Michael Tein, the current attorney for the receiver. Ajoint account with Ron and Debra Kochman for $2.5 million, plus a retirement account for $185,000, were denied, Tein said.

The receiver did show mercy to Kochman's family after they proved that money invested in KL did not come from Ron but from gifts, bar mitzvahs and savings. Tein said Kochman's wife and two of his children received $6,933 despite claiming losses of $305,000. Robert Critton, a Kochman lawyer, had a different number, saying they received about $9,000.

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