David J. Sheehan Marc. E. Hirschfield Karin S. Jenson

Transcription

1 Baker & Hostetler LLP Hearing Date: April 3, Rockefeller Plaza Time: 10:00 a.m. New York, NY Telephone: (212) Objection Deadline: March 27, 2012 Facsimile: (212) Time: 4:00 p.m. David J. Sheehan Marc. E. Hirschfield Karin S. Jenson Attorneys for Irving H. Picard, Trustee for the Substantively Consolidated SIPA Liquidation of Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK SECURITIES INVESTOR PROTECTION CORPORATION, v. Plaintiff-Applicant, BERNARD L. MADOFF INVESTMENT SECURITIES LLC, Adv. Pro. No (BRL) SIPA LIQUIDATION (Substantively Consolidated) Defendant. In re: BERNARD L. MADOFF, Debtor. IRVING H. PICARD, Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC, v. Plaintiff, Adv. Pro. No (BRL) THE ESTATE OF DOROTHY BECKER, WILLIAM P. BECKER, individually and in his capacity as co-executor of the ESTATE OF

2 DOROTHY BECKER, DANIEL I. BECKER, individually and in his capacity as co-executor of the ESTATE OF DOROTHY BECKER, and DAVID M. BECKER, individually and in his capacity as co-executor of the ESTATE OF DOROTHY BECKER, Defendants. MOTION FOR ENTRY OF ORDER PURSUANT TO SECTION 105(a) OF THE BANKRUPTCY CODE AND RULES 2002(a)(3) AND 9019(a) OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE APPROVING A SETTLEMENT BY AND BETWEEN THE TRUSTEE, THE ESTATE OF DOROTHY BECKER, AND WILLIAM P. BECKER, DANIEL I. BECKER, AND DAVID M. BECKER, INDIVIDUALLY AND IN THEIR CAPACITIES AS CO-EXECUTORS OF THE ESTATE OF DOROTHY BECKER TO: THE HONORABLE BURTON R. LIFLAND UNITED STATES BANKRUPTCY JUDGE Irving H. Picard (the Trustee ), as trustee for the substantively consolidated liquidation of Bernard L. Madoff Investment Securities LLC ( BLMIS ) and Bernard L. Madoff ( Madoff, and together with BLMIS, the Debtors ), by and through the Trustee s undersigned counsel, submits this motion (the Motion ) seeking entry of an order, pursuant to section 105(a) of title 11, United States Code, 11 U.S.C. 101 et seq. (the Bankruptcy Code ) and Rules 2002(a)(3) and 9019(a) of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ), approving a settlement, the terms and conditions of which are set forth in the Settlement Agreement (the Agreement ) 1 by and among the Trustee, the Estate of Dorothy Becker (the Probate Estate ), and William P. Becker, Daniel I. Becker, and David M. Becker individually and in their capacities as Co-Executors of the Probate Estate (the Executor-Beneficiaries ). Each of the Trustee, the Probate Estate, and the Executor-Beneficiaries is referred to herein as a Party and 2

3 collectively as the Parties. In support of the Motion, the Trustee respectfully represents as follows: PRELIMINARY STATEMENT The Probate Estate was a Massachusetts probate estate. The Probate Estate s assets were entirely distributed on or before September 15, 2006, at which time the Probate Estate was closed and the Co-Executors the Executor-Beneficiaries herein were discharged by the Probate Court from their duties and any liability regarding their administration of the Probate Estate. Under the Agreement, the Executor-Beneficiaries will pay the Trustee a settlement payment in the aggregate sum of $556,017 ( Settlement Payment ). This settlement represents a good faith, complete, and total settlement between the Parties as to any and all disputes between them raised in the Adversary Proceeding. The settlement will benefit the Fund of Customer Property, and the Trustee respectfully requests that the Court approve it. SUMMARY OF PERTINENT FACTS 1. Prior to her death on June 27, 2004, Dorothy Becker held a BLMIS account, denominated account number 1B0120, in her own name (the Dorothy Becker BLMIS Account ). Upon Ms. Becker s death, her estate was probated in the Commonwealth of Massachusetts Trial Court, Probate and Family Court Department, Berkshire Division (the Probate Court ). Ms. Becker s three sons, the Executor-Beneficiaries, were appointed Co- Executors of the Probate Estate. Ms. Becker s Last Will and Testament granted each of the Executor-Beneficiaries equal shares of the residue of her Probate Estate. 2. On or about December 10, 2004, at the request of Co-Executor William Becker, BLMIS opened a new account in the name of Estate of Dorothy Becker c/o William P Becker, 1 The form of Agreement is annexed hereto as Exhibit A. 3

4 Executor under the Probate Estate s tax payer identification number, which BLMIS denominated account number 1B0270 (the Probate Estate s BLMIS Account ). 3. Between December 10, 2004 and January 12, 2005, the balance of the Dorothy Becker BLMIS Account was transferred into the Probate Estate s BLMIS Account. 4. On February, 10, 2005, BLMIS wired $2,042, from the Probate Estate s BLMIS account into a Smith Barney account held by the Probate Estate (the Smith Barney Account ), where the BLMIS funds were commingled with other Probate Estate funds. 5. On April 14, 2005, the Probate Estate made its first residual distribution to the Executor-Beneficiaries. 6. On September 15, 2006, the Probate Court entered a final decree allowing the First and Final Account of the Co-Executors of the Probate Estate, which formally closed the Probate Estate and discharged the Co-Executors. 7. On December 1, 2010, the Trustee commenced this Adversary Proceeding against the Probate Estate and Executor-Beneficiaries. The Adversary Proceeding seeks to avoid and recover fraudulent transfers of BLMIS funds made to the Probate Estate and the Executor- Beneficiaries, both in their capacities as Co-Executors of the Probate Estate and in their individual capacities as beneficiaries of residual distributions from the Probate Estate. BACKGROUND AND RELEVANT PROCEDURAL HISTORY 8. On December 11, 2008 (the Filing Date ), the Securities and Exchange Commission ( SEC ) filed a complaint in the United States District Court for the Southern District of New York (the District Court ) against the Debtors (Case No. 08 CV 10791). The complaint alleged that the Debtors engaged in fraud through the investment advisor activities of BLMIS. 4

