Federal prosecutors and the trustee charged with recovering assets in the Bernard L. Madoff bankruptcy, announced a settlement Friday that would add $7.2 billion to the cash available to compensate victims of Mr. Madoff’s global Ponzi scheme.

Details of the agreement with the estate of Jeffry M. Picower, a Palm Beach philanthropist who died in October 2009, were released Friday at a news conference in Lower Manhattan.

The settlement “will return every penny received from almost 35 years of investing with Bernard Madoff,” Mr. Picower’s wife, Barbara, said in a statement through her lawyer, William D. Zabel of Schulte Roth & Zabel.

The $7.2 billion will greatly expand the $2.3 billion sum that the trustee, Irving H. Picard, had already collected through asset sales and other settlements in the Madoff bankruptcy. The amount represents the difference between the cash that Mr. Picower put into his Madoff account and the amount that he withdrew over the life of the fraud, according to litigation filed last year by Mr. Picard.

People briefed on the negotiations say that it will be the largest civil forfeiture payment in American judicial history.

Calling the Madoff scheme “deplorable,” Mrs. Picower said that she was confident that her husband had not been involved but that returning the gains was the right thing to do.

“I believe that this settlement honors what Jeffry would have wanted, which is to return this money so that it can go directly to the victims of Madoff,” she said, adding that she planned to return to “the philanthropic work that was so important to Jeffry and me.”

The complicated negotiations, which conclude the trustee’s case against Mr. Picower, involved lawyers for Mr. Picard, federal prosecutors working for the United States attorney in Manhattan, Preet Bharata, and lawyers at the firm of Schulte Roth & Zabel. Settlement talks were already under way when Mr. Picower, who had suffered from Parkinson’s disease and had a history of heart ailments, was found dead in the swimming pool of his oceanfront Palm Beach mansion on Oct. 25, 2009.

The enormous amount involved is certainly plausible: a confidential letter from Goldman Sachs, requested as part of the protracted settlement talks, confirmed that Mr. Picower had been “a valued client of our Investment Management Division for nearly three decades,” and that during that time, he had generated legitimate investment returns “in excess of $2 billion,” primarily through “self-directed investments in public securities.”

A person with knowledge of the Goldman Sachs research said that there were $4.5 billion in “unrealized gains” in Mr. Picower’s account at the firm at the time of his death.

For such a formidable investor, Mr. Picower had long flown beneath Wall Street’s radar. Before he appeared as one of the largest clients of Mr. Madoff’s fraudulent investment advisory business, he was known in financial circles primarily for his medical technology investments. In 2004, a few years after he took control of Alaris Medical Systems with a stake of roughly $86 million, he sold the company to Cardinal Health for more than $1 billion.

The complaint filed against Mr. Picower last year by Mr. Picard asserted that the profits on his investments with Mr. Madoff were equally stellar — but totally bogus. The complaint, which contended that a sophisticated investor like Mr. Picower should have recognized that Mr. Madoff was operating a fraud, sought the return of $7.2 billion — the amount by which Mr. Picower’s withdrawals from his Madoff accounts exceeded the funds he paid in over the life of the fraud.

Mr. Picard, the trustee, has reported that the cash losses in the Madoff scheme total about $20 billion. If that figure holds, the addition of the Picower billions would mean that eligible investors — those who took less from their Madoff accounts than they put in — could recover almost half their losses.

(Source: NY Times)