While the fervor relating to Bernie Madoff’s $50 Billion Ponzi scheme has subsided significantly since his sentencing in June 2009, the fallout caused by this scandal can still be witnessed nearly 3 years later in the realm of matrimonial law and business/asset valuation. Such can be evidenced in the matter of Simkin v. Blank (NY Court of Appeals – April 3, 2012).
In June 2006, as part of their divorce proceedings, Steve Simkin and Laura Blank agreed to equally split the $5.4 million they had jointly invested in Madoff Securities in which Mr. Simkin gave Ms. Blank a $2.7 million check. Subsequently, in December 2008, Bernie Madoff was arrested on charges of running a Ponzi scheme. Mr. Simkin, along with myriad other investors, soon came to learn that the totality of their investments were essentially worthless.
In the appeal, Mr. Simkin argued for a reformation of the settlement relating to the division of the Madoff account and claimed that the division of said account was not equitable because of a mutual mistake in the belief that the account existed when in fact, it never had.
The Court of Appeals denied the husband’s appeal of the Appellate Court’s decision on the basis that, after the June 2006 settlement agreement, the husband was still able to redeem the funds in his Madoff account. It was not only until the scheme was publicized more than two years later that the account was deemed ‘nonexistent’. This is not so much, the Court of Appeal states, evidence of mutual mistake as it is a marital asset that unexpectedly loses value AFTER dissolution of the marriage. The asset, undoubtedly, had value at time of settlement for over two years and had the account increased in significant value during that time, the wife would not have been entitled to claim a portion of the enhanced value either.
Furthermore, the Court’s decision to deny appeal reaffirmed the precedents set by Appellate Divisions denying a spouse’s attempts to reopen settlement agreements based on post-divorce changes in asset valuation.