5 9. On December 15, 2008, pursuant to section 78eee(a)(4)(A) of SIPA, the SEC consented to a combination of its own action with an application of the Securities Investor Protection Corporation ( SIPC ). Thereafter, pursuant to section 78eee(a)(3) of SIPA, SIPC filed an application in the District Court alleging, inter alia, that BLMIS was not able to meet its obligations to securities customers as they came due and, accordingly, its customers needed the protection afforded by SIPA. 10. On that date, the District Court entered the Protective Decree, to which BLMIS consented, and which, in pertinent part: (i) appointed the Trustee for the liquidation of the business of BLMIS pursuant to section 78eee(b)(3) of SIPA; (ii) appointed Baker & Hostetler LLP as counsel to the Trustee pursuant to section 78eee(b)(3) of SIPA; and (iii) removed the case to this Court pursuant to section 78eee(b)(4) of SIPA. 11. At a plea hearing (the Plea Hearing ) on March 12, 2009, in the criminal action filed against him by the United States Attorney s Office for the Southern District of New York, Madoff pleaded guilty to an 11-count criminal information, which included securities fraud, money laundering, theft and embezzlement counts. At the Plea Hearing, Madoff admitted that he operated a Ponzi scheme through the investment advisory side of [BLMIS]. (Plea Hr g Tr. at 23:14-17). On June 29, 2009, Madoff was sentenced to a term of imprisonment of 150 years. 12. On April 13, 2009, an involuntary bankruptcy petition was filed against Madoff. On June 9, 2009, this Court entered an order substantively consolidating the chapter 7 estate of Madoff with the BLMIS SIPA liquidation proceeding. 5

6 THE TRUSTEE S CLAIMS AGAINST THE PROBATE ESTATE AND EXECUTOR- BENEFICIARIES 13. The Probate Estate was a customer of BLMIS and maintained a direct customer Account 1B0270, (as previously defined, the Probate Estate s BLMIS Account ). The Probate Estate s BLMIS Account was the successor account to Account 1B0120 in the name of Dorothy Becker. The Probate Estate withdrew $2,044,494 from the Probate Estate s BLMIS Account in the six years prior to December 11, Of those withdrawals, $1,544,494 (the Six-Year Transfers ) represent fictitious profits, meaning that the Probate Estate withdrew $1,544,494 more than was ever invested in the Probate Estate s Account or the predecessor account held by Ms. Becker. 14. On or about December 1, 2010, the Trustee commenced Adversary Proceeding (BRL) against the Probate Estate and the Executor-Beneficiaries (the Adversary Proceeding ). In the Adversary Proceeding, the Trustee asserts that the Probate Estate and Executor-Beneficiaries are liable to the BLMIS estate under sections 544, 550, and 551 of the Bankruptcy Code, SIPA 78fff-2(c)(3), and the New York Fraudulent Conveyance Act (New York Debtor and Creditor Law ( NY DCL ) ). 15. The Adversary Proceeding seeks to avoid and recover all of the Six-Year Transfers, or their value, from the Probate Estate and Executor-Beneficiaries in an aggregate amount totaling $1,544, The Trustee seeks recovery from the Probate Estate and the Executor- Beneficiaries, in their capacities as Co-Executors of the Probate Estate, as initial transferees under section 550(a)(1) of the Bankruptcy Code. The Trustee also seeks recovery from the Executor-Beneficiaries as immediate or mediate transferees of the Probate Estate under section 550(a)(2) in their individual capacities as beneficiaries of the Probate Estate. 6

7 SETTLEMENT DISCUSSIONS AND TRUSTEE S INVESTIGATION 17. Since mid 2011, the Executor-Beneficiaries and the Trustee have engaged in good-faith discussions aimed at resolving the Trustee s claims alleged in the Adversary Proceeding. 18. During the long period of negotiations, the Trustee has conducted diligence with respect to the claims asserted in the Adversary Proceeding. Defendants have cooperated with the Trustee and facilitated the investigation by providing information the Trustee requested. This investigation included, but was not limited to: the review and analysis of the Probate Estate s BLMIS-related transactional histories as reflected in the BLMIS account statements, correspondence and other records and documents available to the Trustee; and a review of the Probate Estate s bank, brokerage, and tax records, which show the distributions from the Probate Estate as well as the final distribution of the remaining assets of the Probate Estate, and the final accounting of the Probate Estate in the Probate Court. 19. Additionally, the Trustee has conducted diligence with respect to Massachusetts probate laws as they pertain to actions against closed and fully distributed and accounted-for estates and the discharged executors thereof, and the potential defenses to the Adversary Proceeding of the Executor-Beneficiaries relating thereto. 20. As a result of the Trustee s investigation and the Parties successful negotiations, and after thorough and deliberate consideration of the uncertainty, costs and risks inherent in all litigation, as well as the cooperation that the Executor-Beneficiaries have provided to the Trustee, as set forth in the Agreement, the Trustee, in the exercise of his business judgment, has determined that it is appropriate to reach a business resolution in this matter rather than continue the litigation. 7

