On The Trail of Madoff’s Money
By Kenneth Rubinstein, Esq. and Asher Rubinstein, Esq.
As attorneys experienced in asset protection law and especially in the area of offshore asset protection, we have recently been asked to suggest where Bernie Madoff may have secreted the proceeds of his allegedly gigantic and pervasive financial fraud.
 At the outset we must declare that we do not represent (and have not represented at any time) Bernie Madoff or, to the best of our knowledge, any member of his family or organization, or any victim of his alleged fraud; nor do we have any personal knowledge concerning the nature, extent or location of Mr. Madoffâs assets. This article is based on our opinions, assumptions and conclusions drawn from our detailed knowledge of offshore asset protection jurisdictions, their laws, court systems, banking infrastructure and international treaties, protocols and agreements.
 The first step in our analysis requires that we make certain assumptions as to the nature and size of Bernie Madoffâs assets. The nature of the assets will determine whether they are likely situated in the U.S. or offshore. The size of the assets would suggest the elimination of many lesser offshore jurisdictions as possible secure havens.
 Logic compels us to assume that the Madoff assets are highly liquid and located offshore. If the assets were held in U.S. banks or invested in U.S. real estate, U.S. businesses or U.S. securities, the risk of discovery would be very high. In the event of their discovery, they would be subject to immediate restraint and seizure. Indeed, the mere suspicion that any asset may be somehow related to Bernie Madoff would be sufficient for a U.S. court to order the restraint of that asset. U.S. bank records are subject to subpoena by prosecutors and even by civil creditors. Our systems of recording and registration of real property and securities also place such U.S. assets at significant risk of discovery and, if discovered (or even suspected) at significant risk of restraint.
 It is axiomatic that the only assets that lend themselves to safe, efficient and absolute transfer offshore are assets which are purely liquid â cash, via wire transfer. Deeds, stock certificates and other documents representing ownership of U.S. assets are just that â representations of ownership. The underlying U.S. assets would still be subject to restraint and seizure by U.S. courts. Deeds and stock certificates could be declared void and sheriffâs deeds and new certificates could be issued by court order. We must therefore assume that, in order to avoid such risk of discovery and restraint, Bernie Madoffâs assets are predominantly liquid and offshore.
 The assets lost to Bernie Madoffâs alleged fraud have variously been estimated to range from twenty billion to fifty billion dollars (although at least one commentator has stated the loss to be as high as one hundred billion dollars). For purposes of this analysis, let us assume that the majority of these assets were, in fact, lost through investment failure during the current financial crisis. For many years prior to the current crisis, Mr. Madoff claimed to generate annual net profits of at least twelve percent. If we accept the more conservative estimates of twenty billion dollars under management, such profits, at a twelve percent return, would equal $2.4 billion per annum. If Mr. Madoff received only half of the usual hedge fund managerâs twenty percent incentive fee, he would have received $240 million dollars (ten percent of $2.4 billion) per year. This would be in addition to commissions on trades and other fees and charges. Bernie Madoff has claimed twelve percent net profits per annum for decades. Thus, based upon the above conservative assumptions, Mr. Madoff has probably amassed at least $2.4 billion dollars in personal profits over just the last ten years, and very likely much, much more.
 Where could Bernie Madoff safely store billions (or even hundreds of millions) of dollars? Although dozens of offshore financial havens exist throughout the world (they prefer to be called âinternational financial centersâ), very few are equipped to receive or hold deposits of this magnitude. For most, an influx of deposits of this size, even if gradual, would seriously skew the banking infrastructure and would attract the attention of local and international regulatory authorities (e.g., local central banks, monetary authorities, IMF, FATF, etc.). It would be an understatement to say that such an influx of deposits could not remain invisible. Equally important, in most of these offshore jurisdictions the banks and other financial institutions could not possibly offer Mr. Madoff any reasonable degree of security regarding the safety of such large deposits. For this reason, we can eliminate foreign countries that, although they might welcome Madoff Money, would offer no security or stability, countries like Cuba or Ukraine. Although Kobi Alexander, who fled charges of conspiracy and securities fraud while CEO of Comverse Technology, escaped to Namibia where he remains a fugitive, it is unlikely that Madoff stashed assets in any African country.
 Mr. Madoff could have established his own bank in one of these offshore centers, but such bank would still be subject to the aforementioned regulation and scrutiny, and its (Mr. Madoffâs) deposits would still be vulnerable to the jurisdictionâs economic and financial stability. $2.4 billion on deposit in a country whose total G.D.P. is one or two billion dollars would hardly be inconspicuous.
 We may reasonably conclude, therefore, that all but the largest offshore havens can be eliminated. This narrows our focus to London, Tokyo, Hong Kong, Cayman, Switzerland, Liechtenstein, Luxembourg, Austria, Bermuda, Monaco, Israel and Dubai.
 Each of these jurisdictions offer depositors the security of a substantial banking infrastructure and, more importantly, the promise of bank secrecy. This bank secrecy is based either on statute or on tradition. However, in almost every case such bank secrecy is not absolute; it may be preempted by international treaty or agreement between governments.
 Almost every country in the world has entered into a mutual legal assistance treaty (MLAT) with the U.S. These treaties require the disclosure of financial information in connection with specific investigations of serious crime. Mr. Madoffâs alleged fraud would certainly constitute a serious crime in every jurisdiction subject to such MLAT. In addition, some offshore centers have also signed separate agreements with the U.S. Treasury Department requiring the exchange of financial information in response to IRS administrative requests. Most recently, in December 2008, Liechtenstein, which was already subject to an MLAT, signed an additional tax information exchange agreement with the IRS. In jurisdictions subject to these tax information exchange agreements, a simple IRS request for bank information in connection with a civil audit of Bernie Madoff would override any provision of bank secrecy.
 One commentator has suggested (without support) that because Mr. Madoff is Jewish, he has hidden his assets in Israel. This suggestion has no credibility because Israel is subject to an MLAT with the U.S., has a long and consistent record of recognizing and enforcing U.S. judgments against Israeli assets and has repeatedly refused to provide refuge to U.S. (Jewish) fugitives and their assets (e.g., Meyer Lansky of Mafia fame and Eddie Antar of Crazy Eddie fame).
 Of the substantial offshore financial centers listed above, all but one is subject to an MLAT and/or a tax information exchange agreement with the U.S.. Mr. Madoff would be foolish to hide any significant assets in any of these MLAT jurisdictions.
 Only one of the above-listed offshore havens has a strict bank secrecy law and has no treaty or other agreement with the U.S. requiring financial disclosure â the Principality of Monaco. Although several other countries may also offer absolute bank secrecy due to the absence of an MLAT (e.g., Cuba, Andorra, some lesser African countries), none of them contain a sufficiently safe and significant financial infrastructure. The only country in the world that can offer Bernie Madoff complete bank secrecy together with a large, well-established and secure financial infrastructure (total deposits under management as of December 31, 2008: approximately $120 billion) as well as the security of political, social and economic stability, is Monaco. Does our Attorney-General speak French?