Madoff victim helping NM Ponzi investor

ALBUQUERQUE, N.M. (AP) - A noted New York lawyer and Ponzi scheme victim of Bernie Madoff has signed on to help victims of a New Mexico swindler fight a flurry of so-called claw-back lawsuits that seek to recapture some of the $75 million lost by 600 investors around the country.

More than 100 suits had been filed by the end of last week as the trustee for the bankruptcy case of Doug Vaughan worked to meet a deadline Wednesday for making any claims against people who may have profited from their investments in promissory notes with Vaughan and his Vaughan Company Realtors.

While many of the lawsuits are against big money investors and accused insiders who made huge profits over the years with interest rates of 20 percent or more on loans to Vaughan's real estate company, others go after much smaller investors, including one case that seeks to regain just over $4,000 in interest earnings from a $10,000 investment.

The suits claim the victims knew or should have known the rates of return were unrealistically high.

While some have settled the claims, others say they are being victimized twice.

"I have been contacted by people all over the U.S. telling me they too have lost everything and are now being sued for their interest payments," said Ron Frank, a retiree from Devil's Tower, Wyo., and one of several investors behind an attempt to band victims together to fight the claims. Frank and his wife had nearly $400,000 invested with Vaughan, according to court records.

"These people aren't criminals," said Frank. "Neither am I. Believe me, if we had thought it was a Ponzi scheme, we would have run fast and furious."

The group created the website vaughanvictims.com and retained attorneys Helen Davis Chaitman of New York and Merrie Chappell in New Mexico to help fight the cases.

Chaitman is a noted New York lawyer and victim of Madoff. She currently represents some 360 Madoff victims and has led a lobbying effort to fight laws that allow claw-backs against victims of Ponzi scheme.

The attorneys have structured their fee agreement so that everyone who signs on can share in the defense costs for common legal issues, according to a letter another victim, Jonathan Levann of Oregon, sent to investors urging them to join the defense efforts being led by Chaitman.

A scan of the more than 100 cases filed against Vaughan victims indicates the majority go after those who were "net winners," or who ended up earning more than they had invested. But some do go after net losers, like Frank. Even many of the net gainers still lost everything when the scheme fell apart because they kept reinvesting their interest.

Jim Askew, an attorney for Judith Wagner, the court-appointed bankruptcy trustee seeking to regain some of the lost funds to help repay victims, declined to say what criteria was being used to determine who was being asked to repay the interest they earned, noting that they were still litigating settlements in advance of Thursday's deadline for filing lawsuits.

He said most people who might be identified for payback demands have likely been notified.

Vaughan pleaded guilty in the case in December and faces 10 to 12 years in prison.

While many of his victims were from New Mexico, court records indicate he also had victims in a number of other states, including Arizona, Washington, Oregon, New Jersey, Texas, Virginia and Colorado.