8 21. The Agreement represents a good faith, complete, and total settlement between the Parties as to any and all disputes raised in the Adversary Proceeding on the terms and conditions as set forth in the Agreement. Under the Agreement, the Executor-Beneficiaries will pay the Trustee the Settlement Payment of $556,017, which amount represents one hundred Percent (100%) of the subsequent transfers received by them The Probate Estate s assets have been entirely distributed since September 15, 2006, at which time the Probate Estate was closed and the Co-Executors were discharged from their duties by the Probate Court. In light of the passage of time, reopening the estate would be a difficult undertaking under Massachusetts law. Under these unique circumstances, the Trustee will face significant challenges in recovering from the Probate Estate or its Co-Executors as initial transferees of BLMIS funds. See 11 U.S.C. 550(a)(1); Mass. Ann. Laws Ch et seq.; Mass. Ann. Laws Ch et seq. 23. Given the unique facts of this case and the applicable Massachusetts probate law, the Trustee believes that the Settlement Payment is above the lowest point in the range of reasonableness. Importantly, the Executor-Beneficiaries are paying one hundred percent (100%) of the subsequent transfers received by them as the Probate Estate beneficiaries. The Agreement will benefit victims of the Madoff Ponzi scheme, as the Settlement Payment will increase the total and percentage allocation to allowed claims of customers from the Fund of Customer Property. OVERVIEW OF THE AGREEMENT 24. The Trustee believes that the Agreement is in the best interests of the BLMIS estate and will benefit the fund of customer property. The principal terms and conditions of the Agreement are summarized, as follows (as stated above, the form of Agreement is attached as Exhibit A and should be reviewed for a complete account of its terms): 8

9 (a) Settlement Payment. The Executor-Beneficiaries will make or cause to be made the Settlement Payment in the amount of Five Hundred Fifty-Six Thousand Seventeen United States Dollars ($556,017.00) to the Trustee by wire transfer on the Effective Date, as defined in the Agreement. (b) Release by Trustee. Upon entry by the Court of a final, non-appealable order approving the Agreement and the Trustee s receipt of the Settlement Payment, without further action, the Trustee will be deemed to release, remise and forever discharge the Probate Estate and the Executor-Beneficiaries from any and all past, present or future claims or causes of action (including any suit, petition, demand, or other claim in law, equity or arbitration) and from any and all allegations of liability or damages (including any allegation of duties, debts, reckonings, contracts, controversies, agreements, promises, damages, responsibilities, covenants, or accounts) of whatever kind, nature or description, direct or indirect, in law, equity or arbitration, absolute or contingent, in tort, contract, statutory liability or otherwise, based on strict liability, negligence, gross negligence, fraud, breach of fiduciary duty or otherwise (including attorneys fees, costs or disbursements) known or unknown, that are, have been, could have been, or might in the future be, exclusively asserted by Trustee against Transferees based on, arising out of, or relating in any way to the BLMIS Account 1B0270 or the Avoidable Transfers referred to herein. (c) Release by Probate Estate and Executor-Beneficiaries. Upon entry of a final, nonappealable order approving the Agreement, the Probate Estate and the Executor-Beneficiaries, on behalf of themselves and their executors, administrators, heirs and assigns, without further action, will be deemed to release, remise, and forever discharge (a) Trustee, (b) all of Trustee s attorneys, professionals, agents and consultants and (c) BLMIS and its consolidated estate from any and all claims or causes of action (including any suit, petition, demand, or other claim in 9

10 law, equity or arbitration) and from any and all allegations of liability or damages (including any allegation of duties, debts, reckonings, contracts, controversies, agreements, promises, damages, responsibilities, covenants, or accounts) of whatever kind, nature or description, direct or indirect, in law, equity or arbitration, absolute or contingent, in tort, contract, statutory liability or otherwise, based on strict liability, negligence, gross negligence, fraud, breach of fiduciary duty or otherwise (including attorneys fees, costs or disbursements) known or unknown (including Unknown Claims), now existing or arising in the future, arising out of or in any way related to BLMIS, the Madoff Estate, the BLMIS Account or the Avoidable Transfers. 25. The Trustee will dismiss the Adversary Proceeding upon entry of the Court s final, non-appealable order approving the Settlement 26. The Settlement Payment of $556,017 will benefit the Fund of Customer Property. RELIEF REQUESTED 27. By this Motion, the Trustee respectfully requests that the Court enter an order, substantially in the form of the proposed order annexed hereto as Exhibit B approving the settlement as memorialized in the Agreement. LEGAL DISCUSSION 28. Bankruptcy Rule 9019(a) states, in pertinent part, that [o]n motion by the trustee and after notice and a hearing, the court may approve a compromise or settlement. Courts have held that in order to approve a settlement or compromise under Bankruptcy Rule 9019(a), a bankruptcy court should find that the compromise proposed is fair and equitable, reasonable, and in the best interests of a debtor s estate. In re Ionosphere Clubs, Inc. 156 BR 414, 426 (S.D.N.Y. 1993), aff d, 17 F. 3d 600 (2d Cir. 1994) (citing Protective Comm. for Index. Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424 (1968)). 10

11 29. The Second Circuit has stated that a bankruptcy court, in determining whether to approve a compromise, should not decide the numerous questions of law and fact raised by the compromise, but rather should canvass the issues and see whether the settlement fall[ s] below the lowest point in the range of reasonableness. In re W T. Grant Co., 699 F.2d 599, 608 (2d Cir.), cert. denied sub nom. Cosoff v. Romon, 464 U.S. 822 (1983) (quoting Newman v. Siein, 464 F.2d 689, 693 (2d Cir.), cert. denied sub nom. Benson v. Newman, 409 U.S (1972)); accord Nellie v. Shugrue, 165 BR 115, (S.D.N.Y. 1994); In re Ionosphere Clubs, 156 BR at 426; In re Purified Down Prods. Corp., 150 BR 519, 522 (S.D.N.Y. 1993) ( [T]he court need not conduct a mini-trial to determine the merits of the underlying litigation. ); In re Drexel Burnham Lambert Group, Inc., 134 B.R. 499, 505 (Bankr. S.D.N.Y. 1991). 30. In deciding whether a particular compromise falls within the range of reasonableness, courts consider the following factors: (a) (b) (c) (d) the probability of success in the litigation; the difficulties associated with collection; the complexity of the litigation, and the attendant expense, inconvenience, and delay; and the paramount interests of the creditors. Nellis v. Shugrue, 165 B.R. at 122 (citing In re Drexel Burnham Lambert Group, Inc., 960 F.2d 285, 292 (2d Cir. 1992), cert. dismissed, 506 U.S (1993)). 31. The bankruptcy court may credit and consider the opinions of the trustee or debtor and their counsel in determining whether a settlement is fair and equitable. See In re Purified Down Prods., 150 B.R. at 522; In re Drexel Burnham Lambert Group, Inc., 134 B.R. at 505. The competency and experience of counsel supporting the settlement may also be considered. Nellis v. Shugrue, 165 B.R. at 122. Finally, the court should be mindful of the principle that the law 11

