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Bilked by Madoff, Former Fried Frank Partner Joins Forces With Milberg to Recoup Investors' Money
The American Lawyer
April 16, 2009
Among the former clients of Bernard Madoff now trying to push the Ponzi scheme king into personal bankruptcy is a retired Fried, Frank, Harris, Shriver & Jacobson litigator whose career included some of the biggest hostile takeover battles of the 1980s.
Marc Cherno, 72, lost nearly $1.12 million in the con, according to papers filed in the Madoff bankruptcy proceedings Monday. Now the corporate defense lawyer is joining forces with plaintiffs firm Milberg in an effort to recoup investors' money.
Back in the day, Cherno was a prominent litigator in the halls of Fried Frank. The Harvard Law School graduate joined the firm in 1962 and made partner eight years later. In the 1980s, Cherno was a presence in the biggest takeover battles of the decade and frequently found himself across the table from Wachtell, Lipton, Rosen & Katz and Skadden, Arps, Slate, Meagher & Flom.
"Marc was, in his day, if not the best takeover litigator in the country damn close to it," says Matthew Gluck, a former Fried Frank partner himself who is now at Milberg.
At Fried Frank, Cherno played a role in the high-profile takeover battle between Bendix Corp. and Martin Marietta Corp. in 1982. He presented oral arguments to the Supreme Court when Fried Frank client Burlington Northern Inc.'s hostile bid for El Paso Gas made it to the High Court in 1984. Cherno also represented Forstmann Little when Ronald Perelman made his ultimately successful hostile bid for the private equity firm's leveraged buyout target Revlon, Inc. in 1985.
Cherno, who retired from Fried Frank in 1998 and now is of counsel to the firm, says he first invested with Madoff around 2001. He's never met Madoff. But his ex-wife's family invested for years with Madoff, he says, and when he had enough money, Cherno invested, too.
"It seemed like a safe investment at the time, and the returns were steady but they weren't astronomical," he says. "They weren't different from what other hedge funds were getting at the time. So I thought of it as sort of a hedge fund, a hedge fund that's doing well. But I'm not particularly sophisticated financially."
For seven years, Cherno says he left his money with Madoff, never withdrawing and instead letting interest accrue. Of course, it turned out that was phantom income, a fact Cherno only learned on December 11 from CNN after Madoff was arrested. Including phantom income, Cherno lost almost $1.12 million to Madoff.
Gradually, Cherno let close friends and colleagues know, including Gluck who, as it happened, was recruiting former Madoff investors for actions related to the fraud. Gluck, who joined Milberg in 2006, says he's been friends with Cherno for 40-odd years. From time to time, the two will attend a performance at New York's Metropolitan Opera together.
"I guess I was a little bit surprised just because it's never nice to hear from somebody who lost money," Gluck says.
Initially, Cherno says he was just consulting Gluck about how receiverships and trustees work. "I was very interested in his views as to what was going to happen, how it was going to take place, how it was going to unfold," he says. "So even though I didn't retain the firm and he wasn't representing me, we would talk now and then about Madoff."
In one of those talks, Gluck suggested that Cherno could help in the effort to recover money for Madoff investors. Cherno agreed to serve on the committee Milberg established to advise on the actions the firm would take on behalf of the roughly 80 Madoff investors it represents. Since then, Cherno has been an active participant in the process, including the bankruptcy, Gluck says. "He asked lots of good questions about filing an involuntary petition," he says.
How much in assets Milberg and its co-counsel at Seeger Weiss will be able to recover for former Madoff clients through the bankruptcy process is anyone's guess. Meanwhile, Cherno has filed a claim with Securities Investor Protection Corporation -- through that, the maximum an investor can expect to recoup is $500,000.
"I'm not in dire straights," Cherno says. "It was a substantial loss, and it puts a crink in your lifestyle. But I'm OK. I'm not selling stuff. I cut back on a few things, but I haven't had to sell my apartment or anything like that."
For now, the Manhattan resident says he's moving on in retirement, taking some arts classes at Columbia University to keep himself occupied.
And what does he think of Madoff? Cherno still doesn't understand why.
"All these people speculate if he was a sociopath or a psychopath or if something got out of hand," he says. "But it's beyond me. It's absolutely beyond me."
For more coverage of the Bernard Madoff case, see the Law.com Madoff Watch page.
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This article first appeared on The Am Law Daily blog on AmericanLawyer.com.
