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What does a divorce agreement have to do with Bernie Madoff?

It seems like a strange combination: divorce and a Ponzi scheme. But an out-of-state case that's making headlines shows how the notorious Bernie Madoff's investment scam is related to more than criminal law. It's now become a family law issue.

A man who was divorced in 2006 argues that his and his ex-wife's divorce settlement should be modified because he was a Madoff victim. The divorce was finalized before Madoff admitted to his fraud. The amount in assets that the divorcing couple thought that they had at the time of creating their alimony agreement turned out to be wrong.

According to The New York Times, the divorce terms basically split the couple's assets down the middle. The husband and wife believed that they had millions invested with Madoff, and the wife's half of that supposed amount was taken out of the account and given to her. Her ex kept his money invested with Madoff and, as you can probably guess, he lost millions.

Due to his financial loss and the fraud, the ex-husband (a New York attorney) is suing his wife (also a lawyer) for some of the money she got out of the divorce. A trial court initially dismissed the plaintiff's case. An appeals court, however, ruled in his favor, and now it's up to the state's supreme court to make its decision on the family law/contract matter.

Legal and financial analysts have their eyes on this case because of the significant impact it could have on future cases. Specifically for those who are more family-law minded, they worry that the case opens a door to a system in which ex-spouses will never feel secure in the terms of their divorce agreements, even years after the split has been finalized.

We will post an update to this story when new developments become available. Until then, feel free to post your opinions of this high-profile spousal support case.

Source

The New York Times, DealBook: "Madoff Victim Seeks Divorce Do-Over," Peter Lattman, 30 May 2011

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