12 favors compromise. In re Drexel Burnham Lambert Group, Inc., 134 B.R at 505 (quoting In re Blair, 538 F.2d 849, 851 (9th Cir. 1976)). 32. The Trustee believes that the terms of the Agreement fall above the lowest point in the range of reasonableness. The Agreement resolves all claims raised by the Trustee against the Probate Estate and Executor-Beneficiaries and avoids the cost and delay of what could otherwise be lengthy and contentious litigation. See Affidavit of the Trustee in Support of the Motion (the Picard Affidavit ). A true and accurate copy of the Picard Affidavit is attached hereto as Exhibit C. 33. The Agreement represents a compromise based on the Parties best assessment of the uncertainty, costs and risks of continued litigation. 34. Accordingly, because the Agreement is within the range of reasonableness and confers a substantial benefit on the estate, the Trustee respectfully requests that the Court approve the Agreement. NOTICE 35. In accordance with Bankruptcy Rules 2002 and 9019, notice of this Motion has been given to (i) SIPC; (ii) the SEC; (iii) the Internal Revenue Service; (iv) the United States Attorney for the Southern District of New York; and (v) Latham & Watkins, LLP, Attn: William R. Baker III, 555 Eleventh Street, N.W., Suite 1000, Washington, D.C Notice of this motion also will be provided via ECF to all persons who have filed notices of appearance in the BLMIS proceeding and by U.S. Mail or to all defendants in this Adversary Proceeding pursuant to the Order Establishing Notice Procedures (ECF No. 4560). The Trustee submits that no other or further notice is required. 36. WHEREFORE, the Trustee respectfully requests entry of an order substantially in the form of Exhibit B granting the relief requested in the Motion. 12

13 Dated: February 27, 2012 New York, NY /s/ David J. Sheehan Baker & Hostetler LLP 45 Rockefeller Plaza New York, New York Telephone: (212) Facsimile: (212) David J. Sheehan Marc E. Hirschfield Karin S. Jenson Attorneys for Irving H. Picard, Trustee for the Substantively Consolidated SIPA Liquidation of Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff

14 EXHIBIT A

15 SETTLEMENT AGREEMENT AND RELEASE THIS SETTLEMENT AGREEMENT AND RELEASE (this Agreement ) is made and entered into as of February 27, 2012, by and between Irving H. Picard, in his capacity as the Trustee ( Trustee ) for the liquidation proceedings under the Securities Investor Protection Act, 15 U.S.C. 78aaa, et seq. ( SIPA ) of Bernard L. Madoff Investment Securities LLC ( BLMIS ) and the substantively consolidated Chapter 7 case of Bernard L. Madoff ( Madoff ) pending before the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court ), on the one hand, and the Estate of Dorothy Becker (the Probate Estate ); William P. Becker, individually and in his capacity as co-executor of the Probate Estate; Daniel I. Becker, individually and in his capacity as co-executor of the Probate Estate; and David M. Becker, individually and in his capacity as co-executor of the Probate Estate (collectively with the Probate Estate, Executor-Beneficiaries ), on the other hand. Trustee and Executor- Beneficiaries shall be hereafter referred to individually as a Party and collectively as the Parties. RECITALS WHEREAS, BLMIS and its predecessor were registered broker-dealers with the United States Securities and Exchange Commission (the Commission ) and members of the Securities Investor Protection Corporation ( SIPC ); WHEREAS, on December 11, 2008, the Commission filed a complaint in the United States District Court for the Southern District of New York (the District Court ) against BLMIS and Madoff. On December 12, 2008, the District Court entered an order which, among other 1

16 things, appointed Lee S. Richards, Esq. as receiver (the Receiver ) for the assets of BLMIS (No. 08-CV-10791(LSS)); WHEREAS, on December 15, 2008, pursuant to section 5(a)(4)(A) of SIPA, the Commission consented to a combination of its own action with the application of SIPC. Thereafter, SIPC filed an application in the District Court under section 5(a)(3) of SIPA alleging, inter alia, that BLMIS was not able to meet its obligations to securities customers as they came due and, accordingly, its customers needed the protections afforded by SIPA. On December 15, 2008, the District Court granted the SIPC application and entered an order under SIPA, which, in pertinent part, appointed Trustee as the trustee for the liquidation of the business of BLMIS under section 5(b)(3) of SIPA, removed the Receiver as the receiver for BLMIS, and removed the case to the Bankruptcy Court under section 5(b)(4) of SIPA, where it is currently pending as Case No (BRL). By Order dated June 2, 2009, the estate of Madoff (the Madoff Estate ) was substantively consolidated with the estate of BLMIS; WHEREAS, pursuant to section 78fff-1(a) of SIPA, Trustee has the general powers of a bankruptcy trustee in a case under Chapter 7 of the United States Bankruptcy Code, 11 U.S.C. 101, et seq. (the Bankruptcy Code ), as well as the powers granted pursuant to SIPA. Chapters 1, 3, 5 and subchapters I and II of Chapter 7 of the Bankruptcy Code apply to this SIPA proceeding to the extent consistent with SIPA; WHEREAS, under SIPA, Trustee is charged with the responsibility to marshal and liquidate the assets of BLMIS for distribution to BLMIS customers and others in accordance with SIPA in satisfaction of allowed claims, including through the recovery of avoidable transfers such as preference payments and fraudulent transfers made by BLMIS; 2

