Bernard Madoff’s Ponzi scheme cost many investors their life’s savings, but for the lawyers, accountants and consultants hired to clean it up, it has unleashed a gusher of cash.

The tab through the end of last year came to $288 million, and it is expected to grow by $1.1 billion in the coming years, according to a tally recently submitted to Congress.

The money is coming from a small, government-sponsored nonprofit organization called the Securities Investor Protection Corp. (SIPC), which manages the liquidation of failed brokerage firms in much the same way the Federal Deposit Insurance Corp. backstops failed banks.

The lawyers and other professionals have been tracing Ma­doff’s money, selling his possessions, and suing investors such as owners of the New York Mets, who they say were unjustly enriched by the fraud.

But a federal watchdog warned Thursday that neither the courts nor officials at the Securities and Exchange Commission effectively oversee the fees and expenses paid to outside contractors and urged regulators to watch more closely to make sure the payments are appropriate.

When brokerage firms collapse, the SIPC intercedes to recover money for the clients of the firm and can enlist private experts to help in the task. In the Madoff matter, the leader of the private contractors administering the case is Irving H. Picard, who was named as trustee by the SIPC without competitive bidding and then approved by a court.

Members of Picard’s team have been paid at rates that ran as high as $742 an hour, according to the SEC inspector general in his report issued Thursday. As of Dec. 31, payments to Picard and his law firm, Baker & Hostetler, totaled more than $130 million, the SIPC said in a January letter.

Billing called ‘shocking’

Helen Davis Chaitman, a Ma­doff victim and an attorney for fellow Madoff investors, has unsuccessfully urged a judge to reject some of the professional fees, arguing ithat the amount of hours billed for the work produced was “shocking and unconscionable.” In an interview, she said the SIPC could have provided greater relief to victims with some of the money spent on professional fees.

A spokeswoman for Picard’s firm declined to comment.

Stephen P. Harbeck, chief executive of the SIPC, said there was no time for competitive bidding when Madoff’s business was exposed as a $65 billion scam in late 2008. Picard had extensive experience in past cases and had served “well and economically and efficiently,” Harbeck said.

“I am confident that we do an extraordinarily good job of reviewing fee applications,” he said.

Still, the fees being paid to contractors in the Madoff case could exhaust the SIPC’s funds, SEC Inspector General H. David Kotz wrote. If that were to happen, the government could be called upon to step in, he said. The SEC has the authority to lend the group up to $2.5 billion.

Harbeck dismissed the notion that the SIPC might be headed for a federal bailout as “totally erroneous.” He said his group has $1.3 billion in its war chest and is taking in money from the brokerage industry at a rate of about $450 million a year. If the SIPC needed more money, it could raise the funds by levying an assessment on brokerage firms, he said. Those costs could ultimately be borne by customers or shareholders.

The winners

Though big corporate bankruptcies routinely leave losers — shareholders, bondholders, employees, the plumber or electrician left with unpaid bills — they also create a class of winners. The lawyers and other professionals have lots to do. And they are ordinarily given a priority claim on whatever assets the failed business still has.

For example, in the bankruptcy of the investment firm Lehman Brothers, administrative fees as of Sept. 30 totaled about $420 million, the inspector general’s report said.

But in the Madoff case, SIPC concluded that any money Ma­doff’s business held actually belonged to his defrauded investors, so the little-known nonprofit is left holding the bag. In addition to covering cheated clients up to the SIPC insurance limit of $500,000 each, the SIPC is paying the administrative fees.

Picard’s firm is one of many involved in the case. As of Dec. 31, payments to Alix Partners totaled almost $49 million, according to the SIPC. Payments to FTI Consulting totaled almost $85 million.

Asked how much, if any, of the fee applications the SIPC had rejected, Harbeck said he did not know.

“I’d be surprised if it was a high number, because these are people who know what they’re doing,” he said.

In his report, Kotz did not say he found any payments that should have been rejected in the Madoff case.

To the contrary, the inspector general said his review found that SIPC lawyers performed detailed reviews” of the time sheets.

Rather, he complained that the SEC, which is responsible for monitoring the SIPC, does not periodically review the fees SIPC pays to trustees.

The report said it is important for the SEC to do the job because, when the SIPC is paying liquidation expenses out of its own coffers, courts are powerless to block fees the SIPC has approved, even if the courts believe the fees are excessive. In addition, though there is a limit on fees in standard bankruptcy cases, there is no limit in cases where the SIPC is paying the bills.

In response to the report, SEC officials said they agreed with Kotz’s recommendations for improved oversight of the fees paid by the SIPC.