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Estates of Bernard Madoff’s dead sons reach $23 million deal with feds

Mark Madoff, in an undated photo. Madoff committed suicide in 2010.Kimberly Unger/AP/File

NEW YORK — The estates of Bernard Madoff’s dead sons have reached an agreement with the US government to hand over a combined $23 million to victims of his Ponzi scheme, resolving an eight-year legal battle over the remnants of fortunes they amassed at their father’s bogus securities firm.

Mark Madoff committed suicide in 2010, and his younger brother, Andrew, died of cancer four years later.

Their estates were sued by the company’s court-appointed bankruptcy trustee, who accused the men of profiting from their father’s fraud for years and squandering more than $150 million of client money on their lavish lifestyles.

Under the deal, the estates will transfer all cash, business entities, and business interests to funds set up for victims, leaving Mark Madoff’s family with $1.75 million and Andrew Madoff’s family with $2 million, the trustee said Monday in a court filing in Manhattan.

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The estates will also withdraw their claims in the Madoff firm’s bankruptcy case, which total nearly $100 million.

The accord also resolves an investigation by the US attorney’s office in Manhattan, which oversaw a criminal investigation that led to a 150-year prison sentence for Bernard Madoff and a 10-year term for his brother Peter. Both men pleaded guilty.

Bernard Madoff’s sons were never accused of a crime. A civil suit against their mother, Ruth Madoff, is pending.

The claims against the Madoff clan have been symbolically important for the trustee, Irving Picard, who is recouping cash for thousands of victims who lost $17.5 billion in principal when the fraud collapsed on Dec. 11, 2008.

So far, he’s recovered more than $11.5 billion, or almost 64 cents on the dollar, by suing banks and offshore funds that funneled cash into the scam. Picard has also sued investors who profited from the fraud by withdrawing more money than they deposited, including Madoff’s friends.

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A fund overseen by the Justice Department has another $4 billion to distribute, but it hasn’t yet sent out checks. It’s unclear how much of the money from Monday’s settlement will go to the Justice Department and how much the trustee will get.

Andrew Ehrlich and Martin Flumenbaum, the lawyers for the estates with the firm Paul, Weiss, Rifkind, Wharton & Garrison LLP in Manhattan, didn’t immediately return calls seeking comment.

Dawn Dearden, a spokeswoman for the Justice Department, declined to comment until the settlement is approved by a judge. A hearing is set for July 26.

Madoff’s sons had said that they didn’t know about the Ponzi scheme and that they went to the authorities immediately after their father confessed to them. Madoff was arrested two days later.

The brothers had led Madoff’s market-making and proprietary-trading businesses for years, overseeing real trading activity that lent legitimacy to their father’s bogus investment advisory unit at the heart of the scheme.