17 WHEREAS, pursuant to that charge, Trustee filed an action in the Bankruptcy Court captioned Picard v. The Estate of Dorothy Becker, William P. Becker, Daniel Becker and David M. Becker, Case No (the Adversary Proceeding ); WHEREAS, Trustee s claims against Executor-Beneficiaries who received avoidable transfers from BLMIS arise under SIPA, including sections 78fff(b), 78fff-1(a) and 78fff-2(c)(3), sections 105(a), 541, 544, 547, 548, 550(a) and 551 of the Bankruptcy Code, the New York Debtor and Creditor Law 270 et seq. (McKinney 2001) and other applicable laws; WHEREAS, pursuant to an order of the Bankruptcy Court, dated November 12, 2010 (the Settlement Order ), Trustee is authorized to enter into settlement agreements with transferees in settlement of avoidable transfers without Bankruptcy Court approval, subject to the limitations and procedures set forth therein; WHEREAS, Trustee is seeking approval of this Agreement from the Bankruptcy Court; WHEREAS, Trustee alleges that Executor-Beneficiaries received avoidable transfers in the aggregate amount of One Million Five Hundred Forty-Four Thousand Four Hundred Ninety- Four United States Dollars ($1,544,494.00) in connection with BLMIS Account Nos. 1B0120 and 1B0270 (the Avoidable Transfers ); WHEREAS, Executor-Beneficiaries did not file a claim in connection with BLMIS Account Nos. 1B0120 and 1B0270; and WHEREAS, the Parties desire that BLMIS Account Nos. 1B0120 and 1B0270 (the BLMIS Account ) be viewed together for purposes of a global settlement of any and all claims and disputes the Parties may have against each other with respect to BLMIS, the BLMIS Account and the Avoidable Transfers without the expense, delay and uncertainty of litigation. 3

18 DEFINITION The following definition shall apply to and constitute part of this Agreement and all schedules, exhibits and annexes hereto: Unknown Claims shall mean any Released Claim(s), as defined herein, that Executor- Beneficiaries do not know or suspect to exist in their favor at the time of giving the release in this Agreement that if known by them, might have affected their settlement and release in this Agreement. With respect to any and all Released Claims (as defined in Section 3(a). herein), Executor-Beneficiaries shall expressly waive or be deemed to have waived, the provisions, rights and benefits of California Civil Code section 1542 (to the extent it applies herein), which provides: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR. Executor-Beneficiaries expressly waive, and shall be deemed to have waived, any and all provisions, rights and benefits conferred by any law of any state or territory of the United States, or principle of common law or foreign law, that is similar, comparable or equivalent in effect to California Civil Code section Executor-Beneficiaries may hereafter discover facts in addition to or different from those that they now know or believe to be true with respect to the subject matter of the Released Claims, but Executor-Beneficiaries shall expressly have and shall be deemed to have fully, finally and forever settled and released any and all Released Claims, known or unknown, suspected or unsuspected, contingent or noncontingent, whether or not concealed or hidden, that now exist or heretofore have existed, upon any theory of law or equity 4

19 now existing or coming into existence in the future, including conduct that is negligent, reckless, intentional, with or without malice, or a breach of any duty, law or rule, without regard to the subsequent discovery or existence or such different or additional facts. Executor-Beneficiaries acknowledge and shall be deemed to have acknowledged that the foregoing waiver was separately bargained for and a key element of the settlement of which this release is a part. NOW THEREFORE, for the good and valuable consideration set forth herein, the adequacy and sufficiency of which is recognized for all purposes, the Parties agree as follows: 1. Settlement Payment Obligation. In consideration for the covenants and agreements set forth in this Agreement and for other good and valuable consideration (including, without limitation, the release set forth in Section 2.), the receipt and sufficiency of which is hereby acknowledged for purposes of this settlement only, Executor-Beneficiaries shall pay to Trustee within ten (10) days of the Effective Date (as defined in Section 6. herein) the amount of Five Hundred Fifty-Six Thousand Seventeen United States Dollars ($556,017.00) (the Settlement Payment ), representing one hundred percent (100%) of the amount of the subsequent transfers to the Executor-Beneficiaires, by (i) wire transfer of immediately available funds to the account specified on Schedule 1 attached hereto or (ii) bank or cashier s check made payable to Trustee, provided that satisfaction of Trustee s obligations hereunder shall be conditioned on the collection of such funds by Trustee. 2. Release by Trustee. (a) In consideration for the covenants and agreements set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, except with respect to any rights arising under this Agreement, Trustee hereby releases, remises and forever discharges only Executor-Beneficiaries from any and all past, 5

20 present or future claims or causes of action (including any suit, petition, demand, or other claim in law, equity or arbitration) and from any and all allegations of liability or damages (including any allegation of duties, debts, reckonings, contracts, controversies, agreements, promises, damages, responsibilities, covenants, or accounts) of whatever kind, nature or description, direct or indirect, in law, equity or arbitration, absolute or contingent, in tort, contract, statutory liability or otherwise, based on strict liability, negligence, gross negligence, fraud, breach of fiduciary duty or otherwise (including attorneys fees, costs or disbursements) known or unknown, that are, have been, could have been, or might in the future be, exclusively asserted by Trustee against Executor-Beneficiaries based on, arising out of, or relating in any way to the BLMIS Account referred to herein. (b) Notwithstanding the foregoing release contained in Section 2(a)., Executor- Beneficiaries are not released from liability for any transfers that they may have received in connection with any account not specified herein or may receive after the date of this Agreement which constitute subsequent transfers of transfers made by BLMIS which are avoidable and recoverable under SIPA, including sections 78fff(b), 78fff-1(a), and 78fff-2(c)(3), sections 105(a), 541, 544, 547, 548, 550(a), and 551 of the Bankruptcy Code, the New York Debtor and Creditor Law 270 et seq. (McKinney 2001) and other applicable laws. (c) Dismissal of Adversary Proceeding. As soon as practicable after the Effective Date and upon receipt of the Settlement Payment, Trustee will file a Notice of Dismissal dismissing the Adversary Proceeding without prejudice to reinstatement under the conditions set forth in Section 5. herein and without costs to either Trustee or Executor-Beneficiaries. 3. Release by Executor-Beneficiaries. 6

