Comments on: Wall Street’s billion-dollar Madoff tax A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: happytospeakout Fri, 25 Feb 2011 15:03:26 +0000 If you are interested in learning more about the Garrett bill, please visit

By: MadoffCoalition Thu, 24 Feb 2011 04:41:50 +0000 BKlawyer,

Yes, as pointed out by the GAO on multiple occasions, the SIPC statute is vague and often interpreted to the benefit of the trustee, and not in favor of the victims it was created to protect. The statutory definition of customer does preclude many who lost money to have their SIPC claims denied.

However, in the Madoff case, more than 50% of the DIRECT customer claims were denied by Picard.
Many of these claims would be considered as valid if Picard did indeed follow the actual definition of Net Equity as defined by the SIPA.
Picard has created a wholly unique method of determining SIPC claims that is inconsistent with case law and a federally created mandate.

How are American investors to believe in their broker statements when Picard has created a new precedent to totally ignored them?

This is a dangerous signal he is sending to anyone who has any funds invested with an SEC approved broker.

By: bklawyer Wed, 23 Feb 2011 21:37:46 +0000 The definition of “customer” under the Securities Investor Protection Act is very narrow. As a result, it isn’t unusual for a high percentage of claims to be denied. In Lehman Brothers, approximately 90% of purported customer claims were denied customer status. (980 allowed customer claims and 9,600 claims denied.) The SIPA statute is not nearly as well formed, nor does it work nearly as well, as Chapter 11.

By: MadoffCoalition Tue, 22 Feb 2011 05:19:42 +0000 Avictim,

You make a very good point about Picard’s conflict of interest with SIPC. It’s been reported by many (even before discovery of the Madoff fraud) that SIPC notoriously denies victims the payments they are mandated to pay.

If I recall properly, there might be a pending lawsuit against Harbeck and SIPC for falsely promising investor protection and not providing it.

In addition, it is Picard’s responsibility to pursue all who helped perpetuate the fraud and against those who ‘knew or should have known’ about it.

However, he did NOT pursue the SEC, although it was his job to do so. Is this another conflict of interest? The SEC has oversight responsibility to SIPC. Would Picard bite the hand that feeds him? read more here: doff-Trustee-Irving-by-Ronnie-Sue-Ambros i-101206-563.html

This is a very incestuous situation which is causing extreme hardship for innocent investors. However, it’s also bringing to light the failure of the regulatory agencies (and SIPC as well) to provide the American investor with confidence in the financial markets.
Congressman Scott Garrett nailed it when he introduced recent legislation to clarify the role of the trustee (specifically Irving Picard who Garrett feels may be ignoring the law). Garrett said, “If the current law is not followed, no customer can ever have confidence in his or her dealings with a broker. That is contrary to the policy goal of encouraging investment, which is critical to the economic renewal our country needs.”

By: avictim Mon, 21 Feb 2011 21:42:02 +0000 If payments to Mr Picard and others have to be approved by a court and do not come from recovered funds but from the SIPC (funded by the securities industry), isn’t this a conflict of interest? If SIPC in essence is Picard’s boss, wouldn’t he be in a position to rule in SIPC’s favor. Certainly his Cash in/Cash out methodology reduces their payouts. The article points out that over one billion will be paid out to the attorneys and consultants. Payments comes from the securities industry? Whose money is this in reality. Net winners? Attorneys, consultants, and the IRS who were paid taxes on ficticious income.

By: dslater6 Mon, 21 Feb 2011 20:56:25 +0000 Does Picard, or anyone have any question that those who invested through a feeder fund, will share in the net/after expenses, funds collected?

By: MadoffCoalition Mon, 21 Feb 2011 04:02:18 +0000 TFF,

The Madoff victims consist of those who directly invested with Madoff and those who invested through 3rd parties, or investment groups.
Under SIPA, only those who invested directly with Madoff are entitled to SIPC protection.
Part of the 85% who were denied coverage are 3rd party (aka indirect) investors, who at this point in time are not covered by SIPC.
In real numbers, there were 16,518 claims filed, including indirects. All the indirect claims were denied.
Of the remaining direct investors Picard has denied 2740 and approved 2403. However, he has drastically lowered the amount of protection offered because of his fallacious Cash in/Cash out methodology. This manner of determining claims is contrary to the SIPC statute, and has never before been used in a SIPC case where real securities appeared on account statements.

SIPA does not take the time value of money into account, but rather states that claims are to be paid based on the value of the account as of the date of filing (which for Madoff victims is Dec 2008).
Since the only proof of investment value is the account statement, Madoff victims supplied picard with their last account statement which was dated 11/30/08. This is the value that SIPC owes the investors. it is not a ‘high water mark’, as you define it, but rather the statutory value as per SIPC.

SIPC is obligated to pay an advance up to $500,000, based on that statement. If a victim’s statement is valued at more, than it is the trustee’s responsibility to retrieve any money in the bankruptcy proceedings and distribute that on a pro rata basis to any victim whose account value is more than $500k. If there are enough funds collected to pay the victim the entire value of his statement, then he is ‘made whole’. (if a victim’s statement value is less than $500,000, he is paid the full amount of his statement and will receive no additional money from the bankruptcy proceedings. He is ‘made whole’ by the initial SIPC advance).

I hope that helps to clarify what we both agree is a very complex situation.

Congressman Scott Garrett recently proposed legislation to enforce the SIPA, as I have described it above. For a more detailed explanation, please visit

Ronnie Sue Ambrosino

By: TFF Sat, 19 Feb 2011 14:43:07 +0000 It is absolutely a complex issue.

Do you value claims according to the money they invested initially (less distributions)? Do you value them according to the fictitious “high water mark” of the account? Do you take the time value of the money into account? If so, how?

MadoffCoalition does not define what “make them whole” means, so I am a little suspicious of the assertion that Picard is capriciously ignoring 85% of the claims. I suspect that MadoffCoalition is hoping that the “victims” will get the returns that Madoff had pretended. If that happens, then those “victims” will have made out like “bandits”.

By: MadoffCoalition Sat, 19 Feb 2011 05:24:39 +0000 I’d like to clarify that Madoff victims don’t get all the money recovered. It’s a complex issue, but only those victims who Picard decides are worthy of recovery will share in the funds. As of now, Picard has denied 85% of the victims’ claims. So, the 15% of victims entitled to SIPC coverage will receive approximately $6B in order to make them whole. Picard has boasted of collecting $10B to date and expects to receive another $10B from clawing back both innocent victims and others who may be complicit.
So, there will be an excess of funds collected. Based on the Picardian theory (which is contrary to the SIPC mandate) there will be $14B in excess that WILL NOT go to the victims.
However, Cong. Scott Garrett introduced a bill yesterday that will ensure that Picard will be reigned in and the SIPC mandate WILL be followed. If that’s the case, ALL the recovered funds will in deed go to the victims.
If the bill is passed, American investors will be assured that in the future their investments are protected from theft and fraud.

By: bklawyer Fri, 18 Feb 2011 18:38:15 +0000 Did you intend to suggest that the trustees’ professionals are compensated through a percentage of what is recovered? I am pretty confident that the Trustee and Baker Hostetler are charing by the hour, although I haven’t looked at the retention application in any detail. It is possible that the retentions of Alix Partners and/or FTI Consulting have an incentive element based on creditor recoveries, but, typically, the bulk of the fee structure is charging by the hour.