‘Nonexistent’ Madoff Account Insufficient For Divorce Do-Over
New York’s highest court, the Court of Appeals, has rejected an ex-husband’s attempt to change the property settlement agreement he reached with his ex-wife in 2006 on the ground that the value of the account he held with Bernard Madoff was later determined to have been significantly overstated.
The court found that the “core allegation” underpinning the ex-husband's claim – that the Madoff account was "nonexistent" when the parties executed their settlement agreement in June 2006 – did not amount to a "material" mistake of fact. It explained that the ex-husband did not dispute that, until the Ponzi scheme began to unravel in late 2008 – more than two years after the property division was completed – it would have been possible for him to redeem all or part of the investment. Given that any mutual mistake must have existed at the time the agreement was executed in 2006, the fact that the ex-husband could no longer withdraw funds years later was “not determinative,” the court declared.
In the court’s view, the parties’ situation was more akin to a marital asset that unexpectedly lost value after dissolution of a marriage; the asset had value at the time of the settlement but the purported value did not remain consistent. Consequently, the court rejected the ex-husband’s attempt to reform or undo the property settlement he had reached with his former wife.
The case is Simkin v. Blank, No. 48 (N.Y. Apr. 3, 2012). Attorneys involved include Richard D. Emery and Allan J. Arffa.