21 (a) Executor-Beneficiaries, on behalf of themselves and their executors, administrators, heirs and assigns hereby release, remise, and forever discharge (a) Trustee, (b) all of Trustee s attorneys, professionals, agents and consultants and (c) BLMIS and its consolidated estate from any and all claims or causes of action (including any suit, petition, demand, or other claim in law, equity or arbitration) and from any and all allegations of liability or damages (including any allegation of duties, debts, reckonings, contracts, controversies, agreements, promises, damages, responsibilities, covenants, or accounts) of whatever kind, nature or description, direct or indirect, in law, equity or arbitration, absolute or contingent, in tort, contract, statutory liability or otherwise, based on strict liability, negligence, gross negligence, fraud, breach of fiduciary duty or otherwise (including attorneys fees, costs or disbursements) known or unknown (including Unknown Claims), now existing or arising in the future, arising out of or in any way related to BLMIS, the Madoff Estate, the BLMIS Account or the Avoidable Transfers (the Released Claims ). 4. Representations and Warranties; Survival. (a) Trustee hereby represents and warrants to Executor-Beneficiaries that he has the full power, authority and legal right to execute and deliver this Agreement and to perform his obligations hereunder. (b) William P. Becker, Daniel I. Becker, and David M. Becker, in their individual capacities (the Individual Executor-Beneficiaries ), each hereby represent and warrant to Trustee that: (i) he has the full power, authority, legal right and capacity to execute and deliver this Agreement and to perform his obligations hereunder; (ii) this Agreement has been duly executed and delivered by each Individual Transferee and constitutes the valid and binding agreement of each Individual Transferee, enforceable against each Individual Transferee in 7

22 accordance with its terms; (iii) in executing this Agreement, each Individual Transferee has done so with the full knowledge of any and all rights that each Individual Transferee may have with respect to the controversies herein compromised, and each Individual Transferee has received or has had the opportunity to obtain independent legal advice from his attorneys with regard to the facts relating to said controversies and with respect to the rights arising out of said facts; and (iv) no other person or entity, other than those specifically identified herein, has any interest in the matters that each Individual Transferee releases herein, and each Individual Transferee has not assigned or transferred or purported to assign or transfer to any such third person or party all or any portion of the matters that each Individual Transferee releases herein. (c) Each of the representations and warranties set forth in this Section 4. shall survive in perpetuity. 5. Additional Representations and Warranties by Executor-Beneficiaries. To induce Trustee to enter into this Agreement, Executor-Beneficiaries represent and warrant, to the best of their knowledge, information and belief, that (1) other than through the transfers as referenced on Exhibit B of the Complaint filed in the Adversary Proceeding and any subsequent transfers received in connection with the BLMIS Account, Executor-Beneficiaries have not received any money, funds, loans, transfers, assets, financial assistance or financial accommodation from Madoff, BLMIS or any other company or entity owned or controlled by Madoff or BLMIS; (2) Executor-Beneficiaries are not immediate, mediate or subsequent transferees of any funds or property originating from Madoff or BLMIS to an initial transferee, other than as set forth in Exhibit B of the Complaint filed in the Adversary Proceeding and as related to the BLMIS Account; and (3) Executor-Beneficiaries are not aware of any potential claims against Executor-Beneficiaries by Madoff, BLMIS or any other company or entity owned 8

23 or controlled by Madoff or BLMIS. If any of the foregoing representations or warranties is false, misleading or incorrect, Trustee shall have the right to pursue all available legal rights, remedies and/or other claims available under the Bankruptcy Code, SIPA, or any other applicable law against Executor-Beneficiaries arising from or related to any monies, funds, loans, transfers, assets, financial assistance, financial accommodation or claims regarding Executor- Beneficiaries activities relating to Madoff or BLMIS including, but not limited to, the BLMIS Account (collectively, the Undisclosed Claims ). The parties agree that all statutes of limitations applicable to any of the Undisclosed Claims shall be tolled from the date of this Agreement and shall remain tolled for one hundred eighty (180) days from the date on which Trustee first receives notice of the Undisclosed Claim at issue. Executor-Beneficiaries hereby agree to waive and may not assert or have the benefit of any statute of limitations defense, laches or other time-based equitable defenses in any such action(s) commenced by Trustee. 6. Bankruptcy Court Approval; Effective Date. This Agreement is subject to and shall become effective, enforceable, and binding on the Parties only following (a) Bankruptcy Court approval of this Agreement, and (b) entry of a final, non-appealable order by the Bankruptcy Court approving the terms of this Settlement (the Effective Date ). 7. Termination of Agreements with BLMIS. Any and all prior agreements between Executor-Beneficiaries and BLMIS are hereby terminated as of the date of this Agreement. 8. Further Assurances. Each Party shall execute and deliver any document or instrument reasonably requested by the other Party after the date of this Agreement to effectuate the intent of this Agreement. 9

