Photo: Mario Tama/Getty Images
WASHINGTON (Reuters) – The Supreme Court declined to review how the trustee for Bernard Madoff’s customers calculates victims’ losses, a decision that could help speed a payout of billions of dollars.Without comment, the court on Monday let stand an August 2011 decision by a federal appeals court in New York that approved of the calculation method employed by Irving Picard, the trustee liquidating the imprisoned Ponzi schemer’s firm.
Picard has measured losses as the difference between the amounts that customers deposited and the amounts they withdrew from Bernard L. Madoff Investment Securities LLC before Madoff’s fraud was uncovered in December 2008. He has sought to recover money from “net winners” whom he believes took out too much.
Hundreds of customers objected, saying that claims should be based on the final account statements they received from Madoff’s firm, even if the amounts shown were made up.
The U.S. Securities and Exchange Commission and the Securities Investor Protection Corp, which helps customers of failed brokerages, supported Picard’s method.
“The Supreme Court of the United States found no issue worthy of review in the challenge to our net equity calculation formula,” Picard said in a statement. “This settles the issue once and for all and allows us to seek approval for a second distribution of recovered funds to Madoff customers.”
Lawyers for Madoff investors who objected to Picard’s methodology did not immediately respond to requests for comment.
Picard has recovered $9.1 billion for customers, but nearly all has been tied up in litigation. An initial distribution of about $333 million began in October. The trustee has estimated total customer losses at nearly $20 billion.
A ruling in favour of the objecting customers would have significantly increased the number of people entitled to share in what Picard recovers, and likely have reduced recoveries for customers who Picard said deserved to get money back.
In upholding Picard’s method, Chief Judge Dennis Jacobs of the 2nd U.S. Circuit Court of Appeals said relying on account statements to determine claims “would have the absurd effect of treating fictitious and arbitrarily assigned paper profits as real and would give legal effect to Madoff’s machinations.”
Picard has also filed tens of billions of dollars of lawsuits against large banks that did business with Madoff and “feeder funds” that funneled customer money to him. He has been appealing decisions by federal judges in New York that he had no right to raise some of his biggest claims against the banks.
Madoff, 74, pleaded guilty in March 2009 and is serving a 150-year sentence in a Butner, North Carolina federal prison.
The cases are Ryan et al v. Picard et al, U.S. Supreme Court, No. 11-969; and Velvel v. Picard et al in the same court, No. 11-986.
(Reporting By Jonathan Stempel in Washington; Editing by Gerald E. McCormick and Tim Dobbyn)
Business Insider Emails & Alerts
Site highlights each day to your inbox.