The New York Supreme Court, Appellate Division, ruled that a divorce settlement agreement should be re-opened in light of the non-existence of an asset awarded to Husband—the parties’ Madoff account, an investment account of approximately $5.4 million in value which was awarded to Husband. Simkin v. Blank, 2011.
Husband had paid Wife approximately $2.7 million for her interest in this account under the parties’ settlement agreement. Upon learning of the Madoff deception and finding that he would get nothing from the alleged account, Husband moved to re-open the divorce settlement based on his loss. The New York Supreme Court (trial court) initially denied Husband’s petition, pointing out that for several years after the parties’ 2004 settlement agreement, Husband maintained the Madoff account although he could have liquidated it. (Madoff was not arrested, and the fact of the Madoff Ponzi scheme, was not revealed until December, 2008.) By maintaining the account, that court said, Husband took on the risk that he might not be able to recoup his investment. The Appellate Division overturned that finding, pointing out that the account didn’t actually exist. For that reason, the Appellate Division (two Judges dissenting) sustained Husband’s position that a “mutual mistake” had occurred in the original agreement, and allowed the action to re-form the original agreement to proceed.