24 9. Entire Agreement. This Agreement constitutes the entire agreement and understanding between the Parties pertaining to the subject matter hereof and supersedes any and all prior or contemporaneous agreements, representations and understandings of the Parties concerning the subject matter hereof. 10. Amendment; Waiver. This Agreement may not be terminated, amended or modified in any way except by written instrument signed by all Parties. No waiver of any provision of this Agreement shall be deemed to constitute a waiver of any other provision hereof, whether or not similar, nor shall such waiver constitute a continuing waiver. 11. Assignment. This Agreement may not be assigned by either Party without the prior written consent of the other Party. 12. Successors. This Agreement shall be binding upon and inure to the benefit of each Party and its respective successors and permitted assigns. 13. Negotiated Agreement. This Agreement has been fully negotiated by the Parties. Each Party acknowledges and agrees that this Agreement has been drafted jointly, and the rule that ambiguities in an agreement or contract may be construed against the drafter shall not apply in the construction or interpretation of this Agreement. 14. Severability. 10

25 In the event that any term or provision of this Agreement or any application thereof is deemed to be invalid or unenforceable, the remainder of this Agreement and any other application of such term or provision shall not be affected thereby. 15. Counterparts; Electronic Copy of Signatures. This Agreement may be executed and delivered in any number of counterparts, each of which so executed and delivered shall be deemed to be an original and all of which shall constitute one and the same document. Each Party may evidence its execution of this Agreement by delivery to the other Party of scanned or faxed copies of its signature, with the same effect as the delivery of an original signature. 16. Governing Law. This Agreement and any claim related directly or indirectly to this Agreement shall be governed by and construed in accordance with the laws of the State of New York (without regard to the principle of conflicts of law thereof), the Bankruptcy Code and SIPA. Each Party hereby waives on behalf of itself and its successors and assigns any and all right to argue that the choice of New York law provision is or has become unreasonable in any legal proceeding. 17. JURISDICTION; WAIVER OF JURY TRIAL. (a) THE BANKRUPTCY COURT SHALL HAVE EXCLUSIVE JURISDICTION OVER ANY AND ALL DISPUTES BETWEEN OR AMONG THE PARTIES, WHETHER IN LAW OR EQUITY, ARISING OUT OF OR RELATING TO THIS AGREEMENT. IN THE EVENT THE BLMIS PROCEEDING IS CLOSED BY A FINAL DECREE AND NOT REOPENED, THE PARTIES AGREE THAT ANY DISPUTE ARISING OUT OF THIS AGREEMENT MAY BE BROUGHT IN THE UNITED STATES DISTRICT COURT FOR 11

26 THE SOUTHERN DISTRICT OF NEW YORK OR THE SUPREME COURT OF THE STATE OF NEW YORK IN NEW YORK COUNTY. (b) EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 18. Expenses. Each Party shall bear its respective expenses relating to or arising out of this Agreement, including, but not limited to, fees for attorneys, accountants and other advisors. 19. Notices. All notices, requests, demands, consents and communications necessary or required under this Agreement shall be in writing and shall be delivered by hand or sent by registered or certified mail, return receipt requested, by overnight mail with confirmation, by facsimile (receipt confirmed) or by electronic means (receipt confirmed), in each case addressed and copied as set forth on the applicable signature page hereto. A Party may change its address for receiving notice by giving notice of a new address in the manner provided herein. All such notices, requests, demands, consents and other communications shall be deemed to have been duly given or sent two (2) days following the date on which mailed, or on the date on which delivered by courier or by hand or by facsimile or electronic transmission (receipt confirmed), as the case may be, and addressed as aforesaid. 20. No Third Party Beneficiaries. 12

27 Except as expressly provided in Section 2. or Section 3., the Parties do not intend to confer any benefit by or under this Agreement upon any person or entity other than the Parties hereto and their respective successors and permitted assigns. 21. Captions and Rules of Construction. The captions in this Agreement are inserted only as a matter of convenience and for reference and do not define, limit or describe the scope of this Agreement or the scope or content of any of its provisions. Any reference in this Agreement to a section is to a section of this Agreement. Including is not intended to be a limiting term. [The next page is the signature page] 13

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32 APPROVED AS TO FORM: LATHAM & WATKINS LLP By: /s/ William R. Baker III 555 Eleventh Street, NW, Suite 1000 Washington, DC Telephone: Facsimile: William R. Baker III Attorneys for Defendants, The Estate of Dorothy Becker, William P. Becker, Daniel I. Becker, and David M. Becker 18

33 Schedule 1 WIRING INSTRUCTIONS Citi Private Bank 666 5th Ave., 5th Fl New York, NY ABA No.: Swift Code: CITIUS33 Account Name: Irving H. Picard, Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC Account No.: [REDACTED]

34 EXHIBIT B

35 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK SECURITIES INVESTOR PROTECTION CORPORATION, v. Plaintiff-Applicant, BERNARD L. MADOFF INVESTMENT SECURITIES LLC, Adv. Pro. No (BRL) SIPA LIQUIDATION (Substantively Consolidated) Defendant. In re: BERNARD L. MADOFF, Debtor. IRVING H. PICARD, Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC, v. Plaintiff, Adv. Pro. No (BRL) THE ESTATE OF DOROTHY BECKER, WILLIAM P. BECKER, individually and in his capacity as co-executor of the ESTATE OF DOROTHY BECKER, DANIEL I. BECKER, individually and in his capacity as co-executor of the ESTATE OF DOROTHY BECKER, and DAVID M. BECKER, individually and in his capacity as co-executor of the ESTATE OF DOROTHY BECKER, Defendants.

