NEW YORK (AP) — When he was first told in 2008 about Bernard Madoff's epic Ponzi scheme, attorney David Sheehan had a response that now sounds inconceivable.
"Who," he wondered, "is Bernie Madoff?"
Four years after Madoff's arrest, Sheehan has been thoroughly educated about the disgraced financier.
Irving Picard, the trustee appointed to recover funds for Madoff victims, and a battalion of lawyers headed by Sheehan have spent long days untangling Madoff's fraud. On the fourth anniversary of Madoff's Dec. 11, 2008, arrest, it's an international effort that shows no signs of slowing.
So far, they have secured nearly $9.3 billion of the estimated $17.5 billion that thousands of investors put into Madoff's sham investment business. In a recent interview, Sheehan said his team at the Manhattan law firm of BakerHostetler is hopeful it can recover $3 billion more over the next 18 months, cutting investors' losses to around $5 billion. Of the money collected so far, about $3 billion has been approved for redistribution to victims through an ongoing claims process.
It's an outcome that neither Sheehan nor Picard thought possible at the outset.
"I don't think either of us thought we could achieve these results," Sheehan said. "There's never been any case like this."
Sheehan described the task first faced four years ago as daunting: It required cracking the code on a secret Ponzi scheme that spanned decades and victimized thousands of customers on a scale never seen before. Madoff, 74, pleaded guilty and is serving a 150-year sentence.
"We had to reconstruct this from ground zero and put it back together again," Sheehan said.
After examining the books at Bernard L. Madoff Investment Securities LLC, lawyers quickly realized that statements showing investors held more than $60 billion in securities were fiction.
Madoff made no investments. Instead, principal was simply being paid out bit by bit to other investors.
Having to hammer home that reality — over and over — to disbelieving investors was one of the first major hurdles, Sheehan said. Win or lose, Madoff clients were entitled only to what they put in.
Investors who had reaped fake profits had to accept they had "someone else's money," Sheehan said. "We had no choice but to get it back."
Last year, an appeals court concluded that the trustee's calculation was "legally sound" and that a bankruptcy court was correct when it rejected arguments from lawyers for investors who said their clients should receive more than what they initially gave to Madoff.
Picard couldn't be expected "to step into the shoes of the defrauder or treat the customer statements as reflections of reality," the court said.