Since shortly after Bernie Madoff’s December 2008 arrest, how his Ponzi scheme victims should be compensated has been a topic of conversation and debate.
Yesterday, after months of high-stakes bickering, the parties made their arguments to federal bankruptcy judge Burton Lifland.
Irving Picard, the trustee in charge of distributing the recovered money, believes that only those who put more in than they took out should be compensated. The members of this unfortunate group lost an estimated $20 billion.
Attorneys for those who took more money out over the years than they put in, but who still had money with Madoff when the scheme collapsed, argued that the losses should be defined as they are on the balance sheet of their last statement. This side’s losses? $64 billion.
Diana B. Henriques has a full report for the New York Times. Henriques recounts the intensity of the hearing, noting tht Picard’s attorney, David Sheehan was forced to momentarily pause when some victims erupted in what she called “mocking laughter” when Sheehan said “no one in their right mind” would rely on a final account statement.
NYT: “I know the people in this room feel they have been wronged, wronged terribly” by Mr. Madoff, by the government and by the trustee, Mr. Sheehan said when he could continue.
But investors “cannot have a legitimate expectation of sharing in the profits of a fraudster,” he argued. “What’s in the pot is the money of the people who didn’t take anything out.”
Legitimate expectation or not, those who thought they had millions in early December 2008 and had zero by that month’s end are not likely to change their minds.
Judge Lifland reserved his decision to review the evidence, and complimented the attorneys on their Herculean task — 31 briefs in total, he said. He also recognised that, no matter what, one side is going to devastated with his decision.
“No matter how I come down and rule, it will be unpalatable to one party or another,” Lifland said.
Henriques full report is here.
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