36 ORDER PURSUANT TO SECTION 105(a) OF THE BANKRUPTCY CODE AND FEDERAL RULE OF BANKRUPTCY PROCEDURE 9019(a) APPROVING A SETTLEMENT AGREEMENT BY AND BETWEEN TRUSTEE, THE ESTATE OF DOROTHY BECKER, AND WILLIAM P. BECKER, DANIEL I. BECKER, AND DAVID M. BECKER, INDIVIDUALLY, AND IN THEIR CAPACITIES AS CO-EXECUTORS OF THE ESTATE OF DOROTHY BECKER Upon the motion (the Motion ) 1 of Irving H. Picard (the Trustee ), as trustee for the substantively consolidated liquidation of Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff, seeking entry of an order, pursuant to 11 U.S.C. 105(a) and Rules 2002 and 9019(a) of the Federal Rules of Bankruptcy Procedure, approving the settlement by and among the Trustee, the Estate of Dorothy Becker, and William P. Becker, Daniel I. Becker, and David M. Becker, individually, and in their capacities as Co-Executors of the Estate of Dorothy Becker, in substantially the form annexed to the Motion (the Settlement Agreement ) (ECF No. ); and it appearing that due and sufficient notice has been given to all parties in interest as required by Rules 2002 and 9019 of the Federal Rules of Bankruptcy Procedure, and no other or further notice need be provided; and the Court having considered the Affidavit of the Trustee in support of the Motion; and the Court having found and determined that the legal and factual bases set forth in the Motion establish just cause for the relief requested and that this Court has jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. 157 and 1334; and after due deliberation; and sufficient cause appearing therefor; it is ORDERED: 1. The Motion is granted. 2. The Settlement Agreement is approved and incorporated herein by reference. 3. This Court shall retain jurisdiction to hear and determine all matters arising from or related to this Order. 1 All capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Motion

37 Dated:, 2012 THE HONORABLE BURTON R. LIFLAND UNITED STATES BANKRUPTCY JUDGE

38 EXHIBIT C

39 Baker & Hostetler LLP 45 Rockefeller Plaza New York, NY Telephone: (212) Facsimile: (212) David J. Sheehan Marc E. Hirschfield Karin S. Jenson Attorneys for Irving H. Picard, Trustee for the Substantively Consolidated SIPA Liquidation of Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff SECURITIES INVESTOR PROTECTION CORPORATION, v. Plaintiff-Applicant, BERNARD L. MADOFF INVESTMENT SECURITIES LLC, Adv. Pro. No (BRL) SIPA LIQUIDATION (Substantively Consolidated) Defendant. In re: BERNARD L. MADOFF, Debtor. IRVING H. PICARD, Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC, v. Plaintiff, Adv. Pro. No (BRL) THE ESTATE OF DOROTHY BECKER, WILLIAM P. BECKER, individually and in his capacity as co-executor of the ESTATE OF DOROTHY BECKER, DANIEL I. BECKER, individually and in his capacity as co-executor of the ESTATE OF DOROTHY BECKER, and

40 DAVID M. BECKER, individually and in his capacity as co-executor of the ESTATE OF DOROTHY BECKER, Defendants. AFFIDAVIT OF IRVING H. PICARD, TRUSTEE, IN SUPPORT OF MOTION FOR ENTRY OF ORDER PURSUANT TO SECTION 105(a) OF THE BANKRUPTCY CODE AND RULES 2002(a)(3) AND 9019(a) OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE APPROVING AN AGREEMENT BY AND BETWEEN THE TRUSTEE, THE ESTATE OF DOROTHY BECKER, AND WILLIAM P. BECKER, DANIEL I. BECKER, AND DAVID M. BECKER, INDIVIDUALLY AND IN THEIR CAPACITIES AS CO-EXECUTORS OF THE ESTATE OF DOROTHY BECKER STATE OF NEW YORK ) ) COUNTY OF NEW YORK ) Irving H. Picard, being duly sworn, hereby attests as follows: 1. I am the trustee for the substantively consolidated liquidation of Bernard L. Madoff Investment Securities LLC ( BLMIS ) and Bernard L. Madoff ( Madoff, and together with BLMIS, collectively, the Debtors ). I am familiar with the affairs of the Debtors. I respectfully submit this Affidavit in support of the motion (the Motion ) seeking entry of an order, pursuant to 11 U.S.C. 105(a), and Rules 2002 and 9019 of the Federal Rules of Bankruptcy Procedure, approving the settlement (the Settlement ) by and among the Trustee, the Estate of Dorothy Becker (the Probate Estate ), and William P. Becker, Daniel I. Becker, and David M. Becker, individually, and in their capacities as Co-Executors of the Probate Estate (the Executor-Beneficiaries ; each of the Trustee, the Probate Estate, and the Executor- Beneficiaries a Party and collectively, the Parties ). 2. I make this Affidavit based upon my own personal knowledge or upon information that I believe to be true. 3

41 3. All capitalized terms not defined herein have the meaning ascribed to them in the Settlement Agreement submitted as Exhibit A to the Motion. 4. I believe that the terms of the Settlement fall above the lowest point in the range of reasonableness and, accordingly, the Settlement should be approved by this Court. In view of the passage of time since the Probate Estate was closed and the Co-Executors were discharged, the Settlement avoids the legal issues involved in seeking to reopen the Probate Estate. The Settlement resolves all issues regarding the asserted and unasserted claims against the Probate Estate and Executor-Beneficiaries (the Trustee s Claims ) without the need for protracted and costly litigation, the outcome of which is uncertain. I recognize that litigating the Trustee s Claims would undoubtedly be complex, create significant delay, and would involve litigation risk, particularly considering the unique facts and Massachusetts probate law issues involved in this case. 5. As part of the Settlement, the Parties have reached a good faith, complete, and total compromise as to any and all claims the Trustee asserted against the Probate Estate and Executor-Beneficiaries in the above-captioned Adversary Proceeding. The Settlement will return $556,017 of fictitious profits withdrawn from BLMIS, which represents one hundred percent (100%) of the subsequent transfers. 6. The Settlement furthers the interests of the customers of BLMIS by, among other things, adding $556,017 to the Fund of Customer Property without the added delay and uncertainty of further litigation. 4